Trade, Trump, and the National Interest

In his column at the Wall Street Journal Walter Russell Mead correctly characterizes President Trump’s views on trade and the national interest:

Mr. Trump’s record suggests that more trade shocks are coming, and that they may be more severe. His attacks on free trade emerge from one of the most deeply rooted beliefs of his presidency—that American foreign policy has lost sight of the national interest and reaches instead for a vague and unrealistic “globalist” agenda. By “America First,” Mr. Trump means restoring the primacy of the national interest. The president may spend a lot of time on the golf course, but he pursues his nationalist agenda with great persistence. He is willing to take risks and pay a high price to achieve it.

I feel, however, required to point out a few of Dr. Mead’s misconceptions. First, we do not presently have and never have had a regime of “free trade” and virtually no one other than a few economists supports it. We have managed trade. The problem with the present regime of managed trade is that its foundations were laid when circumstances were very different than they are now, the U. S. maintained a trade surplus or rough balance, and the primacy of the U. S. economy was unquestioned.

It’s also worth mentioning, as a commenter here points out, that the very notion of free trade is problematic when you and your trading partners all have fiat currencies.

Dr. Mead writes:

Some neoconservatives in particular concluded that Mr. Trump’s contempt for promoting democracy and the rule of law abroad was a sign that he would destroy democracy in the U.S., and they went on to dedicate their polemical talents to persuading conservatives that President Trump is, at best, the second coming of Cataline.

As the later Mayor Daley used to say, let’s look at the record. Over the last 25 years what have the policies of the neoconservatives, particularly democracy from the barrel of a gun, accomplished? We’ve spent trillions of dollars and wasted more than ten thousand American lives and our repute and democracy’s repute in general is at the lowest ebb in decades. The most effective promoter of democracy is the soft power brought by a strong, vibrant U. S. economy. We’ve squandered that by following the advice of neoconservatives and neoliberals. While Trump has weakened our soft power, what he’s done is nothing by comparison with our being at war for the last nearly 30 years and China’s persistent assault on the global economy.

Dr. Mead concludes:

It is much too early to predict that the president’s assault on the liberal trade order will succeed. But it would be foolish to underestimate the determination he will bring to the fight. Investors, managers and political leaders around the world need to prepare.

There is no liberal trade order to defend. The present order is one in which our putative European allies and frenemies like China alike engage in mercantilist policies while billionaires in the U. S. reap profits. Over the period of the last half century the U. S. has transmogrified from an increasingly egalitarian economy and society to an incipient hereditary aristocracy.

I continue to believe in free trade but not the faux free trade of the present illiberal order. Let’s have free trade. The disruption will be enormous but when the dust has settled we’ll all be better off for it. Except the billionaires, autocrats, and oligarchs, of course.