Trade Policy Is Always Political First

Today, we tend to think of trade policy as an economic debate. Proponents and opponents of free trade argue on economic grounds: proponents say that the benefits outweigh any costs, and opponents disagree. But the history of trade policy shows that trade has always been a political matter first, and economic second.

The first wave of free trade legislation in history was Britain’s Importation Act of 1846, which repealed Britain’s historic Corn Laws, which had imposed high tariffs on agricultural products. The venerable newspaper The Economist was founded to oppose the Corn Laws. We should note that in the mid-19th century, “economist” did not denote a profession as it does today. It was the term used to identify supporters of free trade.

But even given the origins of the term, the debates surrounding free trade were purely political. The Corn Laws were understood by proponents and opponents alike to exist for the purpose of protecting the power of the landed gentry against Britain’s growing industrial and financial sector. Repeal was intended to shift the balance of power away from the ancient aristocracy toward the upstart self-made men in finance. A secondary goal was to lower the price of food, but this was also understood as a way of easing wage pressures on manufacturers, thereby boosting their interests.

Even though the Corn Laws were “conservative” in intent and in effect, in a move that will surprise no one, it was a conservative prime minister, Robert Peel, who repealed the Corn Laws. He claimed that repeal was an emergency response to the Irish potato famine, but this was a bit disingenuous—the Corn Laws included provisions allowing the prime minister to suspend them in case of emergency, so repeal was not necessary strictly speaking.

Conservatives resisted Peel because they understood that such a radical “emergency” provision could not be reversed once enacted, precisely because they would shift the balance of political power away from those who benefited from the law. The measure repealing the Corn Laws passed with Whig and Radical votes and, indeed, the Corn Laws were never restored, even when the Tories returned to government.

Benjamin Disraeli, then a young conservative backbencher, satirized Peel’s government in his novel Coningsby, in a dialogue between the characters Tadpole and Taper, perfect portraits of political hacks in that age and, indeed, of any age:

“Hush!” said Mr. Tadpole. “The time has gone by for Tory governments; what the country requires is a sound Conservative government.”

“A sound Conservative government,” said Taper, musingly. “I understand: Tory men and Whig measures.”

Globalization Begins

 The repeal of the Corn Laws set in motion the first great era of globalization, which lasted until World War I. Few people at the time debated things like gross domestic product figures. The repeal ended up becoming a boon to the UK’s global power since it was the most productive nation on Earth, and trade is always beneficial to the most-productive nation, a fact that was ill-understood at the time. Most economic arguments advanced at the time rested on David Ricardo’s then-cutting-edge thoughts on “comparative advantage.”

But repeal also paved the way for 30 years of Whig dominance in British politics, which only rebalanced to the conservative side when the working classes, more conservative than the emerging managerialist middle class, received the right to vote.

The second era of globalization—the current one—began after World War II. After the war, the United States fostered a set of multilateral institutions including the United Nations and NATO, which formed the basis of the “rules-based liberal order.” The trade component of this order was the General Agreement on Tariffs and Trade (GATT), now replaced by the World Trade Organization (WTO).

And again, while some economic concerns were advanced, the main goal of the United States at the time was political: to halt the advance of world communism by boosting the economies of friendly countries and cut the grass from under the feet of their domestic Communist movements. Washington policymakers considered GATT in tandem with the Marshall Plan, the goal of which was also, explicitly and primarily political—which is why Warsaw Pact countries were ineligible—and secondarily economic.

It was well understood at the time that the new trade regime might be different if it had been conceived with only the narrow economic self-interest of the United States in mind. The economic objectives took a backseat to the political goal, which was containing the Soviet Union.

And it was the right move at the time: GATT and the Marshall Plan enabled the economies of Western Europe and Japan to recover quickly and that recovery bound them to the United States through their interests, though it did not always advance the strictly economic interests of the United States. Fighting world communism was understood at the time to be the more important goal, and given how prosperous the United States was, it could afford the cost (the average auto worker in the 1950s did not lose much sleep over Volkswagen).

In Europe, the first free-trade schemes that would eventually metastasize into the European Union were also understood in political terms. Jean Monnet, a “founding father of Europe” (and a CIA asset), saw the early trade deals as steps to building a United States of Europe; meanwhile, Charles de Gaulle (not a CIA asset) saw European free trade as a way to build up Europe as an independent bloc relative to the United States, which is why he repeatedly vetoed Great Britain’s accession, which made no sense on purely economic terms.

By the same token, in his book The Hundred-Year Marathon, China expert and former Reagan official Michael Pillsbury shows well how the beneficial trade and aid terms that the Reagan Administration extended to China were driven by Cold War concerns, namely extending the Nixon-Kissinger strategy of an alliance with Beijing against Moscow, and not economic concerns. At the time, nobody imagined that China would one day become the workshop of the world—nobody except, perhaps, the Chinese Politburo.

And, again, it was the right move at the time: Reagan can hardly be faulted for abuses that happened years later and in a different context. In the 1980s, China was still desperately poor, and the giant sucking sound—to coin a phrase—of jobs going from the United States to China really only began after Bill Clinton extended “most favored nation” status to China in the lame-duck days of his administration.

The New “Corn Laws” Repeal

Then something strange happened. Maybe the dealers got high on their own supply, but in the 1990s a trade regime that hitherto consistently understood itself as a political tool, the function of which was to achieve political aims, began running on autopilot and understanding itself as a purely economic tool.

In retrospect, this raised an obvious problem: nobody remembered to inform the Chinese that history had ended and that politics had been abolished.

China’s historically literate leadership never lost sight of the fact that economics is always secondary to politics, and they abused the WTO regime to increase their country’s political power, building an industrial base to support their aim of global hegemony.

Now we have come full circle. The WTO regime is a form of Corn Law Repeal 2.0: geostrategically, it boosts the power of that nation which is the workshop of the world (China), making the rest of the world dependent on its cheap exports.

In the United States and Europe, it boosts the power of managerial and financial elites at the expense of their working classes. If there’s one difference, it’s that at least at the time of the Corn Laws, political actors and commentators mostly understood and were honest about what they were doing. Today they pretend it’s about “freedom.”

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About Pascal-Emmanuel Gobry

Pascal-Emmanuel Gobry is a fellow at the Ethics and Public Policy Center. His writing has appeared in numerous publications. He is based in Paris.

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