Gibson: Free trade face imperiled future

Guest writer Scott Gibson is a physician who returned to his hometown of McMinnville to practice medicine and raise a family. He served on the McMinnville School Board from 2011 to 2017, when he and his wife, Melody, moved to the outskirts of Amity to open the Bella Collina B&B. In addition to medicine and science, he counts history, economics and writing among his interests.

Free trade has been getting a bad name. In the economic system that emerged after World War II, it has served as the pillar supporting the entire world financial structure.

The political landscape that has supported free trade for decades, however, has shifted significantly in recent years, and not only in the United States. Protectionist currents are sweeping across every part of the world.

Where this is leading remains uncertain, but the outcome could have dramatic consequences globally.

Well into the 20th century, protectionism was standard practice for many nations. But it began to crumble well before then in Britain, helping set the stage for rollbacks.

In Britain, laws curtailing foreign trade were taken for granted until the mid-1800s. But a movement arose among the lower and middle classes, who began to realize high tariffs were enriching the wealthy at the expense of the poor, as foreign countries retaliated with their own tariffs, keeping prices high for everyone.

So in 1846, Britain repealed its protectionist corn laws, and other the walls of protectionism soon began to crumble there as well.

In the United States, tariffs ranged between 25 and 50 percent in the late 1800s. They plunged to 15 percent in the 1920s, but the Great Depression sent Congress scurrying for quick fixes, leading it to pass the ruinous Smoot-Hawley Tariff, which raised import duties to 55 percent.

As a result, imports dropped 66 percent and exports soon fell off by a like amount.

That sent prices soaring. The prices commanded by a list of 3,200 items rose, on average, by 60%.

Smoot Hawley was effectively repealed in 1934. But the real change in attitudes didn't come until after World War II.

Led by the United States, countries slashed tariffs to encourage trade and invigorate decimated economies.

The results were profound. Per capita gross domestic product rose from $8,000 at the end of the war to $37,000 in constant dollars by 2005.

World poverty plummeted. The fraction of people living in extreme poverty fell from three-quarters in 1945 to one-tenth in 2015. Poverty, which had defined the state of humankind since the dawn of agriculture, had been tamed in large measure by free trade among nations.

With the drop in poverty came a steep decline in fertility. The “population bomb” predicted in the 1970s as the great coming human calamity had been defused.

While Africa still is plagued by spiking population growth, many areas of the world are seeing actual declines.

World fertility has dropped from 4.7 children per woman per lifetime in 1950 to 2.4 today. Vietnam, El Salvador, Bangladesh, and Malaysia are among nations with fertility rates now falling below replacement rates.

Global free trade has been the most potent factor for improving individual well-being worldwide ever devised. And yet it is now coming under increasing attack.

For decades, the Republican party championed the cause of free trade. When Japanese cars were flooding American markets in the 1970s, many Democrats heeded union calls for protectionist tariffs. But Republicans insisted Detroit needed to up its game and make higher quality cars.

Republicans prevailed. Higher tariffs were headed off and American cars got better.

Democrats were reluctantly brought to the free trade table when Bill Clinton signed the North American Free Trade Agreement, which helped spur Mexican manufacturing. American factory jobs were lost along the way, however, and many Democrats remained deeply distrustful as a result.

Another Democratic president, Barack Obama, signed an ever more far-reaching trade deal, the Trans Pacific Partnership. It was designed to increase commerce with nations such as Vietnam, Cambodia and Indonesia.

The pact excluded China. The aim of that was to encourage alternative sites of production for products for which the U.S. had become China-dependent.

The pact failed to win Senate ratification as a treaty, because too many Republicans were unwilling to hand Obama a win and too many Democrats were concerned about manufacturing capacity at home and workers' rights abroad. However, the other countries were ready to move forward anyway.

However, i n President Trump, the Republicans got their first protectionist champion since Herbert Hoover. And when he took office, he scuttled the agreement.

America's Asian partners responded by going ahead on their own to form the world’s largest free trade zone, the Regional Comprehensive Economic Partnership. In addition to including such U.S. allies as Japan, South Korea and Australia, the partners, now free of U.S. influence, also invited China to join in reaping the benefits.

Trump also turned the Republican playbook upside down by placing tariffs not only on China, but on our European trading partners as well. After excoriating NAFTA, Trump pitched a lateral by replacing it with the US-Mexico-Canada Agreement, which tinkered with some of the NAFTA’s details, but largely kept the substance in place.

Trump also worked to circumvent the World Trade Organization, which had proven the most effective non-violent means to negotiate trade disputes the planet had even seen. Trump blocked appointments to the organization's appellate body, curtailing its capacity to mediate disputes.

Trump preferred country-to-country negotiations, as the U.S. tends to pull more weight in those. But the global effect is to undermine the capacity to enforce free trade worldwide.

The Republican Party largely stood by as Trump put decades of work by his Republican predecessors into cold storage. Democrats groused at times, but with unions still cheering for protection, their message was neither strong nor unified.

Under President Biden, the issue of free trade has taken a back seat to the pandemic, immigration and inflation.

Biden supports the World Trade Organization in theory, but yet to end the impasse over WTO appellate appointments. In other words, he preaches free trade in the pulpit, but he’s not leading globalization warriors to the field of battle.

Of course, Biden has been dealt a weak hand on free trade, as globalization is still a dirty word to unions, and thus to many Democrats. And Republicans have largely capitulated to Trump’s America First protectionism.

Without grassroots backing for international commerce, it faces an imperiled future.

But free trade remains the strongest force we have for low prices, quality products and global prosperity. A retreat to protectionism would be foolish and self-defeating.

Without withdrawal from the Trans Pacific Partnership, China has strengthened trade bonds with east Asia, thus weakening our position with those vital countries.

If we are to remain economically vital as a nation, we must compete with other countries to constantly improve. It’s an ability we have mastered. This is no time to lose our edge and throw that advantage away.


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