Clicking on banner ads enables JWR to constantly improve
Jewish World Review April 17, 2002 /6 Iyar, 5762

Amity Shlaes

Amity Shlaes
JWR's Pundits
World Editorial
Cartoon Showcase

Mallard Fillmore

Michael Barone
Mona Charen
Linda Chavez
Ann Coulter
Greg Crosby
Larry Elder
Don Feder
Suzanne Fields
Paul Greenberg
Bob Greene
Betsy Hart
Nat Hentoff
David Horowitz
Marianne Jennings
Michael Kelly
Mort Kondracke
Ch. Krauthammer
Lawrence Kudlow
Dr. Laura
John Leo
David Limbaugh
Michelle Malkin
Chris Matthews
Michael Medved
Kathleen Parker
Wes Pruden
Sam Schulman
Amity Shlaes
Tony Snow
Thomas Sowell
Cal Thomas
Jonathan S. Tobin
Ben Wattenberg
George Will
Bruce Williams
Walter Williams
Mort Zuckerman

Consumer Reports

Special relationships and free trade do not mix | Anyone charting the lows of George W. Bush's presidency - and, for that matter, Tony Blair's leadership of Britain - will want to include the pair's parley this month in Crawford, Texas. There Messrs Bush and Blair cynically plotted an agreement under which Britain might receive an exemption to the new US steel tariffs.

So much for Anglo-American leadership and magnanimity in the area of that great Anglo-American ideal, free trade for all. Robert Zoellick, the US trade representative, then proceeded to add insult to injury by accusing China, which is talking of bringing a complaint about the tariff before the World Trade Organisation, of preparing to join "the running dogs of European imperialism". You have to wonder how that went down.

OK, so Mr Zoellick was joking. But the underlying issue is fundamental. What is the best way to achieve freer trade? Is it by conducting trade diplomacy, dispensing advantage and disadvantage, and retaliating against protectionism? Or is it by unilaterally loosening tariffs and restrictions, foregoing retaliation, and hoping other countries will follow your example?

In the past century, national leaders and parliaments have tended to prefer the multilateral and diplomatic option. The rules of the World Trade Organisation codify trade retaliation. But the furious writing of international treaties was not always the preferred mechanism. Indeed, it was Britain that gave us the most successful example of a unilateral free trade policy, through its repeal of the Corn Laws and the general liberalisation that followed.

The details of Corn Law repeal are worth remembering, if only to remind ourselves how far we have veered from the unilateral free trade path. In 1815, parliament passed the Corn Laws, the aim being to protect the landed upper class by safeguarding their crop prices.

The damage that resulted was not only economic but murderous. Following the potato blight, Britain's Irish citizens were unable to afford bread at the protected prices and saw their infants starve. The general distress galvanised Britain's trade liberals, who, nurtured by intellectual inspiration from the economist David Ricardo, created an Anti-Corn Law League - and eventually forced repeal of the laws.

That brand of liberalism is very different from the Banana War culture that obtains today. The opponents of the Corn Laws understood that free markets would reduce the role of governments, and so increase general prosperity. As Richard Cobden of the Anti-Corn Law League put it, there must be "as little intercourse as possible between governments".

Cobden explained the superiority of unilateral free trade thus: "We came to the conclusion that the less we attempted to persuade foreigners to adopt our trade principles, the better. We avowed our total indifference whether other nations became free-traders or not." The tactic worked: other British protections fell away and other countries loosened tariffs in turn, leading to the west's first golden age of commerce.

But Britain does not provide the only example of unilateral free trade. A century and a half ago, most US government revenue derived from tariffs. But many US lawmakers recognised the domestic damage that their tariff regime caused. Consider Grover Cleveland, who won the presidency on an anti-tariff plank, at his 1893 inauguration. He sought to "reinstate the self-confidence and business enterprise of our citizens by discrediting an abject dependence upon governmental favour".

What stands out is Cleveland's clear assessment of the damage of selective domestic trade policies. To judge by Mr Zoellick's internet home page, which last week highlighted "new information on product exclusions under Section 203" (steel protection) for individual US firms, it is safe to say that such doubts have long been forgotten.

Another great American free trader was Cordell Hull, who in his early years as a freshman Congressman from Tennessee, called Theodore Roosevelt a hypocrite. Roosevelt, he said, had made a career as a trustbuster, yet failed to strike out at "the main source of their constant creation, the protective tariff".

The unilateral movement, of course, eventually transformed into our multilateral trade culture. Cobden later wrote a trade treaty with France, and Cordell Hull was one of the fathers of that early forerunner of the WTO, the 1934 Reciprocal Trade Agreements Act. (Hull also led the campaign for the introduction of income tax).

The justification for the switch to multilateralism remains understandable: by creating trade entities from those of the 1930s to the European Union, leaders sought to prevent war. There was another goal here as well, as Douglas Irwin, author of a new book, points out.* By moving trade out of the domestic debate and into the foreign policy arena - as with the Trade Promotion Authority debate in the US today - lawmakers hoped to reduce the politicking and persuade legislative bodies to go along with trade agreements in toto, rather than writing special exceptions.

Still, you have to wonder whether the near-exclusive pursuit of multilateral free trade has not reached what Mr Irwin calls "a point of diminishing returns". In one of the few areas where the US has remained largely a unilateral free trader - telecommunications - it has hardly lost out.

A new commitment to free trade unilateralism would help to make today's great powers appear less hypocritical in the eyes of allies and potential allies. It would certainly help in areas of Africa where radical Islam is spreading, and which depend on textile exports. And it would benefit steel and banana consumers everywhere.

JWR contributor Amity Shlaes is a columnist for Financial Times . Her latest book is The Greedy Hand: How Taxes Drive Americans Crazy and What to Do About It. Send your comments by clicking here.


04/08/02: Is terror the flip side of globalization?
03/20/02 Bush gives aid but seeks results
03/13/02 The Danger in policy by numbers
02/26/02 :States' smokescreen for tax hypocrisy
02/20/02: Echoes of leadership against a global threat
02/13/02: Jackson Vanik May be a Useful Analogy When Thinking About the Middle East
02/07/02: Budgeting for victory: Requiem for a peace dividend
02/05/02: The detectives of 1930s pulp fiction had a nose for clients bearing gifts. Sadly, those consulted by Enron did not
01/22/02: Allow all American children a decent chance
01/15/02: Do not disturb the profit-sharing revolution
01/09/02: It is dangerous to elevate a currency as a political emblem if the need for other economic reforms is obscured
01/03/02: There is only one way for a free thinker to bring up children
12/20/01: Why America's economy always bounces back
12/18/01: When it comes to taxes, Washington lawmakers can learn a thing or two from The Honeymooners
12/13/01: Bush opens a new era
12/12/01: A flamboyant reversal for the Democratic party
12/06/01: Threat of an oil embargo on the U.S. is a bluff
11/29/01: Which is more important--the war or diplomatic comity?
11/20/01: Unbalanced by a wealth of oil and diamonds
10/17/01: Afghanistan Needs a General MacArthur
09/27/01: The US has gained an understanding of the costs of war for which its European allies have hitherto wished in vain
09/13/01: War against terrorism will rise from the ashes
08/15/01: Geography is no excuse for the state's economic stagnation. Its policymakers should take a leaf from Ireland's book
08/07/01: Teamsters may pay a heavy price for winning its batle in Congress
07/25/01: Towards a patent-free nirvana?
07/17/01: History proves the lasting value of tax cuts
07/10/01: Stem cell research has awakened a bitter debate in Washington but voters care more about other electoral issues
07/03/01: America foots the bill for Europe's largesse
06/26/01: America the litigious, land of the lawyer's fee
06/20/01: Five reasons for gloom about global growth 06/18/01: Show pity for Alice in Tax Wonderland
06/13/01: America must take a French lesson in trade
06/11/01: Time to dream the impossible dream for Iraq
06/07/01: Whatever happened to simple?
06/04/01: When the relationship between companies becomes as close as a marriage, the eventual break-up is often very painful
06/01/01: Loving and hating the Bush tax bill
05/30/01: Will Grisham soon be unemployed? In America's courts these days, there's no room left over for legal fiction
05/22/01: Republicans sample the rhetoric of confidence
05/16/01: Boeing has been promised $60m to site its headquarters in Illinois. The deal looks a poor one for taxpayers
05/14/01: Adam Smith in love
05/09/01: Those rotten Russian capitalists
05/07/01: Why tax havens provide shelter for everyone
05/04/01: Middle classes pay for get-the-rich folly
05/01/01: Money can't buy happiness? Think again.
04/26/01: Calling America's rogues and entrepreneurs
04/19/01: High earners right to feel lonely at the top
04/11/01: The right must learn the comfort of strangers
04/04/01: When domestic law arrives by the back door
03/30/01: A Lexus tax cut suits the jalopy driver
03/27/01: The unchallenged dominance of King Dollar
03/20/01: Natural selection of an intellectual aristocracy
03/16/01: The hidden danger of a regulatory recession
03/14/01: Is the American condition that boring? Why so many Oscar nominated movies aren't set in America
03/07/01: Trampling on the theory of path dependence
03/05/01: Fighting the good fight
03/01/01: It is time for Fannie and Freddie to grow up
02/27/01: IT's important
02/22/01: The guilty conscience of America's millionaires
02/14/01: The benefits of helping the 'rich'
02/09/01: The Danger and Promise of the Bush Schools Plan
02/05/01: Crack and Compassion
01/31/01: Debt is good
01/29/01: Clueless
01/24/01: A gloomy end for a half-hearted undertaking
01/17/01: The challenge of an ally with its own mind
01/15/01: An unexpected American family portrait
01/10/01: A fitting legacy for America's beloved dictator
01/08/01: The trick of tax 'convenience'
01/03/01: Time to stop blaming Greenspan over taxes
12/11/00: So smart they're dumb
12/06/00: How economic bad news came good for Bush
12/04/00: The Boies factor
11/30/00: "The inevitable demands for recounts erupted like acne…"
11/28/00: Fair play and the rules of the electoral game
11/23/00: The shining prospect beyond a cloudy election
11/21/00: Try the Cleveland model
11/16/00: A surprising winner emerges in the US election
11/09/00: Those powerful expats
11/07/00: What's right for America versus what works
11/02/00: Time to turn off big government's autopilot
10/30/00: Canada beating America in financial sensibility
10/26/00: When progressiveness leads to backwardness
10/24/00: The most accurate poll
10/19/00: The Middle East tells us the hawks were right
10/17/00: The split personalities of America's super rich
10/10/00: 'Equity Rights' or Wake up and Smell the Starbucks
10/04/00: Trapped in the basement of global capitalism
09/21/00: The final act of a grand presidential tragedy
09/21/00: Europeans strike back at the fuel tax monster. Should Americans follow?
09/18/00: First steps to success
09/13/00: America rejects the human rights transplant
09/07/00: Minimum wage, maximum cost
09/05/00: Prudent Al Gore plans some serious spending
08/31/00: A revolution fails to bring power to the people
08/28/00: A reali$tic poll
08/21/00: "I Goofed"
08/16/00: Part of the union, but not part of the party
08/09/00: Silicon Alley Secrets
08/02/00: Radical Republicans warm up for Philadelphia
07/31/00: I'll Cry if I Want To
07/27/00: Cold warrior of the new world
07/25/00: The Estate Tax will drop dead
07/18/00: Shooting down the anti-missile defence myths
07/14/00: A convenient punchbag for America's leaders
07/07/00: How to destroy the pharmaceutical industry
07/05/00: Patriots and bleeding hearts
06/30/00: Candidates beware: New Washington consensus on robust growth stands the old wisdom on its head
06/28/00: White America's flight to educational quality
06/26/00: How Hillary inspired the feminist infobabes

© 2001, Financial Times