Free Trade: GOP Hypocrisy

Administrations like the current one talk the talk with respect to free trade but don’t walk the walk. Mark Thoma finds one Republican who is at least honest about his party’s slant towards trade protection:

Free trade has long been popular with liberals, and it remains so with liberal elites today. The editorial pages of major newspapers consistently support free trade. Ted Kennedy supported the advance of free trade. President Bill Clinton fought hard to win approval of the North American Free Trade Agreement. Despite some of his campaign rhetoric, Barack Obama is careful to express qualified support for free trade, even when stumping in the industrial Midwest. Moreover, many American conservatives have opposed free trade. Jesse Helms, the most outspoken conservative in the Senate for three decades, was no free trader. Neither was Alexander Hamilton, who could be considered the founder of American conservatism. For almost 100 years after the Civil War, the Republican Party (led by men like Lincoln and McKinley) was overtly protectionist. Theodore Roosevelt, a hero of John McCain’s, wrote that “pernicious indulgence in the doctrine of free trade seems inevitably to produce fatty degeneration of the moral fiber.” The first significant Republican free trader was President Dwight Eisenhower. But Harry Truman tried to recruit him to run for the White House as a Democrat, and his political affiliation was not clear until he actually began running for the 1952 Republican nomination. Conservatives in 1952 supported the presidential bid of Robert Taft, a steadfast opponent of free trade. If you watched the Republican presidential debates — and had no other knowledge of economic history — you might believe that Ronald Reagan, the personification of modern conservatism, was a pure free trader. During a debate in Michigan, for example, Mr. McCain said that President Reagan “must be spinning in his grave” to hear Republicans expressing concerns about free trade. But while free traders like to quote some of President Reagan’s open-markets rhetoric, they did not like many of his actual trade policies. President Reagan often broke with free-trade dogma. He arranged for voluntary restraint agreements to limit imports of automobiles and steel (an industry whose interests, by the way, I have represented). He provided temporary import relief for Harley-Davidson. He limited imports of sugar and textiles. His administration pushed for the “Plaza accord” of 1985, an agreement that made Japanese imports more expensive by raising the value of the yen. Each of these measures prompted vociferous criticism from free traders. But they worked. By the early 1990s, doubts about Americans’ ability to compete had been impressively reduced.

We should be fair – Bush41 had a decent free trade record. And a junior economist in the Reagan Administration likely did advocate less protectionism. His name? Paul Krugman. Mark’s take on what Robert Lighthizer wrote is:

If Republicans want to label themselves as the party of protectionists (more walls!), that’s fine with me. But attributing the strength of the US economy in the 1990s to the protectionist policies of the Reagan administration is more than a bit of a stretch.

While Mark is correct, let’s recall the historical context of the early Reagan years when he decided to ignore the advice of a young Dr. Krugman. We had a decline in net export demand contributing to the 1982 recession. Of course, this decline was caused by the strong dollar policy that Lawrence Kudlow thought was great. I guess Lighthizer does not that the abandonment of this stupid strong dollar policy (i.e., the dollar devaluation that he notes) likely had more to do with the improvement in net export demand than the tariffs and quotas that Lighthizer endorses.

Finally, it does appear that trade protection to dollar devaluation is preferred by the likes of Lighthizer and Kudlow as trade protection can be given to the friends of the GOP leadership. But then true conservatives like Greg Mankiw and other proponents of free trade likely wish politicians would not play these games. Some of us on the left – such as Mark and myself – tend to agree with these true conservatives.