Trump and the Return of American Economic Nationalism

As the close-knit global economy becomes ever more frayed, these same policies are also increasingly coming under fire.

Protectionism, the preferred political economic choice throughout much of world history, is now once again in fashion.

The United States, long considered the leading promoter of international trade liberalization, currently has a Republican presidential nominee threatening to withdraw the United States from the World Trade Organization (WTO) and the North American Free Trade Agreement (NAFTA).

Mr. Trump is also promising a trade war with two of the country’s biggest trading partners, Mexico and China.

And it’s a popular protectionist position: a bipartisan majority of Americans now believe free trade has been bad for the United States.

At first glance, this might come as a surprise. But from a longer historical perspective, such a protectionist shift is no radical departure for either the United States or the global economic order. It’s a return to the status quo.

Rather, the international turn to trade liberalization since the Second World War — from the General Agreements on Tariffs and Trade (GATT) to the WTO — represents the rare exception to the protectionist rule.

US adhered to economic nationalist policies

Aside from the notable case of Free Trade England, which unilaterally adopted free trade in the 1840s, most nations in the latter half of the 19th century sought safety from the gales of modern global market competition behind ever higher tariff walls. These were further buttressed with government subsidies to domestic industries and imperial expansion.

Few nations pursued that policy package with more gusto than the United States. Under Republican auspices, it adhered to stringent economic nationalist policies at home from the 1860s onward, while increasing its imperial proclivities abroad.

Not until under the change of course executed by FDR’s State Department would free trade begin to displace protectionism as the preferred policy for U.S. economic expansion.

What brought about this sizeable mid-20th-century political, economic and ideological about face within the history of modern U.S. trade policy?

The answers awaited discovery in 19th-century America. It was hidden amid the conspiratorial conflict over free trade, imperialism and global economic integration (economic globalization).

The “conspiracy” of free trade

The battle over economic globalization became particularly frenzied behind the high tariff walls of late-19th-century America, where protectionist sentiment ran rampant within Republican political circles.

The tariff issue dominated American politics like no other in the late 19th century. And, echoing Trump’s rhetoric today, the Republicans of yesteryear sought to protect the country’s infant industries from foreign competition, especially from Free Trade England’s cheaper imports. By the 1880s, the GOP had become the party of protectionism through and through.

As a result, U.S. advocacy for free trade was portrayed by Republicans as tantamount to a British conspiracy. Very different from their often professed love of Adam Smith today, Republican protectionists began seeing Adam Smith’s invisible hand hidden behind any attempt to lower high U.S. tariff walls.

Far from being late-19th-century supporters of trade liberalization, paranoid protectionist GOP leaders instead time and again charged the free-trade opposition with being agents of a vast British conspiracy to undermine America’s protected markets.

Republicans’ protectionist paranoia

When U.S. free traders appeared to be gaining the upper hand in national politics in the early 1890s, future Republican president William McKinley – who had well-earned his nickname “the Napoleon of Protection” as a Republican congressman from Ohio – exemplified the party’s protectionist paranoia.

He charged that a transatlantic conspiracy was afoot. He declared that it was “beyond dispute” that a secret partnership existed between “free trade leaders in the United States and the statesmen and ruling classes of Great Britain.” Similar charges of a transatlantic conspiracy had followed the U.S. free-trade movement throughout the latter half of the century.

If the “paranoid style” were a Victorian American play, the alleged conspiracy of free trade would deserve top billing.

And yet it was the work of this same conspiracy-laden American free-trade movement of the late 19th century that laid the foundations for the subsequent U.S. promotion of free-trade initiatives like NAFTA and the WTO in the 20th century. Those are the very same free-trade initiatives that are now under fire from the Republican Party.

The conflict returns

Despite short-term setbacks and long-term charges of being in cahoots with the British throughout the late 1900s, America’s free traders would nevertheless maintain a semblance of cohesion and optimism as they took the free-trade fight well into the 20th century.

They would continue their struggle for what proponents and critics alike now describe as an American-led neoliberal world order that came into being in the 1930s and the 1940s.

This same U.S.-led neoliberal economic order is now under attack, even within the United States itself.

The global conflict between free trade and protectionism has once again returned to America’s shores – and the terms of the debate mirror those of the late 19th century.

Adapted from The ‘Conspiracy’ of Free Trade: The Anglo-American Struggle over Empire and Economic Globalisation, 1846-1896 by Marc-William Palen (Cambridge University Press, Feb 9, 2016)