In a deserving tribute to Cordell Hull for his work in support of free trade, Jeffrey A. Tucker and Peter C. Earle engage in some unnecessary and gratuitous Trump bashing.

Before dealing with the Trump bashing, some background comments on free trade are in order.

The Academic (Ideal) Case For Free Trade

The case for free trade is simple. Pedagogically, the lawyer – secretary example can be used to introduce the concept.

A lawyer is the best attorney in town. This lawyer is also the best typist. He engages a secretary who cannot type as well or as fast.

This act represents a “division of labor.” This key economic concept is central to understanding personal and group wealth. Markets make the division of labor possible.

Imagine how much poorer the attorney and the rest of us would be if we had to grow our own food, build our own transportation (horses would still be with us), doctor to ourselves, defend ourselves in court, etc. etc.

Wealth creation and higher standards of living occur when markets are large and function well. Defining markets according to political demarcations (nations) diminishes their benefits unless goods pass freely across borders. The bigger the markets, the better the division of labor and the better the wealth effect.

Even if one country has an absolute competitive advantage in all products, well-being is still enhanced by free trade.

Kimberly Amadeo discussed the “theory of comparative advantage:”

Eighteenth-century economist David Ricardo created the theory of comparative advantage. He argued that a country boosts its economic growth the most by focusing on the industry in which it has the most substantial comparative advantage.

For example, England was able to manufacture cheap cloth. Portugal had the right conditions to make cheap wine. Ricardo predicted that England would stop making wine and Portugal stop making cloth. He was right. England made more money by trading its cloth for Portugal’s wine, and vice versa. It would have cost England a lot to make all the wine it needed because it lacked the climate. Portugal didn’t have the manufacturing ability to make cheap cloth. Therefore, they both benefited by trading what they produced the most efficiently.

No trained economist, qua economist, honestly argues against free trade. Economists on government payrolls compromise their independence and routinely prostitute economic ideas in order to support the political needs of their employers. Obvious examples of the duplicity of such gun-for-hire economists is support for trade protections, minimum wage legislation, government spending, price controls, etc.

Honest economists are reluctant to accept political positions. Milton Friedman never joined a political administration because he would have been pressured to modify his positions. He argued he could be more effective as an unconstrained, apolitical analyst.  Sadly, too many second-rate economists are drawn to the power and riches of government positions.

The Political Case For Free Trade

A political case can be made for free trade because it enriches all societies who participate. However, no politician has such a constituency. Few even try to cater to the district or area which elects them.

The highest political priority is to get elected or re-elected. That means pandering for votes. Target groups are identified.  Attractive programs are designed for these groups in order to obtain their votes. This divisive approach benefits some at the expense of others. Proper (the good of all) policies are pursued only if they do not risk re-election outcomes.

A second priority for politicians is to benefit from office. Policies that enhance campaign contributions (legal but usually not optimal) are pursued. Similarly, policies that enhance the monetary well-being of the politician or his cronies (illegal and also not optimal) are pursued. These can involve under-the-table payments or future employment as lobbyists among other things.

Thus, there is little to no political support for free trade.

The less competitive a political race, the greater the opportunity for sub-optimal and illegal activities. That is why the worst political districts (income, crime, etc.) are usually found where political figures or an individual party dominated for long periods.

There are constituencies for all kinds of legislation but there is no constituency for free trade. Innumerable interest groups are against free trade. Market obstructions, properly designed, can reward local companies and/or labor. Non-Americans don’t matter because they can’t vote.

Trade policy offers great leverage to politicians. All incentives point toward restricted trade. Barriers can be tailored to benefit specific constituencies. Inefficient companies can be protected from competition by tariffs or other trade barriers. Labor union monopoly power to extract higher wages than would be otherwise possible can be protected by restricting competition. Organized labor and business are important sources of political support and trade restrictions can help them. For this help, money and votes are the quid pro quo.

Political power is a valuable asset and is not wasted. Politicians quickly learn how to personally benefit from it. Constituents are always asking for preferential treatment of some kind.  There is no free lunch for these “favors.” “Compensation” is always extracted.

Money is the “Mother’s milk of politics.” It corrupts ethics and principles. Many seek office to as a means to wealth. Some politicians enter the field either naive or idealistic. Virtually all are quickly compromised or leave politics. Power corrupts, always. You can’t be in the pigpen without being soiled. Honest and honorable people know that.

All politicians have constituents who they try to “protect” in order to raise money and votes. From a purely political standpoint, there is little motivation to do the right thing if it cannot be used for advantage. Free trade offers little to parochial politicians. These comments apply equally to non-US politicians.

Everyone knows the benefits of free trade, but it takes away the power and income potential for the political class. Thus we have something called “fair” trade which pretends to be a substitute or equivalent to free trade.

Free Trade versus Fair Trade

Free trade is straightforward. Its benefits are known. One cannot be against it.

Hence, politicians must pretend to create free trade agreements. Typically they call them fair trade agreements. But this euphemism allows all the unsavory political benefits while pretending toward free trade.

We don’t have free trade agreements. We have never had free trade agreements. Politicians are not interested in free trade. Yet, here are some of the fraudulent efforts attempted to be called free trade agreements:

A free trade agreement is a simple thing. It requires only one sentence: Goods shall pass between nations absent the effects of any penalties, subsidies or quotas. Yet most of the above “free” trade agreements are more than a thousand pages.

A thousand pages is necessary to placate every interest group with any power. It is nothing but favors to some and penalties to others. Of course, we are unlikely to ever see free trade. It cuts into the extortion power of politicians in all nations.

It is correct to support free trade but it is incorrect to argue that we have ever had it. The political class makes it virtually impossible to achieve.

Trump Bashing

My frustrations regarding free trade (or the lack of it) are likely just as great as the Tucker – Earle piece. Cordell Hull’s efforts were admirable. The Great Depression saw trade barriers erected everywhere in the world as nations attempted to benefit themselves at the expense of others. This policy, like so many before and during the Great Depression, was wrong and harmful. Hull led a crusade for decades to educate and correct in the area of international trade policies.

The reason to call the Trump bashing gratuitous was that it was not necessary to honor Mr. Hull. Furthermore, the first three paragraphs of the article do not even mention Hull:

Generations of Americans have taken the ideal of free trade for granted – until the Trump administration, led by the self-described “tariff man,” turned on it and replaced it with a mercantilist strategy. What began with hope for better deals has turned into the attempted imposition of a pre-modern form of economic planning.

Down with imports. Up with exports. Trade deficits balanced by taxes on Americans masquerading as tariffs against foreigners. The ideal of cooperation between enterprises the world over is replaced with competition between states, funded via the printing press – as the president said directly in a Tweet.

The reversal is only 18 months old, but it is not panning out as planned. Trade deficits are up. Exports to China are down 19% for the year, while imports are down 12%. Direct foreign investment in the US has taken a dive. Businesses fear investment. Prices for many are rising. Many American businesses that depend on trade (which means, at some level, nearly all) are feeling the pain. Stocks are lower today than when the trade war begin in early 2018. International tensions are rising in all directions.

My objections may seem trivial but they are indicative of the current campaign Trump bashing for everything that someone does not agree with. I thought Mr. Tucker had more objectivity than these lead paragraphs suggest. Specifically, here are my objections:

• First, the article is about  Cordell Hull, although his name is not mentioned until the fourth paragraph.
• Second, this country has never had free trade, at least anything approaching the ideal sense.
• Third, the claim that Trump opposes free trade (and is the first one since 1948) appears to me to be wrong or at least not substantiated.
• Fourth, a claim that Trump favors free trade more than any of his predecessors could be made. Trump’s actions in this area could be an attempt to get to free trade by forcing others to back away with policies that obviously are anathema to free trade. Whether that is true or not will be determined over time, but such an interpretation is not inconsistent with many of his other unconventional approaches used to effect positive change in other areas.

I am not necessarily in favor of Trump’s means and methods. His use of unconventional techniques to improve matters have been criticized before. Some of these have actually worked. Trump is not a politician. Nor was Ross Perot who correctly predicted the effects of George H. W. Bush’s trade policy. Is Trump wrong because he approaches things in new ways?

No one has come close to free trade. Perhaps Trump is targeting this ideal or perhaps he is misguided. Time will determine the effectiveness of his motives and methods.