05/11/2016 by Laurence M. Vance
[This article was adapted from a talk delivered at the 2016 Austrian Economics Research Conference at the Mises Institute.]
Although most economists today generally see the benefits of free trade, such is not the case in the political realm. Leftists who are beholden to labor unions, for example, support protectionist measures to keep the votes coming from their their largest constituencies. Meanwhile, Conservatives are a mixed bag, and the “best” conservatives are often the worst when it comes to free trade.
Conservative Critics of Free Trade
Paul Craig Roberts has called free trade “a no-think cult that permits a greedy few to destroy America’s economic position for their own gain.” He claims that “the known necessary conditions for free trade to be mutually beneficial do not hold in today’s environment where factors of production are as mobile, if not more so, than traded goods.” Tom Fleming of Chronicles has stated that free traders are “international socialists to the morrow of their bones.” Greg Kaza, who has sometimes attended this conference, has criticized in Chronicles those who “ignore the success of autarkic U.S. trade policy during the presidency of Thomas Jefferson” that “forestalled” and “delayed” the war that came in 1812. Another writer for the magazine bemoans American’s “stubborn, ideological commitment to free trade.” My friend Pat Buchanan credits protectionism in the 1800s for making the United States “the greatest industrial power the world had ever seen.” The platform of the Constitution Party maintains that “the United States government has engaged in a free trade policy which has destroyed or endangered important segments of our domestic agriculture and industry, undercut the wages of our working men and women, and totally destroyed or shipped abroad the jobs of hundreds of thousands of workers.”
Some conservative opponents of free trade claim that they are merely making a distinction between free trade and government-managed trade agreements or the “free trade agenda.”
This is especially true of articles in The New American magazine, a publication for which I have written many articles. The magazine’s articles often lament the decline of manufacturing jobs, the stagnation of wages, the loss of high-paying jobs, plant closings, the shrinking of the middle class, the waning of the American Dream, the reduction in the standard of living, and the exodus of businesses and jobs to China and Mexico. This is often blamed on the convergence of globalization, outsourcing, offshoring, excessive government regulations, trade deficits, big government, high corporate tax rates, the Export-Import Bank, immigration policy, and multinational trade agreements. Nevertheless, the concept of free trade is sometimes obliquely disparaged and on occasion explicitly so.
One article in particular — although it rightly discerns the statism inherent in mercantilism — explains how multinational trade agreements like NAFTA entail government regulation of trade, describes the theory of comparative advantage articulated by David Ricardo, and points out how even Adam Smith made exceptions to the free-trade principles he advocated — but it also disparages “free-trade purists,” America’s “monstrous trade deficit,” and “blind faith in unrestricted free trade.” “Because most consumers are also workers,” the author writes, “there is no guarantee that, under free trade, they will gain more as consumers than they lose as workers.” He doesn’t even shy away from using the “P” word: “Because we have not been willing to protect various manufacturing industries, America can no longer produce goods in sufficient quantities to offset the amount of goods that it imports.”
Protectionism is alive and well today just as it was alive and well in the nineteenth century.
Champlin’s Critique of Protectionism
While Richard Cobden and John Bright were back then making the case for free trade in Britain, the principle was being advanced in the United States by what seems like an improbable source — a Baptist minister.
James Tift Champlin was born in Colchester, Connecticut, in 1811. He united with a Baptist church at age fourteen. He enrolled in Brown University in 1830 where the president, Francis Wayland, greatly impressed him. Said Champlin: “I greatly admired the man and received a great impulse from his life, his teachings, and especially from his sermons in the church, and his short, pithy addresses to the students in the chapel.”
To understand Champlin, we must first take a look at Francis Wayland.
Wayland was equally an author, a preacher, a teacher, a pastor, and an administrator. He became the president of Brown University in Providence, Rhode Island, in 1827, serving until 1855. In 1837, Wayland wrote one of the great but long-forgotten works of political economy from the nineteenth century. The Elements of Political Economy is based on sound and insightful economic principles with an emphasis on human action. Wayland was a staunch defender of private property, merchants, retailers, middlemen, money-lenders, and classical liberalism.
After graduating in 1834 and trying his hand at teaching, James Champlin returned to Brown University as a resident graduate and was appointed a tutor in the university in 1835. In 1838, he accepted the pastorate of the First Baptist Church of Portland, Maine, and was ordained. In 1841, he was elected professor of ancient languages at Waterville College in Waterville, Maine, which is still in existence today as Colby College. After publishing several classical works, he was awarded the honorary Doctor of Divinity degree from the University of Rochester in 1855, and the same from Brown University in 1860. In 1857, Champlin became the college’s president and professor of moral and intellectual philosophy. During this period he published books on philosophy, ethics, and, most notably, Lessons on Political Economy in 1868. After his retirement, he published a volume of Selections from Tacitus and a massive work on the US Constitution. He died in 1882.
Champlin also wrote for denominational journals. One article in particular, “Free Trade and Protection,” is the basis of this talk. It was published in The Baptist Quarterly in October of 1873. This was a Baptist quarterly journal published by the American Baptist Publication Society in Philadelphia from January 1867 to October 1877. I have gone through the contents of every issue. The vast majority of the articles are just what you would expect to find in a theological journal. It is surprising that Champlin was able to have this purely secular article in defense of free trade published in such a periodical.
Champlin recognizes the distinctive nature of his article, and justifies its inclusion in a religious journal in his introductory remarks. Because it is true of individuals that an enlightened self-love, “which regards the rights of others, and their good also, as far as their good does not conflict with our own, is the only sound principle upon which business can be conducted,” it must also “be true of nations.” Therefore, “the public policy of a government, then, should aim to promote the true interests of the greatest possible number of its subjects, and never can be justified in aiming to promote those of a mere minority.” Champlin then says he makes no apology “for occupying a few of these pages in discussing some of the leading doctrines of the protectionist school of political economists.” He reasons: “If these doctrines shall be found to favor the interests of the majority, let them stand; if not, they must fall.”
Champlin introduces four “maxims” of the protectionist school:
1. The stimulus of protective duties is necessary in order to develop certain manufactures and industrial pursuits which are essential to national independence, and hence that it is good policy for a government to impose such duties on the importation of those foreign articles which naturally compete with these manufactures.
2. A protective tariff may at first increase the price of the protected articles, yet this is more than compensated by the great reduction in price which is certain to ensure in consequence of that protection.
3. Certain manufactures, having been thus introduced by protective tariffs, tend to introduce others, increase capital, develop the resources of the country, and furnish occupation for the different classes of a community.
4. As other nations protect their own favorite manufactures by laying a tariff upon the like articles imported from our country, we ought in retaliation, or self-defense, to protect our favorite manufactures in the same way.
Regarding the first protectionist maxim, the economic independence argument, Champlin acknowledges that it is “one of the most plausible” and “one of the most tenable” protectionist maxims that has “a grain of truth in it.” He includes within it, without specifically mentioning them, what we might call the infant industries and national defense argument arguments. No doubt because the unstated purpose of protecting infant industries is so that economic independence in some industry can be achieved, which is important because a country doesn’t want to find itself at the mercy of another in time of war.
The Problem of Economic Calculation
Nonetheless, Champlin believes that government intervention into some particular industry is harmful, unnatural, and ineffective. He asks: “Can the insight of a king or a parliament be a surer guide for a people in their business, than the combined insight of the entire nation, each familiar with his own sphere of operations, and having a direct personal interest in the success of his own labor?” He says that “the government adds nothing to the wealth of the community; it only bestows on a few what it has first raised from the many.” Champlin also points out the relation between free trade and peace: “By bestowing their industry upon what they can produce cheapest and best, and exchanging their surplus with other nations, a people are taking the most effectual course to avoid war; since nations that trade with each other have a common interest in maintaining peace. “
Champlin rejects the second protectionist maxim for being an “unsound” post hoc argument. Temporal succession is not necessarily evidence of causal relation. The reduction in the price of a good because of “improved machinery and greater familiarity with the business” after the initial increase in the price of a good because of the addition of a protective tariff is a possibility. “But,” Champlin says, “to ascribe this cheapening process to the effect of the tariff, is simply absurd” because “the effect of a protective tariff, at every subsequent period, must be substantially the same” as when it was “first established.” Protectionists are forgetting that “in the progress of the industrial arts, nearly all processes of production are gradually cheapened, not only in one, but in all progressive nations.” Champlin asks if it is “not supposable” that “those foreign nations which were acquainted with the manufacture” of a good and “formerly supplied” the US market before a tariff increased the good’s price, “may have cheapened the process in at least as great a proportion”? He concludes that “those interested in protected manufactures are always so anxious to retain the protection” because it does in fact raise the price of the good being protected.
Is It Stimulus or Malinvestment?
The third protectionist maxim discussed by Champlin is the economic stimulus argument. He begins by questioning its foundational premise that tariffs can introduce manufactures at the outset. “Tariffs,” he argues, “do not create wants, neither do they increase the sagacity of men.” While acknowledging that various industries necessitate and are mutually dependent on each other, and recognizing the gradual improvements that have occurred in manufacturing, Champlin makes clear that neither of these things can be attributed to protective tariffs. “Since,” he points out, “all the great branches of manufacture had already got a good start in our country before protection was thought of,” “is it supposable that, with such a people as ours, they would not have gone on steadily improving without any aid from the government?” Tariffs that “induce men to engage in certain species of manufactures before they are really profitable” do not “increase the capital of the country.” It is profitable production that enriches a nation, “and whenever any branch of industry promises to be profitable, men are sure to find it out, and will not require the stimulus of a protective tariff to induce them to engage in it.” To say that protectionism has increased our wealth “is the height of folly.” To suppose that Americans, “with such resources at their command, can have been in any considerable degree dependent upon protective tariffs for their advanced position in the arts of production, is the absurdest thing imaginable.” Americans have gained this position “in spite of such tariffs, which have simply transferred money from the hands of one class to those of another.”
The last protectionist maxim refuted by Champlin is the retaliation argument. Using the simple example of two communities separated by a river with the soil conducive to growing strawberries on one side and melons on the other, Champlin explains how the introduction of a protective tariff, even by one community, injures both of them, and how a retaliatory tariff merely adds insult to injury. He concludes that “should it be allowed to be both a natural and a commendable principle to injure others in retaliation, it will hardly be considered either natural or commendable to injure ourselves, for the sake of doing so.” And besides, says Champlin: “In order to enforce the law, and collect a duty so tempting to smugglers to avoid, more custom-houses will have to be established along the banks of the separating river, with additional officers and an increased police force at their command.” This he terms “another loss, or injury, to the injurer.”
Champlin concludes his purely secular defense of free trade with the reflection that all of the protectionist maxims are “unsound.” A protective tariff “is an unnatural, unnecessary, roundabout, and wasteful method of encouraging home production, alike hostile to the interests of the country where it exists, and to the harmony of the world.” And I want to conclude by referring once again to the article in The New American magazine that I earlier singled out. The author states that the theory of comparative advantage is “the linchpin that holds together all of the standard arguments supporting free trade.” I think rather that the linchpin is freedom. As Edmund Burke wrote way back in 1795: “Free trade is not based on utility but on justice.”