Robert Lighthizer writes in this 2023 book:
* The most noteworthy distinction between the Reagan years and the Trump years was that President Trump cared enormously about trade issues. It was one of the major reasons why he chose to run for president. Taking action in this area was something that he thought about every day, whereas for President Reagan, trade had not been a top – level priority — he had many critical domestic and international policy issues on his mind. President Reagan didn’t talk about trade or have meetings on it more than a few times a year. The same thing could be said of President Bush and President Obama.
* First, the post – World War II strategy of reducing barriers to imports in return for the hope of new exports seriously went off the rails in the 1990s. The United States placed an all – or – nothing bet on free trade in the form of three consecutive deals. Since that time, we have seen the loss of millions of jobs and exploding trade deficits. Second, the United States needs to insist on fair trade in our market and reciprocal access in foreign markets. Decades of poor trade deals have produced neither. Third, we need a policy that assures balanced trade. We cannot afford to continue to transfer our wealth to foreign countries in return for consumer products. These are the realities. The more fundamental questions are, how did we get to this place, and what is the philosophy of trade that will achieve these objectives?
* For most average people, economic policy and thus trade policy should be about improving the prosperity of our communities, not high – minded foreign policy maneuvering or getting cheap stuff. They want to have better jobs, stronger families, and safer, more prosperous communities. They believe that America’s strength is its people as producers. A trade policy that pursues these goals is what we call a trade policy for the common good…
* Our country is the second largest exporting nation after China, and overseas markets help support millions of American jobs. Global competition is essential to maintaining technological superiority. Our companies must go head – to – head with foreign companies to remain sharp, and they must often integrate cutting – edge overseas technology to improve their own. Further collaboration in research and development with friendly, secure nations is important. The profitability of the American agriculture sector depends on exports. Our services sectors run substantial surpluses every year, and we lead in technology, financial services exports, and a number of other areas. America has a number of competitive advantages, and we make them count.
* The US services surplus is very significant for our country. However, it is important to understand what that means. First, compared to the goods deficits, the services surpluses are small. Second, the services numbers are much less reliable than the goods numbers. By their nature they are more difficult to count than goods crossing a border. To create this data, the Department of Commerce sends out a survey to businesses in these industries and then it guestimates the imports and exports based on the responses. Many things that readers may not think are exports are still counted as exports. For example, foreign students coming to our universities and foreign tourists are both large services export categories. Finally, it is important to know that over 80 percent of our services surplus is accounted for by royalty payments for the use of intellectual property paid back to US companies by their foreign subsidiaries and financial services in which the United States has a large competitive advantage, but which also produce relatively more employment overseas than they do at home.
* After the fall of the Soviet Union in 1989, however, the United States began to throw caution to the wind. Many believed that the end of autocracy and the triumph of democratic market capitalism was inevitable. This post – Cold War push for unfettered trade liberalization did yield some benefits. For example, lower trade barriers and the proliferation of free trade agreements (FTAs) in recent decades swelled the profits of many multinational corporations. That benefited not only CEOs but also middle – class Americans who hold equities in their retirement accounts. Trade also helped revive many of the country’s great urban centers. Cheap imports and the rise of big – box and online retailers have made an ever – expanding class of consumer goods available to the masses. And in China, India, and throughout the rest of the developing world, millions of people have been lifted out of poverty.
* Between 2000 and 2016, the United States lost nearly five million manufacturing jobs. Median household income stagnated. And in the places that prosperity left behind, the fabric of society frayed. Since the mid – 1990s, the United States has faced an epidemic of what the economists Anne Case and Angus Deaton have termed “deaths of despair.” They have found that among white middle – aged adults who lack a college education — a demographic that has borne much of the brunt of offshoring — deaths from cirrhosis of the liver increased by 50 percent between 1999 and 2013, suicides increased by 78 percent, and drug and alcohol overdoses increased by 323 percent. From 2014 to 2017, the increase in deaths of despair led to the first decrease in life expectancy in the United States over a three – year period since the 1918 flu pandemic.
* Free trade is a unicorn — a figment of the Anglo – American imagination. No one really believes in it outside of countries in the Anglo – American world, and no one practices it.
* All the great economies were built behind a wall of protection and often with government money. The British industrial revolution was aided by a wall of tariffs. Likewise, the late – nineteenth – century explosion of American industry was the product of protectionism and often subsidies. Can anyone imagine the great American railroads being built without the grant of free land per mile? Similarly, the manufacturing countries of Japan, Germany, and now China all benefited during their development from tariffs, other barriers, and subsidies of one kind or another. It is important important to remember that no country became great by consuming. They became great by producing.
* Advocates of free trade frequently argue that enhanced international trade corresponds with greater international peace. This point of view traces back to the post – World War II period. Before World War II, tariffs were high by contemporary standards. From the 1820s until the late 1940s, the weighted average US tariff (which measures duties collected as a percentage of total imports) rarely dipped below 20 percent. President Franklin Roosevelt and the New Deal Congress ushered in a period of relative tariff liberalization in the 1930s, but even then the tariff rate remained in the mid – to high teens throughout the decade. After the war, however, both Democrats and Republicans came to champion tariff reduction as a means of preventing yet another conflict, arguing that trade fostered interdependence between nations. Trade liberalization came to be seen not just as a tool of economic policy but also as a path to perpetual peace. Indeed, Cordell Hull, the secretary of state from 1933 to 1944 in the Roosevelt administration and lead architect of its trade policy, claimed that his philosophy centered on the idea that “unhampered trade dovetailed with peace; [and] high tariffs, trade barriers, and unfair economic competition, with war.”
The need for the United States to temper the often uncritical post – World War II enthusiasm for interdependence at all costs has never been greater than it is now, in the face of the Chinese threat. We need to remember that, historically speaking, interdependence does not always lead to peace. In the United States, economic ties between the North and the South did not prevent the Civil War. Global trade grew rapidly in the years right before World War I; exports as a percentage of global GDP peaked at nearly 14 percent in 1913, a record that would hold until the 1970s. Likewise, it would be hard to argue that the rise of Germany as a major exporter in the late nineteenth century helped pacify that country in the first half of the twentieth. Japan’s dependence on raw materials from the United States motivated its attack on Pearl Harbor. More recently, as we will discuss in chapter 4, China’s accession to the WTO in 2001 — which was supposed to make the country a model global citizen — was followed by massive investments in its military capabilities and territorial expansion in the South China Sea. And certainly the great trade between Ukraine and Russia did not stop Putin’s invasion in 2022.
On the flip side, conflict over trade is not always destabilizing or a threat to broader foreign policy objectives. The North Atlantic Treaty Organization (NATO) alliance survived the tariff hikes associated with both the 1960s “chicken war,” when the United States clashed with France and West Germany over poultry duties, and the 1970s “Nixon shock,” when the United States effectively abandoned the Bretton Woods system. The United States and Japan fought about trade in the 1980s, but their bilateral bilateral security alliance stayed strong.
Countries, like people, compartmentalize between separate issues. There may be situations when it is appropriate to make concessions on trade to achieve broader diplomatic aims, but one should keep in mind that such bargains can prove costly in the long run. Letting India join the General Agreement on Tariffs and Trade (the precursor to the WTO) in 1948 with nearly a third of its industrial tariffs unbound, for example, no doubt made sense to Cold Warriors, who thought that it would help bring India into the US camp. Yet the negative repercussions of that decision persist to this day, now that India has become one of the world’s largest economies and, at times, a troublesome trading partner for the United States. Over the years, such concessions have piled up.* Some cite efficiency as a rationale for free trade. For adherents of this faith, the sole objective of trade policy is market efficiency. Lower tariffs and nontariff barriers reduce the costs of producing and distributing goods and services; that, in turn, makes society as a whole better off — or so the argument goes. Of course, there are advantages to lower prices when considering Americans as consumers. The problem is that adherents of this view seldom consider how this single – minded pursuit of efficiency affects the men and women who actually do the producing.
According to the definitions preferred by these efficiency – minded free traders, the downside of trade for American producers is not evidence against their approach but rather is an unfortunate but necessary side effect. That’s because free trade is always taken as a given, not as an approach to be questioned. Rather than envisioning the type of society desired and then, in light of that conception of the common good, fashioning a trade policy to fit that vision, economists tend to do the opposite: they start from the proposition that free trade should reign and then argue that society should adapt. Most acknowledge that lowering trade barriers causes economic disruption, but very few suggest that the rules of trade should be calibrated to help society better manage those effects. On the right, libertarians deny that these bad effects are a problem, because the benefits of cheap consumer goods for the masses supposedly outweigh the costs, and factory workers, in their view, can be retrained to write computer programs. On the left, progressives promote trade adjustment assistance and other wealth – transfer schemes as a means of smoothing globalization’s rough edges.
Please name me a large or medium sized country that became rich without using protectionism.
Grok: “No large or medium-sized country has become rich without using some form of protectionism during its development. Historical evidence shows that virtually all major economies—such as the United States, Germany, Japan, South Korea, and China—employed protectionist measures like tariffs, subsidies, or trade barriers to nurture industries before achieving wealth. Even smaller, open economies like Singapore used targeted state interventions, though less overtly protectionist, to climb the economic ladder. If you’re looking for a counterexample, the closest might be Hong Kong, but it’s a city-state, not a large or medium-sized country, and its wealth stemmed from unique geopolitical and trade roles, not pure free-market policies.”
People who believe that free trade is the path to wealth live in a world of fantasy. They have no empirical evidence to support them.
In 2011, our own forebear of Trump’s reciprocal tariff was published in the Estes Center Journal of International Law and International Trade. We were developing ideas about trade first published by one of us, Raymond Richman, who had received a Ph.D. from the University of Chicago in 1957 with Milton Friedman as his dissertation adviser and then worked as a university professor and economics department chairman and as a consultant for the OEEC, the World Bank, the IMF, the Inter-American Development Bank, the U.S. Agency for International Development, and the Asian Development Bank.
Our tariff would apply only to the goods of trade-surplus countries with a rate designed to take in 50% of the trade deficit as tariff revenue. It would be adjusted quarterly and suspended whenever trade reached balance. Trump’s formula for calculating specific country tariff rates is remarkably similar to our proposal…
Free trade is a wonderful ideal. Each country produces what it can produce with comparative advantage and trades it to another for what that country produces with comparative advantage. As a result, the people of both countries benefit. But in order for free trade to work, it has to be reciprocal. If a trade-surplus country produces products and trades them in return for IOUs, the trade-surplus country gets industries, wealth, and prosperity while the trade-deficit country loses industries, goes into debt, and loses its prosperity.
Trump’s tariffs would have been unnecessary had Keynes, Gephart, Levin, Riegel, Buffett, Morici, or ourselves succeeded in enacting a system that would continue balanced trade into the distant future. Trump has come up with and is implementing a strategy to achieve that worthy end.