By George A. Pieler and Jens F. Laurson The rhetoric has only quieted for the moment, but the World Financial Crisis has not prevented free trade from coming under assault – and if the past teaches us which mistakes will be repeated, the political ‘fixers’ will find free trade a useful, populist target, yet. Sen. Obama has positioned himself as the most anti-trade US candidate in decades (rewrite NAFTA, hold off on new trade accords, and stop ‘exporting US jobs’), though his campaign advisors gave Canada a wink-and-nod assurance he didn’t really mean all that. Sen. McCain has sound free trade credentials but treats them as if they were a liability (they might well be), only mentioning them on occasion. In the wake of Doha’s collapse, this is not good. Trade’s most ideological critics want us to believe that free trade is some sort of luxury, something we can ‘afford’ only when we first have assurance that domestic jobs will be preserved and domestic companies protected from too much turbulence. But trade is not a luxury, it is a necessity. Without trade, there would be no luxury – anywhere – in the first place. The siren song of protectionism is the idea that the US or any nation can freeze things in place when the economy is healthy. But it’s not just not that simple, it’s simply not true. Economies are dynamic in nature, they thrive of their own movement, the constant traffic of trade. If we merely try to preserve the status quo, we are bound to fall backwards. Trade is the key source of that dynamism. It increases competitive pressure, it enables nations to pursue the markets where they do best (Australian wine, American software, Japanese cars—pace, GM) and benefit from imports that help restrain prices and broaden consumer choice. All that translates into higher productivity: more goods and services for the same production inputs. Higher productivity equals lower inflation, faster job creation, and technological progress. That means there is a lot at stake in advancing open trade, but the case for it is really quite simple. Trade is the linchpin of economic – and civilisatory – progress. It is what has lifted the struggling, starving majority of peoples (well over half a billion Chinese in the last two decades alone) out of the daily grind to the comfortable existence we now consider the standard. (As if, somehow, even most Europeans hadn’t comparatively lived in the poorhouse just a hundred years back.) The turbulence of creative destruction is a small price to pay for keeping the doors to our economic future wide open and barring them to the stagnation of economic privation.. That privation is exemplified by our economic downturn, with less buying power here and abroad, triggers less buying and selling across borders and within borders. Voila—automatic trade restriction. As Robert Krol demonstrates, writing for the Cato Institute, “expansion of international trade has benefited the United States and its trading partners considerably. The benefits include a higher standard of living, lower prices for consumers, improved efficiency in production and a greater variety of goods.” Krol believes international trade is so beneficial that a global elimination of trade barriers would boost the income of Americans by a total of half a trillion dollars. While it’s too late to change the near-term trajectory of the economy, recovery will be slower if the US signals that it is no longer interested in championing free trade (not that we do so perfectly). As for new restrictions on trade: that’s what helped catapult the world into the Great Depression long after the stock market recovered. That concern should be at the forefront of G-20 meetings, beginning in Washington on November 15, to set course for revamping the global financial system. George A. Pieler is a senior fellow with the Institute for Policy Innovation. Jens F. Laurson is editor in chief of the International Affairs Forum.

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