Canada is considering its own round of tariffs on goods from China and other exporters, Bloomberg reports, to stop imports no longer welcome in America from swamping its markets. If Canada takes this drastic step, President Trump’s trade policy may no longer simply threaten American consumers with higher prices or penalize American companies that have foreign producers in their supply chain. He may be threatening the whole global trade infrastructure that has lifted hundreds of millions of people out of poverty, improved the quality and quantity of the goods we all consume, and built tightly integrated trade networks of mutual advantage to replace adversarial military posturing.
Some part of me can’t quite believe it. I started my career at the Economist in 2003, a giddy time for a magazine founded to promote the principles of free trade. China, the world’s largest nation, had just been admitted to full membership in the World Trade Organization; the notorious Multi-Fiber Arrangement, which governed the world trade in textiles, was on the verge of ending, and the Doha round of WTO talks in Qatar was off to a promising start.
Oh, we free traders understood that there were protectionist voices here and there, but it seemed as if they were fighting rearguard actions on the road to defeat. The world economy was simply too deeply integrated, the benefits of trade too obvious and well-known.
Looking back, I think we were reading too many economics papers and not enough W.H. Auden: “ . . . Remember when / Your climate seems a permanent home / For marvelous creatures and strange men, / What griefs and convulsions startled Rome, / Ecbatana, Babylon.”
The Doha round’s 2003 ministerial conference in Cancun, Mexico, collapsed after four days. Attempts were made to revive the talks, but prospects dimmed over the next few years. Then it became clear: The patient had been dead since 2003.
For the next decade, it was free-traders who were fighting a holding action, earnestly debating the merits of better-than-nothing bilateral or regional trade agreements. Then came Brexit. And Trump. Suddenly we’re no longer even thinking about minor advances; we’re thinking about how to manage the retreat.
Free-traders, I now realize, made two basic mistakes, one analytical and one more fundamental.
The analytical mistake was underestimating the effect that China’s accession to the WTO would have on domestic industries in the rich world. When workers complained about trade displacement, we free-traders pointed out that trade creates jobs as well as destroys them, leaving workers generally better off. That’s usually true. But China was a special case. Most trade liberalization occurs slowly, giving workers time to adjust, but when trade barriers to Chinese goods fell, manufacturing workers in the 37 nations of the Organization for Economic Cooperation and Development were suddenly exposed to competition from millions of low-wage workers. Recent research by economists David H. Autor, David Dorn and Gordon H. Hanson suggests that the “China shock” destroyed jobs faster than they could be created.
In our defense, this was a unique situation. There is no other country with a comparable population and a comparable pace of industrialization. It won’t happen again. But that isn’t easy to explain to people who can see what it did to their town, not much comfort to those who lost their jobs.
Which brings me to free-traders’ second, more fundamental mistake: We forgot, in all our pro-trade rhetoric, that people care more about their identities as producers than they do as consumers.
Well into the China shock, people like me rather glibly pointed to all the cheap goods that trade with China had made available. Somehow, it didn’t occur to us that someone who has gone from making $20 an hour as a machinist to making $9 an hour as a Walmart associate doesn’t much care that his new employer now offers fabulous deals on flat-panel televisions.
Our rhetoric had worked when changes were slow and the relatively few people displaced could find reasonably similar employment. But when the changes were fast and harmed large numbers of people, this rhetoric seemed — and was — incredibly callous.
I haven’t changed my mind about free trade. It remains the surest way to improve human prosperity. But I have revised my opinions about the wisdom and tactics of free-traders. We were right about trade but also unconscionably arrogant. If we’d had a little more humility, we might have been able to manage China’s WTO accession so that rich-world workers had more time to adjust. And we could have talked less about what trade made possible for people to buy and more about what it could help them produce.
Alas, we can’t go back and rectify our mistakes. But we can certainly remember them and try to do better, as we fight to keep the current retreat from free-trade principles from turning into a full-fledged rout.