Free Trade vs Patrick Buchanan
February 15, 1996

Patrick Buchanan is proving to be a headache for some of his fellow-Republicans. While his strong views on abortion and gay marriages find support among the so-called social conservatives, his belligerent stance on international trade and corporate profits is alienating the "economic" conservatives within his party. This article deals with Mr. Buchanan's views on trade.

The proponents of free trade have always found it difficult to explain its virtues to the general public. The opponents of free trade, on the other hand, can articulate their arguments for protectionism (i.e., trade subject to government restrictions) with a degree of lucidity that is immediately apparent to the layperson.

And so, when Mr. Buchanan rails against an influx of cheap imports into this country, he can point out with piercing clarity the industries - and the workers - that are adversely affected by the imports. Cheap shirts from China? The U.S. apparel industry. How could American workers possibly compete with the low wages paid to Chinese workers? No wonder, then, that our apparel industry is in decline. Or, take the case of automobile imports. All those Toyotas and Hondas from Japan - are they not destroying American jobs in the automobile industry? (Although, in this case, the low-wage argument does not apply - Japanese workers earn more than their American counterparts.)

Once the import-related problems are identified, the solution is clear. Restrict imports into the country. Let's impose a tariff, says Mr. Buchanan, on Chinese and Japanese goods; by making foreign goods more expensive in the U.S., our industries will have a better chance of competing with them, and our economy will prosper.

Ah, were it so simple. Mr. Buchanan is by no means the first to offer this seemingly elegant solution to our problems - trade protection has been around for centuries. But Mr. Buchanan's call for its use poses a dilemma for Republicans who generally favor free trade and open markets.

What is the problem with Mr. Buchanan's arguments against free trade? There are several. One, free trade forces domestic firms to become more efficient and productive. Witness the result of the forces of competition unleashed, in the 1980s, by the much-maligned Japanese car makers; arguably, it was the influx of cheap, reliable and fuel-efficient Toyotas, Hondas and Nissans that forced Detroit to produce better-quality cars at competitive prices. Indeed, the recent resurgence of the U.S. auto makers - Chrysler is one of the most innovative car makers in the world today - can be traced to the need to survive and compete with the best that the world (read Japanese and German) had to offer.

The experience of the automobile industry, or the apparel industry, or indeed any import-competing industry, reveals the second benefit of free trade. Low prices for consumers. This virtue of free trade is often neglected in public discourse - apparently, for protectionists, the consumers don't matter. But they do. The next time you hear rants against cheap shirts from Asia, think of this: Who buys these shirts? Why, mostly low-income and middle-income families. Families that don't have a great deal of purchasing power. And it is not just cheap shirts that are the target of Mr. Buchanan's fulminations - many of the goods that we buy today would be rendered more expensive by the imposition of import tariffs. For many consumers, the increases in the prices of these goods will make a significant dent in their wallets, thereby lowering their standard of living.

The third benefit of making trade more open is not immediately apparent; it shows up over time. Indeed, in the short run, it may not be a benefit at all. For, the removal of trade barriers does indeed result in the decline of certain industries - apparel, for instance - with a concomitant loss of jobs. Would these jobs have survived for long in the presence of trade barriers? Perhaps. Technological changes in the economy serve to make certain kinds of employment redundant, while creating new opportunities elsewhere. And so it is with free trade. The worker laid off in the import-competing industry will, with suitable retraining, find alternative sources of employment in the thriving sectors of the economy. Admittedly, the process of acquiring new skills may be quite arduous and time-consuming; however, the government can make the transition easier by offering suitable tax breaks for continuing education and retraining programs.

Mr. Buchanan's proposal to impose trade restrictions - "social" tariffs on goods from developing countries, and the garden variety of tariffs on goods from others - is fraught with peril. For, when confronted with barriers to their exports to the U.S., other countries are likely to erect trade barriers of their own to keep out U.S. goods. Not only will the U.S. export sector be decimated as a result, the erection of trade walls on each border will choke off world trade leading to drastic declines in economic growth everywhere and a substantial deterioration in the world's standard of living.

Pretty sobering stuff. But there's more.

Unfortunately, Mr. Buchanan's protectionist bent takes him even further. Not content with mere import tariffs, he argues that the United States should withdraw from its international trade commitments, specifically the North American Free Trade Agreement (NAFTA) and the World Trade Organization (WTO). In addition to its deleterious effects on the economy, such a course of action would isolate the United States in the world community and seriously diminish the leadership role that it currently plays in the international arena. The world would be worse off for it; so, too, would the United States.

Mr. Buchanan may be unconcerned about all this. Right now his objective is to play on the fears of the working-class - primarily, the fear of the loss of a job. In seeking to portray trade as the villain, however, he has barked up the wrong tree.