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VIDEO: Learning the Lessons of Tariffs and Trade

Our friends at the Adam Smith Society—the Manhattan Institute’s professional association for business students—have hosted some excellent events and presentations over the past few years, including at their 2018 annual meeting. At that event The Wall Street Journal’s Mary Anastasia O’Grady interviewed Prof. Douglas Irwin about his 2017 book “Clashing over Commerce: A History of U.S. Trade Policy.” The event took place in April of last year, but their conversation is still very much relevant to trade debate going on today.

O’Grady and Irwin cover several important points, including a debunking of the argument that widespread use of tariffs in the 19th century forms an example that the United States and other countries should embrace today. Irwin also points out that rather than government using tariffs to successfully incubate domestic industries (as their advocates claim), the politics of tariffs more often works in reverse: domestic producers emerge due to a variety of factors, but then demand protectionist policies to avoid market competition.

My Competitive Enterprise Institute colleagues Iain Murray and Ryan Young wrote an excellent study last August, “Traders of the Lost Ark: Rediscovering a Moral and Economic Case for Free Trade,” that incorporates many of the themes that Irwin covers in “Clashing over Commerce.” Ryan followed that up with the short Web Memo “Common Myths and Facts about Trade.” In his foreward to “Traders,” British politician and Initiative for Free Trade President Daniel Hannan summarized how historical analysis demonstrates the overwhelmingly advantages of free trade:

“Free trade, one of the greatest blessings which a government can confer on a people, is in almost every country unpopular.” So wrote Lord Macaulay, the British poet, historian, and Member of Parliament, in 1824. His words were true then and are, if anything, even more true today. Which is bizarre when we consider the improvements that free trade has brought to the human condition during the intervening two centuries.

The economic historian Deirdre McCloskey has chronicled, at vast length, how the past 200 years have seen a rise in living standards on a different scale from anything Homo sapiens had experienced up to that point. In Macaulay’s time, almost everyone subsisted on around $3.00 a day. The life of a peasant farmer in Poland or Ethiopia or India or Japan would have been recognizable, in its essentials, to his Iron Age ancestors. Since then, our species has increased its wealth by, at a conservative estimate, 3,000 percent.

Yet clever people campaign against the system that enabled that secular miracle. In industrialized countries, they protest that free trade will shift jobs to places with lower wage levels; in developing countries, they fret that wealthy corporations will take over.

If you’re in business school or know someone who is, the Adam Smith Society is an excellent source of knowledge and fellowship. See their brief introduction video below.