A theoretical analysis of protectionism

The Trump Administration, through its aggressively realist view on trade, has reverted back to the idea of protectionism. Utilizing the rationale that employing tariffs on imports will galvanize domestic industries and protect them from foreign competition, the White House has gotten the country involved in several costly trade wars, most notably with China. The data clearly shows that tariffs, such as the section 232 imposed on steel and aluminum, have hurt both consumers and producers in the industry in a multitude of ways. Rather than looking at the issue of protectionism through an empirical lens, it may be worthwhile to understand the philosophical foundations of protectionism, as well as the opposing school of thought: liberal free trade.

For starters, examining the trade war with China (the phase one “detente” notwithstanding) and how it unfolded will give us a better sense of the underlying causes of adopting protectionist policies. In my understanding, the tariffs set by the U.S., along with the retaliatory tariffs from China, epitomizes great power politics and the lengths that superpowers will go in the face of perceived danger. It is no surprise that China has emerged as the fastest-growing economy booming with potential given their labor power and capital. Given this premise, the Trump Administration concluded that sitting around idly and letting the Eastern superpower grow will lead to a Chinese dethroning of global supremacy. As a result, the tit-for-tat situation that these two states found themselves in, with failure of reciprocity having immense economic consequences, ultimately lead to a trade war. With the ineptitude of global liberal institutions such as the WTO, and its infamous appellate court that is seemingly incapable of resolving disputes of any sort, great powers have taken unilateral approaches in settling matters concerning trade and cooperation.

Trump’s slogan of “Make America Great Again” has been the catalyst behind the isolationist rhetoric and protectionist policies. It operates on the claim that America is no longer great and is on the decline, neither of which are valid statements. Although it faces a powerful competitor in the East, protectionism should not be the favored option for a nation that is becoming dangerously economically and socially nationalistic. Globalization and economic interdependence has inextricably tied great power states; it would be wiser to at least try to loosen the knot through peaceful negotiations rather than cutting it completely via tariffs and independence.

Now what exactly does the other alternative, namely free trade, entail? Well we should go back in time 200 years ago and ask a Scottish Moral Philosopher named Adam Smith, who is regarded by some to be the father of modern economics. A champion of free trade and laissez-faire economics, the crux of Smith’s philosophy was the driving force of man, or in this case, the self-interest of the consumer. According to him, this axiom is so apparent and universal, that it could never have been called into “question had not the interested sophistry of merchants and manufacturers confounded the common sense of mankind”. Free trade with no barriers will undoubtedly benefit the consumer, yet Trump’s actions speak not for the common people but for those manufacturers and industrial bourgeoisie. One could argue that unfair trade practices have harmed our industries, which will in turn harm our consumers. However, globalization necessitates that almost every aspect of our lives depends on imports in one way or another; tariffs and protectionism will sever that dependence and penalize consumers for the sake of nationalism and an “America first” lifestyle.

All in all, protectionism is a form of realism that places great power politics and competition at the center of foreign policy. Cooperation is the less viable choice in this paradigm, since dependence and mutual gain will fail to increase at parallel rates. Rather than embracing this doctrine of state level self-interest, it would be wiser to let the invisible hand guide the decisions of consumers and work towards bolstering international institutions to better deal with trade disputes and bring about free trade.