What's Left

December 19, 2004

Is the US a free-trade country?

Stephen Gowans

Yes. And no. It depends on who's doing the trading. The US is without question a free trade country when it comes to exports. US exporters want unrestricted access to foreign markets, and have the WTO, IMF and US Air Force, Army, Navy and Marines to back them up. Imports are another matter. China is imposing "voluntary" restrictions on its exports of textiles to the US because Washington has signaled it won't tolerate unrestricted access to its home market (1). Vietnam has already "voluntarily" done the same.

In the '80s Japan slapped export quotas on its automobile industry to avert threatened retaliation from "free-trading" Washington. The Japanese either had to mix a little water with their sake, or find themselves on the losing end of a trade war with the much larger US.

Trade disputes between the two countries are hardly new.

"The lands of the far shores of the Pacific Ocean played an increasingly important role as markets for American export products and as sources of cheap raw materials and labor. But in the thirties America faced the competition there of an aggressive rival power that sought to realize its own imperialist ambitions in China and in rubber- and oil-rich Southeast Asia. This competitor was Japan, the land of the rising sun, which did not shy away from violence in order to build up a sphere of influence of its own. What bothered the United States was not that the Japanese abused their Chinese and Korean neighbors as Untermenschen, but that in that part of the world they erected their own closed economy where American competition found no open door. When the Americans protested against this, Tokyo offered to apply in China the principle of non-discriminatory trade relations on the condition that the Americans did the same in their own sphere of influence in Latin America. However, Washington wanted reciprocity only in the sphere of other imperialist powers, and not in its own. The Japanese offer was rejected”(2).

An escalating series of demands, counter-demands, threats and sanctions followed, eventually culminating in war.              

Disputes over free trade also played a role in the growing tension between Nazi Germany and the United States. US exporters balked at the Nazi policy of autarky, blocking imports from other countries to achieve economic self-sufficiency, the complete opposite of free-trade. They were even more exorcized when the Nazis extended the policy to their newly established greater economic zone, a closed economy comprising countries the Wehrmacht had conquered. To make matters worst, Germany had embarked on a trade offensive in Latin America, increasing its exports to Brazil, Chile and Mexico, at the expense of US exporters (3).

Great Britain, on the other hand, proved far more congenial to America's trading interests. It was the principal beneficiary of Washington's policy of cash and carry, which stipulated that customers for arms manufactured in the US must pay cash and transport the armaments themselves. Since the British Navy dominated the North Atlantic, Britain was the customer of choice. Eventually, cash and carry would give way to the policy of lend-lease, in which Britain received arms and other goods in exchange for promising to dismantle protectionist barriers which limited US exports to Britain and its dependencies. Accordingly,  an alliance with Great Britain held out the promise of expanded export opportunities, while growing Nazi domination of Europe threatened US trade (4).

Unrestricted trade is often presented as the best possible plan for the best possible state of society. Indeed, George W. Bush's September 2002 National Security Strategy even elevates free trade to a moral principle. “The concept of 'free trade' arose as a moral principle even before it became a pillar of economics," remarked Bush. But this is more rhetorical than real. For example, no sooner had Bush used his national security strategy to place 'free trade' on a moral pedestal than he began backpedaling, promising that "the benefits of free trade would not come at the expense of American workers." And of course they won't if free trade is one way.

By the mid-19th century, Britain was a big advocate of free trade. And why not? Industry in other countries was too immature to compete against the industrial giant Britain, the workshop of the world. Free trade would mean continued domination by British capital of world markets and the continued destruction of handicraft industries abroad by cheaper, British machine-made commodities, and  hence, the further expansion of British export markets. In Britain, it was easy to regard 'free trade' as a pillar of economics, the best possible plan for the best possible state of the world.

But that's not the way others saw it. In the United States, northern industrialists favored a policy of tariff barriers as protection against cheap British imports. On the other hand, plantation owners of the south, who depended on export markets for their cotton and wanted access to cheap imports from abroad, favored free trade. But with the defeat of Confederate forces by the North in the Civil War, the United States joined the ranks of other industrializing countries, like Germany, and erected protectionist barriers. Eventually, the industrial bases of a few "advanced" countries, including the United States, grew large enough to compete against British industry, and a scramble to divide the world into colonies and spheres of influence -- that is, fields for investment and exports -- ensued.

Today, the United States is more like Britain of the mid-19th century.  Free trade is a boon to many investors and owners, because, for the most part, it means access to markets abroad with little threat of reciprocal competition. As a result, the US favors free trade as a general rule, in the rhetorical sense absolutely, but in the real, everyday, you export to me and I export to you sense, with a big proviso: if it's good for US businesses, fine; otherwise, break out the "voluntary" export quotas.

1. "China Relents, and Promises Textile Tariffs," The New York Times, December 13, 2004.

2. Jacques R. Pauwels, "The Myth of the Good War: America in the Second World War," James Lorimer & Company Ltd., Toronto, 2002, p. 67.

3. Ibid.

4. Ibid.

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