America Must Rediscover the Trade Policy of the Founders

By Johnny B. Davis

Alexander Hamilton on the ten dollar bill.
Image Credit: iStock/Professor25

American trade policy in the post-Cold War era has been grounded in a larger embrace of globalism by the establishments of both political parties. This modern embrace of globalism is a sharp departure from the ideas of the Founding Fathers. 

The United States needs to move away from trade agreements driven by globalist ideology and move to a system which makes the national interest the cornerstone of trade policy. 

In the post-Cold War era, the United States has engaged in a policy of trade “managed” by institutions like the World Trade Organization. This includes systematically increased imports and exported manufacturing production (and jobs) to increase interdependence between nations.  

President George H.W. Bush laid out this vision in the United States National Security Strategy of 1991. The loss of millions of jobs and much of American production capacity was not merely the result of market forces but also in good part due to government policy. 

The ideological assumption was that interdependence prevents war. Thus, the loss of manufacturing jobs and the reduction in the middle-class wages of Americans was worth global peace. 

The United States’ trade policy was once rooted in the “American System” established by President George Washington and Secretary Hamilton. The American System promoted free enterprise at home and was a trade policy guided by national interest.  

Tariffs were established not to promote the interest of certain businesses, but rather to promote the general welfare and self-sufficiency of the United States.  

The United States needed to protect native manufacturing and other new enterprises from being undercut by the subsidized exports of major economic powers.  The American System worked and led to the rise of the United States as the leading economic power of the world in the early 20th century.

However, President Woodrow Wilson laid the ideological foundations for the departure from traditional American policies with his globalist ideology and belief that the interdependence of nations promoted peace.  Wilson’s ideas took root in the elite circles of academia, media, business, and the political establishment.  

President Franklin Roosevelt later embraced Wilson’s vision and was able to gain fast track-authority to negotiate trade treaties which avoided the constitutional requirement of a Senate supermajority. Instead, proposed deals only required an up or down majority vote from the House and the Senate. He set the stage for globalist trade and foreign policy at the Bretton Woods Conference. 

President George H.W. Bush moved America’s trade policy into a complete globalist ideology.  Manufacturing jobs were intentionally moved to other nations and imports were increased to further interdependence between nations.  The establishments of both parties embraced the globalist agenda.  

This agenda remained almost completely unchallenged until the election of President Donald Trump, who ran on a platform directly challenging modern trade policy and globalism. However, Trump’s administration was dominated by establishment globalist figures and as a result, little strategic change in trade policy occurred. 

America must rediscover the traditional American trade policy of Washington and Hamilton. In his Report on Manufacturers submitted to Congress in 1790, Hamilton supported free enterprise domestically coupled with tariffs to protect infant manufacturing. 

The goal of American trade policy would be to promote the national interests of the United States and national self-sufficiency. Hamilton rejected ideological trade policies and policies designed to help one section or certain special interests. The American System was rooted in economic nationalism, free enterprise, and natural law.

The first and most important principle of the American System was the imposing of tariffs on imported manufacturing goods to allow the development of American industries. In the modern era, the American economy is the largest and most developed economy in the world. Therefore, the principle of tariffs would translate into preventing foreign powers from undermining the United States through unfair trade practices.  

For example, the United States has failed to take any action that could deter China’s dumping of massive amounts of steel exports to the United States that caused severe harm to America’s steel production. The reason for this policy failure is the globalist ideology that grips the American governing elite.

Hamilton wanted to combine protection from foreign trade with strong domestic competition, the removal of barriers to internal trade, and allowing market forces to govern business rather than government regulation. The modern globalist agenda has been matched by increases in government regulation increasing the domestic costs for businesses.  

The traditional American System also includes strong protection for patents and intellectual rights to encourage innovation. Likewise, tariffs were to be used to bar the import of goods that infringe on the patents and intellectual rights of American innovators. American political elites have been weak in the protection of American businesses from patent violations from China, due in large part to their globalist agenda. 

Hamilton was not advocating a European-style mercantilist system. Mercantilism focused on the interests of the state. The American System focused on the interests of the American people, both their economic and security interests. 

Therefore, self-sufficiency was needed but not protection from competition from imports from nations with market forces determined comparative action.  

Hamilton embraced the ideas of Adam Smith in a pragmatic manner. He understood that economic efficiency was not the only factor to be considered in trade policy. Hamilton envisioned that once new industries were developed, tariffs could be lowered to allow more competition from imports.

Washington added to the American System the idea that trade agreements should be upheld by mutual good faith between nations. America’s first president warned against expecting disinterested special favors from other countries or having a habitual fondness or hate against trade. Thus, Washington would have rejected the globalist idea that engagement with China through trade would alter the nature of the regime.

Hamilton also wanted strong consumer protection laws against fraud. He understood it was vital that American business operates ethically so that American goods would be of high quality.  Hamilton heeded the warning from Adam Smith that businesses would tend to try to undermine market competition through undue influence on government.

Most importantly, Washington strongly cautioned against giving up any part of independence which would include sovereignty and ties which hinder America’s independent decision-making.  Washington would likely reject the modern national security policy of promoting interdependence.  

Washington also warned against economic dependence on other nations.  Trade was not to be forced but done freely to the extent other nations mutually desired the trade. 

A modernized American System trade policy should be adopted, one which rejects the current ideology of globalism. It will base trade policy on the promotion of free enterprise domestically. Trade policy should also focus on bilateral treaties, which maximize American bargaining advantages, and no sovereignty should be ceded to international bodies. 

Trade treaties to reduce free trade barriers should be negotiated without multilateral governing bodies like the World Trade Organization. Trade policy should be upheld through the good faith of the partnering nations with the mediation of disputes while rejecting arbitration and regulation by international institutions.

By rediscovering the American System and abandoning the idea of promoting global interdependence, America can once again have a trade policy that brings prosperity and power.

Johnny B. Davis is an international and constitutional law attorney. He also serves as an adjunct professor at Liberty University. An Army Reserve JAG, he is currently a Ph.D. candidate at Liberty University School of Government

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s