Nov

9

Grover Cleveland"Free trade" seems to me one of those unfortunate phrases (like "tax cuts can pay for themselves") that misrepresents and undercuts what is a wonderful idea. Small trading entrepots like the Dutch Republic in the 17th and 18th centuries and Singapore today have practiced "free" trade; but larger countries have always had customs and excise. If there really had been a magic moment of "free" trade in the 19th century, families of smugglers would not have been there to save Butler's hero in The Way of All Flesh. What did occur in the United Kingdom after the defeat of Napoleon was the successful opposition to the Corn Laws by Cobbett, the Irish liberals and the merchants of London and manufacturers of Sheffield. Cobbett and the Irish liberals wanted cheaper grain for the poor to buy; the merchants and manufacturers wanted the sovereigns that Britons paid for grain to be recycled into iron and creamware exports. That political alliance resulted in the abolition of tariffs that had been so high that they had worked as quotas on grain and other imports. Trade was made much "freer", but it was never "free."

Within a few decades of the abolition of the Corn Laws, the London merchants found themselves increasingly interested in the finance that could be done under a rule of Imperial preference. The prospects for lending money to Britain's colonies seemed even more attractive than issuing trade bills on exports to North and South America. Added to this was the reaction to America's explosive military growth during the Civil War (at its end the Union Army and Navy were each the largest forces of their kind in the world). Both Britain and its erstwhile enemies and allies — France, Prussia, the Hapsburgs, and Russia — found themselves eager to adopt the uses of steel and steam that American military railroads and ironclads had pioneered.

Ironically, the United States was the one country that took a different path. To the amazement of the rest of the world, the United States did not take its Army north to Canada and/or south to Mexico and the Caribbean but instead disbanded its forces. President Grant hoped that Santa Domingo could be peacefully annexed, but incorporating even more free blacks into the Union was too much even for a nominally Republican Congress to accept. What he was able to establish was a political consensus that accepted tariffs but not quotas or protectionism. The customs excise could not be exclusionary; it would simply be the tax by which the Federal government would pay for itself. The success of this "freer" trade revolution can be seen in Grover Cleveland's clever campaign slogan — Tariffs for Revenue Only. The Republicans, Cleveland argued, were failing to live up to Grant's promise; they were using the tariff as a means of rewarding their favorite constituents. It worked. To this day Cleveland is the only President to win reelection on his second try.

John Floyd relates:

This morning my five year old, after reading the various labels and boxes from a recently assembled telescope, asked "Why does everything say "Made in China?". The question led to several explanations that provided lessons on free market economics, internationalization, and geography, amongst other topics. For one it is in the self interest of countries to engage in free trade, and the rule of law, as the most efficient and cost effective means of production is most likely to be utilized. The benefits can then be passed along to consumers in the form of product diversity, quality, and cost. Furthermore, if protectionism, tariffs and other forms of artificial support were lifted we all would be better off. The impact of trade protectionism and higher taxes following the '29 crash were greatly responsible for turning the crash into a depression. My answer also led to a discussion of the development of the port areas that receive many of these goods such as Long Beach, LA, NY/NJ, and Charleston in the U.S. and Singapore, Hong Kong, and Rotterdam outside the U.S. It is also interesting to note that the vast majority of global trade is still transported over water. The reception of materials has been centralized a bit more into large container ports in the latter half of the 20th century as opposed to going to a more widespread geography of ports as in the 19th century. As a kid I can remember many goods produced having the label "Made in Japan" or "Made in Hong Kong" as those economies have evolved into the service sector we have seen China replace them as the producer of many of these goods. I wonder who is going to replace China in the coming decades in "Made in …".


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