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Comparative advantage rose phoenix-like from the ashes of World War II, as American economists sought to claim for themselves a leading role in rebuilding a peaceful, US-led world order. In his recent book, No Trade Is Free, Ambassador Robert Lighthizer, US Trade Representative in the Trump administration, explains: “After the war, however, both Democrats and Republicans came to champion tariff reduction as a means of preventing yet another conflict, arguing that trade fostered interdependence between nations. Trade liberalization came to be seen not just as a tool of economic policy but also as a path to perpetual peace.” This may give the economic rationale too much credit. C. Fred Bergsten, founding director and Posen’s predecessor at the Peterson Institute, put the matter bluntly in Foreign Affairs in 1971: “The economic argument was always marginal,” he wrote. “It was the foreign policy case which provided the real impetus for liberal trade policies in the United States in the postwar period.”
The rehabilitation of comparative advantage to advance a geopolitical agenda is especially obvious in Samuelson’s textbook. Recall, just before the war, he could not answer his friend Ulam’s challenge to name a proposition of social science both nontrivial and true. A decade later, he was singing the praises of this “closely reasoned” and “unassailable” doctrine, “able to separate out gross fallacies in the political propaganda for protective tariffs.” But in doing so he inserted a notable caveat: it applies only “where there is substantially full employment.” Anyone troubled by this assumption, he suggested, should refer back to an earlier chapter in which “we agreed that a country like the United States must not depend upon beggar-my-neighbor international economic policies to solve her domestic problem of unemployment.”
Discussion in that earlier chapter appears under the heading “Postwar International Trade.” While “as compared to doing nothing toward depression unemployment, it may be better to increase exports and refuse imports,” the text teaches, “a little knowledge is a dangerous thing.” Indeed, one not careful might find himself “taking a leaf from Hitler’s Nazi book.” But never fear, “Any intelligent person who agrees that the United States must play an important role in the postwar international world will strongly oppose [protectionist] policies, because they all attempt to snatch prosperity for ourselves at the expense of the rest of the world.” Dig to the bottom of the post-war case for free trade, and one finds not a closely reasoned and unassailable doctrine, but rather a condescending lecture about preferring the global to the national interest. Who was the “we” that had “agreed” to this?