The Evolving Debate on U.S. Trade Policy: Free Trade, Fair Trade, or Protectionism?
In the wake of the COVID-19 pandemic and a long period of deindustrialization, the landscape of American trade policy is changing radically. This shift is reflected in declining support for free trade, particularly with China, across the political spectrum.
This fall, the Northwood University Freedom Seminar featured a panel that explored free trade, fair trade, and protectionism. Panelists included Dr. Michael Makovi, Associate Professor of Economics and Bretzlaff Scholar at Northwood University, Dr. Thomas Kratzin, Northwood University International Business Chair, and Ian Fletcher, an economist and author with the Coalition for a Prosperous America. During the Freedom Seminar panel, which was held Oct. 29 at Northwood University in Midland, Michigan, these three experts examined whether policies that have been proposed to reverse these trends would actually benefit Americans, or merely protect certain industries to the detriment of consumers.
The following breaks down each presenter’s main thoughts.
Michael Makovi: The Case for Free Trade
Dr. Makovi defended the virtues of free trade, arguing that the primary objective is to procure goods and services at the lowest possible cost, based on the law of comparative advantage. He stressed the importance of minimizing production costs through global sourcing, which ultimately translates into lower prices for consumers. He also asserted that every nation benefits from concentrating on producing what it knows best, thus enabling lower-cost imports and promoting efficiency. Dr. Makovi warned against the risks associated with import taxes, which in his view simply displace jobs without creating new ones, thereby raising consumer prices. He admitted that while exceptions linked to national security and labor protection are valid, the general principle should prioritize efficiency and consumer benefits over political favoritism.
Thomas Kratzin: Advocating for Fair Trade
Dr. Kratzin presented a more nuanced approach, suggesting that a balance between free trade, fair trade and protectionist policies may be necessary. He defined fair trade as an effort to mitigate the higher costs imposed by trade barriers, aiming to avoid unfair competition and promote economic development while recognizing the benefits of increased competition. He acknowledged, however, that fair trade could lead to complications such as higher consumer prices and free-trade verification problems. He stressed the need for a strategic mix of policies, especially as the U.S. maintains a robust exchange rate.
Ian Fletcher: The Case for Protectionism
In contrast to his colleagues, Fletcher presented a critical view of free and fair trade, arguing that protectionism can be a legitimate strategy if applied judiciously. He pointed out that traditional economic theories, such as comparative advantage, often overlook externalities and other complexities. Citing historical figures such as Alexander Hamilton, Fletcher argued that a more strategic application of tariffs could strengthen national interests. Lastly, he noted current U.S. trade policy has improved under both President Trump and President Biden.
Conclusion: Navigating the Trade Policy Landscape
During a lively discussion, it became clear that there is no “perfect” solution to the challenges posed by global trade. While advocates of free trade focus on efficiency and consumer benefits, proponents of fair trade and protectionism raise valid concerns about national interests and economic fairness.
As the U.S. struggles with these complex trade dynamics, policymakers must balance competitiveness with the well-being of American consumers and industries. The conversation is ongoing, reflecting a nation in search of a coherent trade strategy that can adapt to the realities of a changing global economy.
In summary, panelists stressed the need to carefully consider all options, including free trade, fair trade and protectionism, recognizing that no single approach can guarantee prosperity.
About this author
An international student from Aizenay, France, Mathilde Champagne studies healthcare management at Northwood University. She is a member of Northwood’s International Student Organization, the Student Events Assistance Team (SEAT), and Student Health Care Management Organization (NUSHMO). She was inspired to write this piece for the December 2024 edition of When Free to Choose after attending a Northwood University Freedom Seminar presentation this fall. Click here to subscribe to When Free to Choose, Northwood’s signature publication promoting freedom and free enterprise.