Even if it was often more wishful thinking than unambiguous reality, it used to be that American economic freedom was a (classical) liberal model that many other world governments hoped to imitate or at least felt obliged to offer excuses for not following. Now, it seems, the situation is clearer: America is becoming a dirigiste model that European politicians and bureaucrats are consciously vying to plagiarize. At least, this is obvious in the matter of international trade.
It must be admitted that it is not the first time the US government has been on the frontlines of protectionism in the “free world.” From the Civil War to Franklin D. Roosevelt (and his “hillbilly free trader” Secretary of State Cordell Hull, as later described by Senator Paul Douglas of Illinois), America had some of the highest tariffs in the developed world. More generally, American trade policy has seesawed between regulated free trade and protectionist regulation. See Douglas Irwin’s extraordinary book Clashing over Commerce and my review in Regulation—for example:
In 1976, by some calculations, the U.S. market was more protected by nontariff barriers than the European Economic Community and Japan, although exports were less subsidized in America.
In the same review, I wrote:
But what is surprising, at least for an amateur student of American history, is the nearly continuous protectionist tendency of the U.S. government from the Founding to the present time and, when free trade was defended, the modesty and prudishness of its defenders. In the early 1830s, Sen. Henry Clay, inventor of the “American [protectionist] system,” stated that “to be free,” trade “should be fair, equal, and reciprocal.” So-called “fair trade” is not a recent invention. More often than not in the 19th century, the benefits of international trade were understood to attach exclusively to exports, like in the old mercantilist thought. There was not much understanding that tariffs are a tax on domestic consumers.
So what’s happening now? Nudged by the French government, the European Union government is building up a set of protectionist legal instruments presented as a response to, and imitation of, restrictive trade actions taken by the administrations of both Donald Trump and Joe Biden. The continuity between the two latest presidents, who would claim to be so different, says something about the dire condition of American politics.
A story in the Financial Times provides examples (Andy Bounds, “France gets its way, thanks to Brexit,” June 6, 2022). We learn that the new protectionist activism in France and at the EU
is partly a response to Donald Trump’s US administration, which slapped tariffs on steel and aluminium on national security grounds.
Even the Defense Production Act (DPA), a remnant of the Korean War that was invoked by Trump at the beginning of the Covid pandemic and which Biden has also used, is the object of envy:
Brussels was finally prompted to toughen its stance last year, when US president Joe Biden invoked the Defense Production Act to restrict exports of vaccine ingredients in the midst of the Covid-19 pandemic. Thierry Breton, the EU’s internal market commissioner, threatened to withhold supplies of vaccines to the US unless it lifted its de facto ban.
He said he needed a similar tool to the DPA — most recently used to increase production of baby formula and airlift supplies from Europe.
An imitation DPA would allow the EU restrict exports when deemed expedient—which of course means that it will prevent others from importing and stop the efficient sharing of supplies during an emergency:
The French commissioner’s team is now working on a Single Market Emergency Instrument, which would allow export restrictions on five or six categories of goods, such as raw materials, in an emergency.