Fair trade, foul politics.

Protectionists are a minority in the Republican Party -- but a growing one. There are a number of reasons for this. The postwar bipartisan consensus in favor of free trade rested on beliefs about American leadership of the world which younger Republican congressmen tend not to share. Then again, as a result of the postwar decision to pursue free trade multilaterally rather than unilaterally, free trade has become linked to international entanglements of which conservatives have long and justifiably been suspicious. And that decision has had other consequences. The multilateral approach makes it seem that free trade is a good idea only if it's a two-way street (whereas the classical case for free trade asserts that trade barriers harm the nation that imposes them regardless of its trading partners' policies). Protectionist sentiment thus increases when countries are perceived, fairly or not, as closed to American exports. And, finally, there is Pat Buchanan.

Mr. Buchanan is the first Republican presidential candidate to challenge the postwar GOP orthodoxy on free trade. Because he is a conservative in good standing on cultural issues -- indeed, a courageous conservative champion in what was for years the generally unsympathetic media -- he has built up a stock of goodwill on the Right. And contrary to his image, he is a thinker with a love of history who takes the trouble to master, hone, and argue his case in public debate. So, when he complains that "the Japanese . . . have been taking advantage of America" and labels them "predatory traders," he is heeded where others might be ignored.

He has been helped in his campaign by the reluctance of free- traders on the Right to take their case to the public. Republican presidential candidates who espouse free trade, like Phil Gramm, consider it too difficult to explain the benefits of free trade in a campaign. Other free-traders have said surprisingly little to counter Buchanan's arguments. Or, worse, they have simply sneered. James Bovard says of him, "He's going to have a certain appeal to people who have never been able to balance a checkbook and are still afraid of the dark." Comments like that make it easy for Mr. Buchanan to depict free-traders as elitists. Since free trade in fact enjoys more support from elites than from the general public, it has come under suspicion as conservatism has taken an increasingly populist cast. Pat Buchanan and his allies stirred up considerable grass-roots opposition to NAFTA and GATT by framing them as elite frauds against the public. Protectionism, in contrast, offers conservatives an easy way to signal their solidarity with working-class Americans.

These are all solid political advantages -- in the short term. But the essential test of a policy is more mundane: Will it work? Because if protectionism won't work, then it won't produce popularity or sustain an Administration in office. And both economic theory and experience give us a pretty good idea of exactly how protectionism won't work.

To begin with, it would raise prices for both consumer goods and capital goods. It would therefore almost certainly increase unemployment: as prices for protected goods rose, industries that use them and even some of the protected industries would shrink. Mr. Buchanan attaches far more importance to the trade deficit than it deserves -- he recently described it as the "worst" of President Clinton's failures -- but it is not clear that his proposals would affect it. Trade barriers would reduce both the incentive for American companies to export from the sheltered home market (by causing the exchange rate to appreciate) and their ability to do so (by raising their supply costs).

Nor would his proposed "social tariff" against the Third World protect American workers' wages to any great extent, because cheap labor has not been as important in international competition as he believes. If it were, companies would have moved in droves to Haiti and Bangladesh. They have not done so, because they look at wages in relation to productivity. American wages are higher than those in developing nations not because U.S. workers have been shielded from competition, but because they are more productive. The route to higher American wages therefore is primarily through building on this advantage. Tariffs would only reduce the purchasing power of Americans' wages. Small businesses and low-income households would suffer most from a high-cost economy.

Any economic damage would be compounded, of course, if our trading partners retaliated against our tariffs by enacting barriers against us. Mr. Buchanan calls the desire to avoid retaliation "the counsel of fear and timidity. Had we followed it in the Cold War we would all be speaking Russian." This retort, while rhetorically effective, confuses commerce and war. He would be protecting Americans not from Soviet tyranny but from products they want to purchase. An "invasion" of cheap cars is not like an invasion of tanks; there's a difference between VCRs and ICBMs. A trade war that destroyed international commerce seems a high price to pay to prove America's toughness. Running on a jobs platform and then destroying jobs is ultimately not a clever political strategy.

Mr. Buchanan attempts to counter these economic arguments by invoking U.S. history. In an op-ed two years ago he wrote, "From Lincoln to Teddy Roosevelt to Coolidge, the GOP was the party of industry. It supported free markets at home, protected by a high tariff wall -- with low taxes and little regulation. The Night Watchman State. This was the foundation of American prosperity, the formula that converted the small agrarian economy of 1800 into the greatest industrial power the world had ever seen by 1900." But America's vast internal market had more to do with the country's success than tariffs did. The most protected industries, like sugar and textiles, were uncompetitive. And other industries paid the price of that protection: the high price of protected steel decimated the merchant fleet.

What may understandably appeal to Mr. Buchanan (and other conservatives) about the last century's protectionism, however, is that U.S. tariffs were then an alternative to other taxes, notably the income tax. And, indeed, he has recently proposed raising tariffs in order to cut other taxes that he dislikes. He would replace income taxes on small business with a 10 per cent tariff on all imports from Japan, allegedly an unfair trader; he would slash inheritance taxes and replace the revenue with a 20 per cent tariff on Chinese goods. The goal is to move back toward tariff funding of the government. (Ironically, the income tax itself originated as a populist blow against the tariff, which first the South and later farmers and workers saw as oppressive.) By cutting some taxes and raising tariffs, Mr. Buchanan hopes to create "a new coalition of supply-siders and economic nationalists." He writes that his tax plan "marries the growth ideas of Ronald Reagan to 'The American System' devised by Hamilton and Washington."

Alas, the marriage he proposes is unlikely to be a happy one -- and not just because he stands alone among Republican candidates in funding his proposed tax cuts with an anti-growth policy. His press release asserts that since Japanese imports are currently $125 billion, his tariff will yield $12.5 billion -- a projection that assumes that his taxes will have no effect on consumer behavior. That's not just implausible; it directly contradicts the protectionist purpose of the trade barriers. The barriers can raise the revenues he seeks, or they can keep out imports that he believes harm the economy. They cannot do both. And they certainly could not finance anything even remotely approaching the size of today's government. Hamilton understood the difference between a revenue tariff and a protective tariff: in Federalist #21, he explained that such taxes "prescribe their own limit, which cannot be exceeded without defeating the end proposed." Only by eliding that distinction can Mr. Buchanan simultaneously appeal to union members and to anti-taxers.

Mr. Buchanan's tax proposals also have unsettling implications for foreign policy. A government funded by tariff revenue is extremely dependent on the actions of foreign governments for its financial stability. In the War of 1812, for instance, tariff revenues crashed because the U.S. went to war with its major trading partner. It therefore financed the war by printing money, which of course led to inflation and economic destabilization. The pattern repeated itself in World War I: a decline in tariff revenues was the reason the income tax was so quickly increased far beyond what anyone had envisioned. If the government became dependent on tariff revenue, foreign governments and companies wouldn't need to hire the lobbyists Mr. Buchanan deplores. They could stay in their own capitals and exert leverage on U.S. policy. Indeed, tariff funding of programs would turn domestic interest groups into foreign lobbyists by making their programs dependent on other countries' willingness to trade. It's hard to imagine a more anti-nationalist tax system.

Indeed, "economic nationalism" in general would divert foreign policy from more worthwhile priorities. It would be difficult to maintain an alliance with a country while simultaneously engaging in a painful trade war with it. It is often said that an economic policy based on the premise that the material interests of nations conflict with one another would be likely to lead to international hostility. What is less frequently remarked is that a protectionist world would also be more hospitable to command-economy dictatorships like the ones that have been America's enemies in this century. Such societies, unable to compete with property-based systems industrially, tend to generate trade goods through extraction. Limited world markets enhance the value of these goods. Thus, American policies of the 1970s that raised the price of energy played right into the Soviets' hands, while the reversal of those policies under Reagan created a foreign-exchange crisis that forced the Soviets to reform. (Following Mr. Buchanan's foreign- policy advice during the Gulf War would have meant an effective return to the '70s policy of high energy prices, this time for the benefit of lesser totalitarians.)

Mr. Buchanan's apparently shrewd use of economic nationalism as a strategy that "enables me to reach into Clinton's constituency" has hidden dangers. As Robert Novak wrote in NR [Aug. 14], Goldwater and Reagan also tried to enlarge the conservative coalition, but without "consciously reaching out to a wholly new constituency with ideas that differed substantially from those of their rivals inside the party." Mr. Buchanan's new coalition might not remain dedicated to limited government for long -- or indeed for short. Its position on trade suggests a cramped view of economic freedom. And already the effort to create this coalition is pulling him in a statist direction. His speeches these days imply that if we ended foreign aid we would not have to cut "programs for veterans, for the elderly, for the poor, for farmers." Like Robert Reich, he attacks wealth inequality.

The link between protectionism and expansive government is more than a matter of ideological affinities. Free trade forces governments to compete by allowing consumers and investors to vote with their wallets against government excess. When burdens on the private sector grow too heavy, economic activity moves to other jurisdictions. Trade barriers, however, shut off this escape route. (It was precisely in order to prevent this kind of regulatory competition that liberals demanded labor and environmental side- agreements to NAFTA; those side-agreements led some free-traders to oppose the whole package.) Mr. Buchanan complains -- rightly -- that federal taxation and regulation make it harder for American companies to compete with foreign ones. Yet instead of attacking the burdensome taxes and regulations, he would reduce the pressure to reduce them by shielding industry from their consequences.

Protectionism invites Big Government, Big Labor, and Big Business to form a coalition to socialize the economy; free trade protects ordinary citizens from all of them. Free trade is not just another issue to be bargained away for progress on OSHA regulations or on welfare. It is strategically important because it is a structural limit on government power. Protectionism, on the other hand, is a prerequisite for higher levels of regulation, spending, and taxes.

It would therefore undermine Mr. Buchanan's goal of political reform by giving government another set of favors to sell. As Joe Cobb of the Heritage Foundation explains, "A lot of the buying and selling of the Senate [in the nineteenth century] was due to tariffs." Whatever the argument for a particular breach of free trade -- to help infant industries, to guard national security, whatever -- any conceivable protectionist regime would soon become the plaything of politically powerful industries. That's not a hypothetical concern; it is once again increasingly the way U.S. trade policy is set.

In short, Pat Buchanan offers Americans a false economic nationalism -- one that would cause the economy to contract, the government to expand, and foreign policy to be hobbled. Conservatives should stand for something better: a true economic nationalism, one that's confident of Americans' ability to compete in global trade without federal favoritism.