Ideology Over Interest

The story of America’s embrace of free trade is a lesson in how coalition-based strategies to address episodic challenges can morph into ossified doctrine over time. What started as an attempt to stabilize international relations after World War II eventually developed into a free trade absolutism that Americans now widely acknowledge was a mistake, and which the Trump administration and policymakers in both parties are actively seeking to unwind. As the United States develops a new trade paradigm, it is essential to understand how a prudential postwar strategy evolved into a doctrinal position and what global developments and theoretical assumptions drove that evolution.

Before World War II, the United States embraced a protective and competitive approach to political economy. After the war, having established unparalleled industrial dominance and facing an escalating Cold War with the Soviet Union, a free trade posture appeared to have immediate geopolitical advantages and few economic risks for the United States. This created a political window for free trade’s strongest advocates to push for a systemic overhaul of U.S. trade policy under the pretext of fostering lasting peace and circumventing the Soviet Union. 

Over the next 50 years, contextual postwar support for freer trade calcified into a more rigid ideological commitment. By the end of the Cold War, free trade advocates argued that open markets would not only advance peace but were always aligned with every nation’s broad interests; that global organizations could govern international trade neutrally and effectively; that trade liberalization would spread democracy (and democracy spread peace); and that the industrial composition of the U.S. economy either would not be harmed or did not matter in the first place. Geopolitical and economic reality have proven each of these assumptions wrong. 

An unconditional free trade posture, far from being universally beneficial, overlooks the political nature of economics and the inevitability of self-interested behavior among nation-states. The central pillar of the free trade paradigm, universal and unconditional “non-discrimination,” is a geopolitical impossibility in a world of competing interests—a reality evident to those who first established the multilateral trading system in part to counter the Soviet Union, but one that has gradually been disregarded. While trade can be mutually beneficial, it will not be when trading partners follow different sets of rules and objectives that global organizations cannot standardize. Production and consumption, as well as imports and exports, are not equally valued among political factions within each nation, let alone across countries and different political systems. 

Acknowledging the wide disparities in economic conditions and legal regimes across nations and their resultant trade distortions, the United States must recognize that trade balance is a better guarantor of national interests than trade neutrality. To achieve that balance, the U.S. trade paradigm must shift toward a results-based system rather than continue to rely on a rules-based approach that has yielded poor outcomes.

World War I and “Non-Discrimination” in the National Interest

From the founding of the republic through the mid-1930s, the United States largely protected its industries and economy under a strong tariff regime. These policies emerged from a tradition that began with the first bill passed by the U.S. Congress and Alexander Hamilton’s “Report on Manufactures.”

U.S. protectionism was a natural response to hostile tensions¹Joshua L. Rosenbloom, “The Industrial Revolution in the United States: 1790-1870,” Working Paper No. 34225 (National Bureau of Economic Research, September 2025), XX. with Britain in the early days of the republic, during which Britain used trade routes as a tool of geopolitical and economic power. Even Thomas Jefferson, who had opposed tariffs and industrial policy for most of his career, reflected after the War of 1812, “Experience has taught me that manufactures are now as necessary to our independence as to our comfort.”²Thomas Jefferson to Benjamin Austin, Monticello, January 9, 1816, in Founders Online, National Archives. Recent research credits the Embargo Act of 1807 with protecting what would become a thriving U.S. textile industry, and early government investment in firearms production with developing U.S. precision manufacturing and machine-building techniques.³Joshua L. Rosenbloom, “The Industrial Revolution in the United States: 1790-1870,” Working Paper No. 34225 (National Bureau of Economic Research, September 2025), 25-26.

A second generation of U.S. statesmen, led⁴Tom Cotton, “Foreword: On Security,” in Rebooting the American System (Washington, D.C.: American Compass, 2020), 17. by Henry Clay and eventually Abraham Lincoln, would champion⁵John A. Burtka IV, Don’t Trade on Me (Washington, D.C.: American Compass, 2022). tariffs and industrial investments under the “American System.” This system, supported by the Whigs and Republican Party that dominated American politics after the Civil War, saw the United States transition⁶Oren Cass, “Free Trade’s Origin Myth,” Law & Liberty, January 2, 2024. from a small agrarian economy to an industrial powerhouse, with its GDP per capita growing at twice the rate of Great Britain. The industrial base developed during this rapid period of expansion and its continued growth during the early 20^th century laid a foundation⁷Robert Lighthizer, “Speech: The Naval War College Foundation Symposium,” America First Policy Institute, August 17, 2023. for the defense industrial base⁸Mark A. DiPlacido and Oren Cass, “Big Stick Economics,” Commonplace, February 6, 2025. that would help propel the Allied powers to victory in World War I and World War II.

As seen in the reflections of the American founders on the War of 1812, trade policy had long been understood to have foreign policy implications. Until World War I, this gave protectionists a political advantage in defending a fledgling nation against larger, more established European powers. But after the war, free trade advocates began to formulate a foreign policy justification for their own trade preferences. 

These efforts began with President Woodrow Wilson. After decades of Republican control, Wilson and a Democratic Congress took control in 1912. By the end of his first year in office, Wilson had reduced tariffs and instituted an income tax as an alternative source of federal revenue. By the end of his presidency, tariffs were at their lowest level since 1792.⁹Douglas A. Irwin, Clashing Over Commerce: A History of US Trade Policy. Chicago: University of Chicago Press, 2017, 347. But in the aftermath of World War I, the free trade position, previously argued on economic and regional grounds, became wedded to geopolitical theories about peace. 

In his “Fourteen Points” program, Wilson sought “The removal, so far as possible, of all economic barriers and the establishment of an equality of trade conditions among all the nations consenting to the peace and associating themselves for its maintenance.”¹⁰Woodrow Wilson, Address to Congress, “The Fourteen Points,” January 8, 1918. In a letter defending these points, Wilson further explained that “The experiences of the past among nations have taught us that the attempt by one nation to punish another by exclusive and discriminatory trade agreements has been a prolific breeder of that kind of antagonism which oftentimes results in war,” and that peace required casting such obstacles aside.¹¹Irwin, Clashing over Commerce, 345.

Conscious of the protectionist leanings still dominant at the time, Wilson had to clarify that he “meant to suggest no restriction upon the free determination of any nation of its own economic policy, but only that whatever tariff any nation might deem necessary…it should apply equally across all nations; in other words, that there should be no discriminations against some nations that did not apply to others.” Against his detractors, he further argued, “To pervert this great principle [of non-discrimination] for partisan purposes, and to inject the bogy of free-trade, which is not involved at all, is to attempt to divert the mind of the nation from the broad and humane principle of a durable peace by introducing an internal question of quite another kind.”¹²Ibid.

Thus, the principle of “non-discrimination” entered the American political discourse. Initially isolated from discussions of trade openness, it would eventually form the foundation of the free trade paradigm. 

Wilson’s “Fourteen Points” program, including its proposal for a “League of Nations,” was largely dismissed by Congress. But his more limited notion of “non-discrimination” found bipartisan support by 1922. Before the war, the United States lacked trade agreements with most European nations and, as a result, faced higher tariffs than those nations’ other trading partners. Many of these nations offered lower rates to their colonial networks, which the United States lacked. Non-discrimination was appealing to leaders in both U.S. parties as a means of securing equal treatment and access in foreign markets, with no apparent downside.

The technical term for this trade principle at the time was “unconditional most-favored-nation” (“MFN”) treatment. Unconditionality was new. Since its first commercial treaty with France in 1778,¹³Irwin, Clashing over Commerce, 363. U.S. trade agreements did not automatically extend concessions given to one U.S. trade partner to its other partners without additional trade concessions. The new framework did. A concession to one country would be extended unconditionally¹⁴Charles Benoit, “Reciprocal Tariffs Are Not Enough,” The American Conservative, April 2, 2025. to every other country with which the United States traded, which would ensure both parties would always receive the lowest available tariff rates, even if those rates were negotiated down later by another nation. 

Unconditional MFN did not mean all nations set their tariff rates at the same levels—or even at low levels. One country could apply a 10% tariff on a good while another applied a 2.5% tariff, as long as those rates were applied equally to all trading partners. In fact, when the United States established its first unconditional MFN agreement with Germany in 1924, it did not have to adjust its tariff schedule at all.¹⁵Irwin, Clashing over Commerce, 365. This framework left room for some nations to maintain higher tariffs and barriers while enjoying lower tariffs from nations more committed to free trade. 

The international trade environment after World War I inspired bipartisan support for the MFN principle. A key Republican advocate for unconditional MFN emerged in William Culbertson, who had been appointed to the recently established bipartisan Tariff Commission. He argued that 

“[I]n this period of reconstruction, when many countries are revising their treaties and reconsidering their grants of most-favored-nation treatment, the conditional most-favored-nation principle is liable to be applied against us… Now that Congress has taken a definite stand for the policy of equality of treatment, it would seem to follow logically that in the revision of our commercial treaties we should adopt the unconditional form of the most-favored-nation clause.”¹⁶Ibid.

Culbertson convinced both Massachusetts Republican Henry Cabot Lodge, a strident opponent of Woodrow Wilson who was chairman of the Senate Foreign Relations Committee, and Republican President Warren G. Harding. As a result, the Fordney-McCumber Tariff Act of 1922, which significantly re-raised U.S. tariffs consistent with the Republican platform, also gave the president the power to establish unconditional MFN agreements.¹⁷Irwin, Clashing over Commerce, 364. In its origins, then, MFN was a policy enacted by protectionist Republicans, who intended to enhance the competitiveness of American exports and did not subscribe to Wilsonian theories of peace through low tariffs. But in cementing this policy, Republicans entrenched a tool that would later be used by those who did hold Wilson’s idealist views.

Cordell Hull and the Patient Rise of Free Trade Peace Theory

While Wilson’s appeal for non-discrimination had gained bipartisan support, his broader argument about free trade and peace lay dormant for most of the 1920s and 1930s—indeed, 1930 saw the passage of the Smoot–Hawley Tariff Act, which raised protective tariffs on over 20,000 goods in response to the Great Depression. But it was not forgotten. Wilson’s vision garnered several serious and influential adherents, chief among them a Tennessee congressman and future secretary of state named Cordell Hull.

A Southern Democrat, Hull was naturally inclined toward free trade in his early years, but his support became more comprehensive during World War I. Recalling this intellectual development around 1916, Hull wrote in his memoirs, 

“…I enlarged my views of trade and tariffs from the national to the international theater… I embraced the philosophy I carried throughout my twelve years as Secretary of State, into Trade Agreements, into numerous speeches and statements addressed to this country and to the world… [that] unhampered trade dovetailed with peace; high tariffs, trade barriers, and unfair economic competition, with war. Though realizing that many other factors were involved, I reasoned that, if we could get a freer flow of trade—freer in the sense of fewer discriminations and obstructions…we might have a reasonable chance for lasting peace…. I decided to announce and work for the broad policy of removing or lowering all excessive barriers to international trade, exchange and finance of whatsoever kind, and to adopt commercial policies that would make possible the development of vastly increased trade among the nations.”¹⁸Cordell Hull, The Memoirs of Cordell Hull, vol.1 (The Macmillan Company, 1948), 81, 84.

Hull anchored his support for free trade in a grand theory of foreign policy that rejected immediate national economic interests as a governing framework.¹⁹Hull was later quoted as saying in private that “only five percent [of the 1930s U.S. trade agreement program] is economic, while the other 95 percent is more or less political or psychological.” Irwin, Clashing over Commerce, 447. Geopolitically, Hull argued, “alliances, and their basic idea of balance of power had to give way to favor a confederation of nations that would maintain the peace.”²⁰Hull, Memoirs, 86. His support for non-discrimination also extended beyond conceptual parity for the United States in foreign markets. His goal was not fair and balanced trade for the United States, but lowering global trade barriers and increasing international trade volumes. Toward these ends, he introduced a resolution in Congress in 1917 to establish a WTO-like international trade organization—an institution that would take another 75 years to gain support.²¹Gunnar Jahn, “Award Ceremony Speech,” Nobel Committee, December 10, 1945.

Hull’s ideals, like Wilson’s, found little sympathy over the next two decades. Lamenting the return of protectionism under Republican control in the 1920s, Hull nearly retired from office in 1929.²²Irwin, Clashing over Commerce, 366. Even after Democrats gained the presidency and a sizeable majority after the Great Depression, the world responded to the economic catastrophe by returning to protectionism and preferential treatment—Britain with its imperial preference system, Germany with favorable rates for southeastern European nations, and Japan with its “Great East Asia Co-Prosperity Sphere.”²³Irwin, Clashing over Commerce, 407-408. These developments, along with the United States’ own defensive impulses amid the economic downturn, eroded support for significantly lowering tariffs and trade barriers, even among Democrats.²⁴Irwin, Clashing over Commerce, 415, 423-4. Hull himself was dismissed as naïve throughout much of his tenure, even at times by Roosevelt, who reportedly “excluded him from most high-level foreign policy decisions.”²⁵Irwin, Clashing over Commerce, 422. Irwin later includes a passage from the diary of President Roosevelt’s advisor, Harold Ickes, who complained, “All [Hull] ever tried to do, in addition to his futile protests at continued encroachment by the dictators, was to negotiate reciprocal trade agreements. These were all right so far as they went; they might have led to something in ordinary times when peace was the principal preoccupation of the nations of the world, but as I remarked to the President on one occasion, with the world in turmoil, they were like hunting an elephant in the jungle with a fly swatter.”

Hull was nevertheless successful in changing U.S. trade law. A large Democratic majority, the desire to expand U.S. exports, and widespread disgust at the logrolling that characterizes congressional negotiations over tariff policy enabled the Roosevelt administration to secure executive authority to adjust tariff rates under the Reciprocal Trade Agreements Act of 1934 (RTAA). Roosevelt and Democrats also justified this transfer of authority from Congress as part of his emergency response to the Great Depression.²⁶Irwin, Clashing over Commerce, 424-6. By the end of the 1930s, Hull and his team had established bilateral trade agreements with 21 nations,²⁷Reflecting on this period, Hull wrote, “In earlier years I had been in favor of any action or agreement that would lower tariff barriers, whether the agreement was multilateral… regional… [or] bilateral… But…no country, especially our own, would at that time support a worthwhile multilateral undertaking. My associates and I therefore agreed that we should try to secure the enactment of the next best method of reducing trade barriers, that is, by bilateral trade agreements which embraced the most-favored-nation policy in its unconditional form— meaning a policy of nondiscrimination and equality of treatment.” Hull, Memoirs, 356; Irwin, Clashing over Commerce, 424. all but one of which included unconditional “most-favored-nation” (MFN) provisions that applied the new rates across all U.S. trading partners.²⁸Irwin, Clashing over Commerce, 431. It is worth noting here that trade volumes were exceptionally low at this time. Irwin estimates that dutiable imports in the mid-1930s accounted for only about 2% of U.S. GDP. Irwin, Clashing over Commerce, 446.

Like Wilson had been, Hull was careful in his posture and approach, prioritizing tariff reductions on goods with little domestic competition and “consistently maintain[ing] that the program was designed to reduce excessive tariffs, not introduce free trade.”²⁹Irwin, Clashing over Commerce, 442. To further illustrate this point, Irwin later includes the following statement from Hull’s Assistant Secretary of State, testifying before Congress in support of RTAA’s 1937 reauthorization: “To open up trade channels, trade barriers must naturally be reduced on both sides. This does not mean free trade. It does not mean throwing open the flood gates so as to allow the importation of great quantities of foreign goods which are highly competitive with our own. It does not mean, as some would have you believe, lessened home production in return for increased production in American export industries.” Irwin, Clashing over Commerce, 444. As a result, his State Department was able to point to a larger rise in U.S. exports to countries with which it secured agreements (63%) than either imports from those nations (22%) or exports to non-agreement trading partners (32%).³⁰Irwin, Clashing over Commerce, 439. Like the unconditional MFN policy in the 1920s, agreements to (cautiously) lower rates were sold as a means of advancing American export competitiveness without damaging existing industry.³¹It is also worth noting that tariffs were still negotiated down on a product-by-product basis under this policy. When tariffs on a particular good were lowered, the lower rate was also negotiated with the “principal supplier” to the United States at the time, thereby protecting U.S. industries sensitive to imports and preventing major U.S. competitors from free riding on negotiations with less competitive nations. This policy changed under the Kennedy Round of trade negotiations in the 1960s, when the United States agreed to begin lowering tariffs “horizontally” across all products from all MFN countries with minimal exceptions. See Irwin, Clashing over Commerce, 436, 522-23.

Hull’s cautious approach eventually paid off. While Republicans remained protectionist throughout the 1930s and even Democrats remained wary given U.S. economic conditions, World War II offered an opportunity to finally elevate trade policy to the ideological level Hull had always desired. Shortly after the war broke out in Europe, Hull gave an address arguing that trade agreements should be the “cornerstone around which nations could rebuild their commerce on liberal lines when the war ended.”³²Irwin, Clashing over Commerce, 447-8. Hull’s argument finally convinced President Roosevelt, who shortly thereafter echoed that RTAA should be extended in 1940 “as an indispensable part of the foundation of any stable and durable peace.”³³Irwin, Clashing over Commerce, 448. This justification served as the stated basis for RTAA’s extension three years later in 1943—a significant departure from the original economic justifications for the policy less than ten years earlier.³⁴The State Department’s statement on the extension read: “The general objectives of the program are to substitute economic cooperation for economic warfare in our relations with other countries; to give economic substance to our good neighbor policy; and to create the kind of international economic relations upon which a structure of durable peace can be erected.” Irwin, Clashing over Commerce, 454. By 1943, many Republicans, such as Sen. Arthur Vandenberg (R-MI), supported the reauthorization of executive RTAA authority after stridently opposing it in the 1930s, but still expressed convictions “against the economic wisdom of permitting the State Department, which is essentially a political rather than an economic arm of government, to make unchecked decisions which may spell life or death for various sectors of industry, agriculture, and labor within our own United States.” (Irwin, Clashing over Commerce, 452. See also pp. 432, 490-1.)

The General Agreement on Tariffs and Trade: An Anti-Soviet Trading Bloc for the Free World

World War II was a boon to U.S. exports, which more than quadrupled from $3 billion to $13 billion between 1939 and 1943 while imports remained flat.³⁵Irwin, Clashing over Commerce, 450. Coming out of World War II, the United States accounted for half of global GDP,³⁶The Wilson Center, “A Short History of America’s Economy Since World War II,” Medium, January 13, 2014. more than half of global goods production,³⁷Kristen D. Burton, “Great Responsibilities and New Global Power” The National WWII Museum, October 23, 2020. and held 80% of the world’s hard currency.³⁸The Wilson Center, “A Short History.” The United States had also developed substantial industrial capacity to supply the war effort—producing, for example, over 300,000 airplanes³⁹Brian Potter, “How to Build 300,000 Airplanes in Five Years,” Construction Physics, May 23, 2024. in five years—while the industrial bases of other nations located in war zones in Europe and Asia were heavily damaged. To many, U.S. economic supremacy appeared complete and destined to last, while politically, isolationism was discredited. Meanwhile, many U.S. manufacturers, who had favored protectionism for most of U.S. history, began to favor free trade as a means of expanding exports after the wartime destruction of foreign competitors.⁴⁰Irwin, Clashing over Commerce, 470, 490. This consensus began to erode when U.S. manufacturers faced resurgent competition from Europe, Japan, and South Korea in the 1970s.

These conditions permitted a far bolder approach to expanding trade relations than was possible during the depression. Internationally, nations also sought to avoid the economic turbulence experienced after the First World War.⁴¹As discussed in [Part II], lingering debts and trade imbalances after World War I led many nations to devalue their currencies, sparking cycles of trade retaliation and economic instability. See also, Irwin, Clashing over Commerce, 455-58, 479, 493. This guided the establishment of international organizations such as the United Nations, the World Bank, and the International Monetary Fund. It also strengthened the appeal of a multilateral trade agreement, which took shape in the 1947 General Agreement on Tariffs and Trade (GATT). 

After significant debate, the GATT was signed by 23 nations, all of which were either Allied powers during World War II or former colonies of the Allied powers. Although its proposed companion institution—the International Trade Organization—failed to gain purchase, the deal provided the critical framework that later evolved into the World Trade Organization (WTO) in 1994. Outlined in Article I, MFN became the core principle anchoring the new agreement. Shortly thereafter, Nobel Prize-winning economist Paul Samuelson would characterize Ricardo’s theory of comparative advantage—the economic theory most often touted in support of unconditional MFN—as an “unassailable” doctrine in his standard-setting 1948 textbook, Economics.⁴²Paul A. Samuelson, Economics: An Introductory Analysis (McGraw-Hill Book Company, 1948), 538. As Oren Cass has pointed out, the irrefutable truth of this theory was not so evident to Samuelson before the war. An earlier chapter of the textbook titled “Postwar International Trade” acknowledges, “As compared to doing nothing toward depression unemployment, it may be better to increase exports and refuse imports,” but that “[a]ny 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.”  Cass, “Free Trade’s Origin Myth.” His argument then was not that free trade is unconditionally good for all nations under all circumstances, but that the United States should pursue free trade for the good of the world despite potential drawbacks.

Cordell Hull had “fundamentally changed the direction of U.S. trade policy over the course of the 1930s and 1940s.”⁴³Irwin, Clashing over Commerce, 420. Secretary of State Dean Acheson, who had previously served under Secretary Hull, credited him with “a reversal of a hundred years of American policy.” Nevertheless, it was only when U.S. national interests appeared to align with a freer trade posture that his broader theory of “peace through trade” seemed credible. Nor was the reach of that theory unlimited. The United States constrained the universal and unconditional aspirations of the GATT not long after its initial signing by keeping the Soviets out.

The threat of communism informed many of the stated reasons behind the GATT. Many U.S. leaders sought to aid the recovery of allies after the war; the fear that additional countries would fall to communism if their economies cratered lay on the other side of their benevolence. “A sense of crisis and urgency” about the communist threat “pervaded the Truman administration in the spring of 1947,” and provided the backdrop for GATT negotiations.⁴⁴Irwin, Clashing over Commerce, 498. Irwin also recounts that by mid-1947, the U.S. Central Intelligence Agency concluded that “The greatest danger to the security of the United States is the possibility of economic collapse in Western Europe and the consequent accession to power of Communist elements.” Irwin, Clashing over Commerce, 495.

The continued expansion of export markets⁴⁵Irwin notes that the expansion of U.S. exports made bigger U.S. companies and their unions more favorable toward free trade policies, while smaller and medium-sized U.S. producers and other labor groups remained opposed. Irwin, Clashing over Commerce, 467. and a monetary agreement at Bretton Woods that pegged the world’s currencies to the U.S. dollar also did not hurt U.S. interests at that time, nor did U.S. lenders lament that expanded imports would help foreign nations repay war debts. If European countries were going to regain their independence, they would have to sell more goods to the United States to increase their own dollar reserves. Recognition of this reality was reflected in Article II of the GATT, which allowed signatories to institute import quotas if they were experiencing balance-of-payment issues.⁴⁶General Agreement on Tariffs and Trade 1947, World Trade Organization.

But even these justifications paled in comparison to the threat of communism. Irwin explains that “American officials wanted to assist Europe’s ability to import from the United States not simply because it would help maintain exports, but because anything that jeopardized the European recovery and risked economic collapse, political chaos, and possible Communist takeovers would be detrimental to America’s national security.” These conditions pointed to the necessity of balanced trade for geopolitical stability rather than open markets for their own sake.

These reasons for expanded trade, anchored in a defensive posture to protect U.S. national security against a foreign adversary, did not quite align with Cordell Hull’s theories of peace. If U.S. leaders were following Hull’s argument more consistently, the Soviet Union might have been invited to join negotiations alongside its World War II allies. In reality, having already refused to join the IMF and accept U.S. aid through the Marshall Plan, the Soviets formed their own economic bloc in January 1949. Later that year, the U.S. Congress barred strategic exports to the Soviet Union and pressured its allies to do the same, threatening to withdraw aid from nations that did not comply.⁴⁷Michael McNair, “Coalition of the Compelled,” Michael’s Substack, April 9, 2025. In 1951, Congress also explicitly removed⁴⁸Trade Agreements Extension Act of 1951, Public. L. No. 82-50, 65 Stat. 72. MFN treatment for Soviet-aligned countries, ending its unconditional extension.⁴⁹MFN rates were extended universally under the RTAA since 1934, including the GATT, so the Soviet Union technically received MFN rates until 1951. When MFN rates were revoked, the rates reverted to those established under the Smoot-Hawley Tariff Act of 1930. With that said, there was little trade between the United States and the Soviet nations by that time, and other restrictions and embargoes were later applied beyond higher tariff rates. Hull’s vision of a world without alliances or the balance of power would remain elusive.

From Cold War Realism to Free Trade Idealism

At the beginning of the Cold War, Republicans were more anti-communist than anti-import, and protectionism became less palpable as export-oriented sectors grew among their constituencies in the Northeast.⁵⁰Irwin, Clashing over Commerce, 498, 518-19. Irwin cites a study of congressional voting patterns in the 1950s that indicated “the American people cared deeply about the Soviet threat and were willing to support politicians who pursued even difficult aid and trade policies that furthered national security goals.” The study concluded that RTAA likely would not have been reauthorized in 1955 and 1958 if the public had not been as supportive of aiding U.S. allies. In a 1971 essay for Foreign Affairs, C. Fred Bergsten, a former advisor to Henry Kissinger and founding director of the free trade oriented Peterson Institute, recalled, “[I]t was the foreign policy case which provided the real impetus for liberal trade policies in the United States in the postwar period. Expanded exports were an essential component of the reconstruction of Europe and Japan, and a liberal U.S. trade policy was therefore an essential corollary to Marshall Plan aid.”⁵¹C. Fred. Bergsten, “Crisis in U.S. Trade Policy,” Foreign Affairs, July 1, 1971. As the Cold War continued, Bergsten explained:

“…freeing of trade was seen as a key to forging an Atlantic partnership between the United States and Europe, thereby to contain communism. Our interest in keeping the lower-income countries free from communism, and their obvious need for increased markets abroad to complement our capital and technical assistance programs, also required liberal trade policies. In submitting the Trade Expansion Act, President Kennedy went so far as to state that, ‘Our efforts to maintain the leadership of the Free World thus rest, in the final analysis, on our success in this undertaking.’”⁵²Bergsten, “Crisis in U.S. Trade Policy.” At the conclusion of his essay, Bergsten, a free trade advocate, asserted, “[T]he basic objective of present U.S. foreign policy is to forge new and mature partnerships with other areas of the world; many other countries rank trade policy very high on their priority lists, and it will be impossible to create true partnerships if we fail to heed these most crucial concerns of theirs.”

A clearer rhetorical link between free trade and Freedom in general emerged under President Kennedy. In support of his signature trade expansion legislation, Kennedy argued, “This philosophy of the free market—the wider economic choice for men and nations—is as old as freedom itself.”⁵³Irwin, Clashing over Commerce, 522.

Perhaps as an outgrowth of the stark geopolitical divide between Western democracy and Eastern communism, economic theory was hardening into a similarly rigid framework. Despite their clear lineage to progressive Wilsonian idealism,⁵⁴Michael Lind, “Why Are Free Traders So Emotional About Trade?,” Commonplace, April 24, 2025. Hull’s older arguments received⁵⁵Michael Brendan Dougherty, “The Real Case for Protectionism,” National Review, August 12, 2025. theoretical cover on the right from libertarian economists such as Ludwig von Mises and Milton Friedman. In his 1944 book, Omnipotent Government: The Rise of the Total State and Total War, von Mises opined that “Within a world of free trade and democracy there are no incentives for war and conquest.”⁵⁶Ludwig von Mises, Omnipotent Government: The Rise of the Total State and Total War (Yale University Press, 1944), 4-5. In 1962, Friedman went a step further and argued that another nation’s trade and policies should not matter and that “free trade” should be pursued unconditionally: 

“I believe that it would be far better for us to move to free trade unilaterally…There are few measures we could take that would do more to promote the cause of freedom at home and abroad. We could assume a consistent and principled stance by saying to the rest of the world: We believe in freedom and intend to practice it. No one can force you to be free. That is your business. But we can offer you full cooperation on equal terms to all. Our market is open to you. Sell here what you can and wish to. Use the proceeds to buy what you wish. In this way, co-operation among individuals can be worldwide yet free.”⁵⁷Mark J. Perry, “In 1962, Milton Friedman Made the Case for Unilateral Free Trade as the Best and Fastest Path to Economic Prosperity,” AEI Carpe Diem, October 19, 2018. Despite the U.S. witnessing a proliferation of unfair practices by its trading partners in the following decade, Milton Friedman was still arguing in 1978 that the United States “could set a great example to the world and benefit the world as a whole, contribute not only to prosperity but to peace around the world, by moving in the direction of free trade.” Milton Friedman, “Free Trade: Producer Versus Consumer,” Landon Lecture (Kansas State University), April 27, 1978.

Evincing a more strident free trade posture, President Kennedy proposed moving from product-by-product tariff reductions to “horizontal” across-the-board cuts in the early 1960s. His Secretary of State remarked that “The concept that we must protect every American industry against adjustments required by competition is alien to the spirit of our economy.”⁵⁸Irwin, Clashing over Commerce, 523. After the formation of the European Economic Community (EEC),⁵⁹Recall that strategic opposition to European trading blocs was the original motivation for the U.S. embrace of unconditional MFN in the 1920s. a precursor to the European Union, Kennedy was also worried businesses would offshore and invest more in Europe to gain access to their common market if U.S. tariffs remained high—another motivation for lifting trade restrictions.⁶⁰Irwin, Clashing over Commerce, 522. He later notes, “Starting in the late 1960s, companies began shifting labor-intensive assembly operations in the United States to other countries— particularly final stages of the production of apparel and consumer electronics—in order to reduce production costs. For example, in the case of televisions, electronic components would be fabricated in the United States, shipped to Mexico for assembly, and then returned to the United States for final sale. This was encouraged under sections 806.30 and 807 of the US tariff code, which allowed for the duty-free entry of US components sent abroad for further processing or assembly. This provision affected only a small amount of imports, but the offshore assembly provision was an important factor in the overseas relocation of the apparel and electronics industries.” Irwin, Clashing over Commerce, 541.

Soon, the appeal of expanding U.S. exports started eroding the limits Cold War realism had placed on free trade idealism. A 1971 memo⁶¹Peter G. Peterson, “Information Memorandum from the President’s Assistant for International Economic Affairs (Peterson) to President Nixon,” in Foreign Relations of the United States, 1969–1976, Vol. IV: Foreign Assistance, International Development, Trade Policies, 1969–1972, ed. Bruce F. Duncombe (United States Government Printing Office, 2001). from President Nixon’s Assistant for International Economic Affairs concluded that expanding trade with the Soviet Union would benefit the American economy, potentially doubling U.S. goods trade by 1975. As part of the détente Nixon sought with the Soviet Union, he signed a trade agreement⁶²Robert Starr, “A New Legal Framework for Trade Between The United States and the Soviet Union: The 1972 US-USSR Trade Agreement,” The American Journal of International Law 67, no. 1 (1973): 63. with the USSR in 1972. Congress ultimately rejected it, but it was a warning sign. An outright ban on trade with Soviet nations was partially lifted, but extending MFN treatment to Soviet countries would require the president to obtain an annual waiver from Congress.⁶³Under this policy, the United States began granting annual MFN treatment to China in 1980. Mark A. DiPlacido, Chris Griswold, and Trevor Jones, Disfavored Nation (Washington, D.C.: American Compass, 2024), 5. Congress continued to deny the Soviet Union such a waiver under this policy, but in 1980 it began granting annual waivers for communist China.

Concern over industrial competition with foreign trade partners accelerated throughout the 1970s and ‘80s, alongside the recognition of growing foreign non-tariff barriers. By 1971, a three-volume report⁶⁴“FG 263 (Commission on International Trade and Investment Policy) (White House Central Files: Subject Files),” Richard Nixon Presidential Library and Museum. commissioned by President Nixon’s Commission on International Trade and Investment Policy (a.k.a. the Williams Commission) recognized a “new mood” in the United States toward trade policy that was developing into a “crisis of confidence in the system.”⁶⁵The Commission’s report began, “The world has changed radically from the one we knew after World War II. At the conclusion of World War II, the United States emerged, alone among the major industrial countries, with its production capacity and technological base not only intact, but strengthened. We did not have to worry about our competitive position in the world. The main limitation on our exports was the ‘dollar shortage’ of our trading partners.” The report concluded that the United States should embrace a “new realism” in trade policy and an end to the “Marshall Plan psychology” that had permeated U.S. trade policy since the end of the war.⁶⁶As evidence of this “new mood,” the report cited “mounting pressures in the United States for import restrictions as foreign- made textiles, clothing, shoes, steel, electronic products, and automobiles penetrate our market; growing demands for retaliation against foreign measures which place American agricultural and other products at a disadvantage in markets abroad; a growing concern in this country that the United States has not received full value for the tariff concessions made over the years because foreign countries have found other ways, besides tariffs, of impeding our access to their markets; labor’s contention that our corporations, through their operations abroad, are ‘exporting jobs’ by giving away the competitive advantage the United States should derive from its superior technology and efficiency; a sense of frustration with our persistent balance-of-payments deficit and a feeling the other countries are not doing their fair share in making the international monetary system work; an increasing concern that the foreign economic policy of our government has given insufficient weight to our economic interests and too much weight to our foreign policy relations, that it is still influenced by a ‘Marshall Plan psychology’ appropriate to an earlier period.” Irwin, Clashing over Commerce, 539. That same year, Bergsten noted that: 

Non-tariff distortions now probably rival tariffs as barriers to trade, and national policies in new areas (such as protection of the environment) will add to the list. In view of their disparate nature and subtle effects, these distortions are very hard to measure. Our analyses of the trade effects of tariffs have always been unsatisfactory, but at least they could be made. But it will be exceedingly difficult to demonstrate convincingly that the United States—or anybody else—will have gotten true commercial reciprocity from a negotiation on non-tariff distortions.⁶⁷Bergsten, “Crisis in U.S. Trade Policy.” The United States began tracking these non-tariff barriers in its National Trade Estimate Report on Foreign Trade Barriers in 1984. 2025 National Trade Estimate Report on Foreign Trade Barriers of the President of the United States on the Trade Agreements Program (Office of the United States Trade Representative, 2025), foreword.

These realities led Congress to give the executive branch broader authority to defend against unfair foreign trade practices under the Trade Act of 1974.

Beyond failing to account for non-tariff barriers, the GATT lacked enforcement mechanisms for even its agreed-upon trade provisions. The only thing holding the system together was fear of retaliation.⁶⁸Irwin, Clashing over Commerce, 613-4. In response to growing sentiment against trade openness, countries often sought to release pressure on the system by forcing “voluntary restraint agreements” (“VRAs”) on their trade partners. These agreements ensured, consistent with the MFN regime, that retaliation against dumping or other anticompetitive behavior by one country that caused an import surge would not result in higher tariff rates for all trade partners.⁶⁹Irwin, Clashing over Commerce, 540, 557, 561. Early U.S. VRAs were applied to textiles from East Asia in the 1950s and steel from the EEC and Japan in 1969. By 1989, 236 export-restraint agreements had been implemented worldwide, including 67 on exports to the United States.⁷⁰Irwin, Clashing over Commerce, 614.

But VRAs were often ineffective at preventing import surges. As more developing nations, especially in East Asia,⁷¹Irwin, Clashing over Commerce, 559. were brought into the GATT, efforts by more developed countries to lower tariff rates were often not expected to be reciprocated.⁷²Irwin, Clashing over Commerce, 556-7. Irwin notes that “The Tokyo Round [from 1973-1979] was the first in which developing countries began playing a more active role in the GATT. That role was still quite limited, because developing countries received ‘special and differential treatment,’ meaning that they did not have to reduce their own tariffs in order to receive the benefits of tariff reductions by developed countries. The poorest developing countries also benefited from various tariff preference schemes, such as the Generalized System of Preferences, which technically violated the MFN clause.” When U.S. imports from one of these nations soared, prompting VRA negotiations, production often shifted to a neighboring country to fill in the gap, an evasion technique that remains common today.⁷³Irwin, Clashing over Commerce, 561-562. Recognizing the continued threat to U.S. industry and the growing trade deficit, President Reagan responded with additional trade protections across several sectors throughout the 1980s.⁷⁴Irwin, Clashing over Commerce, 574.

Reagan’s early turn toward protectionism was so stark, his own Office of Management and Budget Director later recalled, “…the essence of the Reagan administration’s trade policy became clear: espouse free trade, but find an excuse on every occasion to embrace the opposite.”⁷⁵Irwin, Clashing over Commerce, 576. By 1985, facing a surging U.S. trade deficit, he began to argue that “if trade is not fair for all, then trade is free in name only.”⁷⁶Irwin, Clashing over Commerce, 606. He even began questioning whether bilateral or regional agreements would better serve U.S. interests than the multilateral MFN system.⁷⁷Irwin, Clashing over Commerce, 615. He writes, “If GATT participants were not willing to strengthen the enforcement of existing rules and patch holes in the legal framework, the United States was prepared to bypass the multilateral process by undertaking unilateral actions to enforce trade rules and address foreign trade barriers, as well as starting bilateral and regional discussions to open trade further. In 1985, President Reagan again called for the start of a new multilateral trade round, but warned that ‘if these negotiations are not initiated or if insignificant progress is made, I’m instructing our trade negotiators to explore regional and bilateral agreements with other nations.’”

But by the end of the decade, the U.S. economy was booming, and competition from Japan was declining. The global expansion of supply chains led more U.S. firms to source commodities and intermediate goods abroad, shrinking the political coalition supporting protections.⁷⁸Irwin, Clashing over Commerce, 619-623. The revaluation of the dollar under the Plaza Accords also caused a decline in the trade deficit. The GATT system faced many close calls after its inception, especially in the 1970s and ‘80s. But U.S. leaders seeking to preserve the system were able to relieve enough pressure through safeguards and voluntary export restraint agreements to maintain it.

The WTO and the End of History: A Bipartisan Embrace of Hull’s Trade Vision

In addition to positive economic trends, the late 1980s brought the end of the Cold War. The exuberance following the fall of the Soviet Union led many to believe that any remaining influence of communism would give way to an embrace of free markets and democracy everywhere. Political scientist Francis Fukuyama infamously prophesied in 1989 that the world was on its way to the “end of history,” offering a liberal counter-eschaton to the failed one proffered by communism.⁷⁹Francis Fukuyama, “The End of History?,” The National Interest, no. 16 (1989): 3-18.

Like the original 1947 GATT, the 1994 update to the GATT was ushered in by post-war optimism. Under this iteration of the agreement, signatories rose to 128 nations, and the international trade body sought by Hull in 1917 took shape with the establishment of the World Trade Organization. The agreement no longer encompassed only World War II allies and their former colonies, but a significant majority of existing nations. Today, all but a handful of tiny nations are either WTO members or observers on the path to membership.“⁸⁰Members and Observers,” World Trade Organization, accessed November 20, 2025.

With the Cold War over and U.S. industry fully embracing globalization, political coalitions shifted. Social conservatives concerned with community and the realist wing of the Cold War hawks eventually took a backseat to the economic agenda of libertarians and the global foreign policy aims of the neoconservatives. On the left, the New Democrats, led by President Bill Clinton, loosened the party’s previous allegiance to working-class interests and fully embraced globalization.

Under the leadership of these factions, bipartisan support grew for a fully global free trade system under the WTO, which was established on January 1, 1995. Soon after, many U.S. leaders in both parties⁸¹Cass, “Free Trade’s Origin Myth.” and across various disciplines⁸²Wrong All Along (Washington, D.C.: American Compass, 2022). vigorously advocated⁸³Joseph Kahn, “Nobel Economists Back China’s Joining Global Trade Group,” New York Times, April 26, 2000; “U.S. Economists Sign Letter Supporting China’s WTO Entry,” USInfo, accessed November 20, 2025. for China’s admission to the WTO, arguing that greater trade relations with democratic countries would lead a communist nation like China to liberalize. Reflecting this view at the World Economic Forum in 2000, President Clinton argued, “I believe that having [China] in the WTO will not only have economic benefits for the United States and other countries […] but will increase the likelihood of positive change in China and therefore stability throughout Asia.”⁸⁴Robin Wright, “Clinton Urges Dialogue on Globalization,” Los Angeles Times, January 30, 2000. Making a similar argument during “World Trade Week” in 2001, George W. Bush stated, “Societies that open to commerce will one day open to liberty.”⁸⁵Proclamation 7441—World Trade Week, 2001, 37 Weekly Comp. Pres. Doc. 771 (May 18, 2001). Those advocates were successful, and China was granted permanent MFN treatment in October 2000, becoming a full WTO member the following year.⁸⁶DiPlacido, Jones, and Griswold, Disfavored Nation, 5. The universal MFN system that Hull had envisioned had arrived, and the principle of non-discrimination had evolved from a practical strategic measure to the centerpiece of a new ideological orthodoxy.

The Folly of Total Neutrality

Thirty years later, the results have come into full view. An agreement that initially served as a foundation for post-war recovery and a new anti-Soviet trade bloc evolved into the post-national trade regime, undergirded by an ascendent trade orthodoxy seeded by Hull and the libertarians. In contrast to traditional considerations of political economy, which included the health of the U.S. industrial base and national security, champions of the free trade system began to consider expanded trade volumes as a de facto measure of success,⁸⁷Ngozi Okonjo-Iweala, “A Stress Test for Global Trade,” Financial Times, September 4, 2025. regardless of their composition. Trade partners under the MFN framework now had widely varying economic structures, norms around corruption, and labor and environmental protections. Trade exposure to these economic variations put the United States and many of its allies on a path toward industrial decline and geopolitical vulnerability. 

Today, U.S. GDP is slightly more than a quarter of global GDP, its share of global industrial capacity is expected to drop to 11% by 2030,⁸⁸The Future of Industrialization: Building Future-Ready Industries to Turn Challenges into Sustainable Solutions (Vienna, Austria: United Nations Industrial Development Organization), 17. and its debt has risen to over $38 trillion.⁸⁹“What Is the National Debt?,” United States Department of the Treasury, accessed November 20, 2025. In 1971, the share of physical U.S. currency held abroad was around 13%.⁹⁰Thomas Haasl, Sam Schulhofer-Wohl, and Anna Paulson, “Understanding the Demand for Currency at Home and Abroad,” Chicago Fed Letter, no. 396 (2018). By 2021, the percentage had risen to 45%, including roughly two-thirds of $100 bills.⁹¹Christopher J. Neely, “The Innocent Greenbacks Abroad: U.S. Currency Held Internationally,” Federal Reserve Bank of St. Louis, October 18, 2022. The U.S. net foreign asset position has declined to negative $26 trillion,⁹²“International Investment Position,” U.S. Bureau of Economic Analysis, accessed November 16, 2025. reflecting decades of ever-increasing trade deficits—now nearly $1 trillion annually—that have been funded by the sale of U.S. assets. When adjusting⁹³“GDP Based on PPP, Share of World,” International Monetary Fund, accessed November 20, 2025. for purchasing power parity, which reflects differences in relative price levels across nations, the United States’ share of world GDP has fallen from 21.7% to 14.9% since 1980, while China’s share has risen from 2.1% to 19.5% over the same period, surpassing the United States in 2016. The United States’ position in the world today is vastly different from its position in 1945 and 1989.

In seeking to lower trade barriers among all nations, the WTO framework aimed to prevent protectionist behavior targeting strategic industries. Given China’s successful rise through deliberate mercantilist policies as a WTO member, the framework has clearly failed. Despite setting the lowest tariff levels, erecting the fewest trade barriers, and accruing the largest trade deficits, the United States has faced more litigation than any other nation under the WTO’s dispute settlement system.⁹⁴Under the WTO agreements, the U.S. simple average bound tariff rate is roughly 3.4%. Before President Trump raised rates in 2025, the average applied rate was 2.7%, less than half of the world average applied tariff rate of 6.7%. Lori Ann LaRocco, “Why President Trump is Pursuing a ‘Sledgehammer’ Approach with Tariffs and Global Trade Deals,” CNBC, February 19, 2025. The weighted U.S. average rate was even lower at 1.5%. Further OEC data show recent average tariff rates on U.S. goods of 17% in India, 13.4% in Argentina, 12% in South Korea, 7.5% in China, and 7% in Mexico. LaRocco, “Why President Trump is Pursuing a ‘Sledgehammer.’      Approach with Tariffs and Global Trade Deals” This baseline disparity in applied tariffs between the U.S. and other nations was permissible under WTO rules, leaving little ground for the U.S. to secure more reciprocal rates. USTR’s 2020 report on the WTO Appellate Body also details how the organization developed a bias against the United States and usurped authority over time. Report on the Appellate Body of the World Trade Organization (Office of the United States Trade Representative, 2020), Introduction. Almost all of those disputes have ended with some portion of the result being unfavorable to the United States.⁹⁵“Capital Conversations: Amb. Robert Lighthizer, United States Trade Representative,” December 14, 2020, posted December 23, 2020, by The Federalist Society, YouTube, 9:40-9:54. Regular offenders face no greater sanctions or possibility of removal, and regular victims receive no greater recompense, marking little improvement over the pre-WTO GATT. Thus, the choice before nations under the WTO remains whether to wait for an arcane, slow, and often biased system to grant permission to respond to abuses, or simply to respond and let the other side pursue the arcane process itself.

Despite its ambitions toward transparency and multilateralism, the WTO has proven incapable of responding to the many ways countries distort trade. While tariff rates receive most of the attention in trade discussions, they remain only one tool nations can use to favor their domestic industries over foreign competitors. These practices run counter to the principle of “national treatment” outlined in Article III of the GATT, which aims to prevent signatories from favoring their own domestic industries over those of foreign competitors once goods enter their markets (i.e., through discriminatory taxes or regulations).⁹⁶GATT Analytical Index – Guide to GATT Law and Practice, 6th ed. (WTO Secretariat, 2012), 123, 162. Predictably, the principle of “national treatment” remains aspirational. The appendix to this collection lists these non-tariff barriers and describes how they distort trade among nations.

Total nondiscrimination has proved unsustainable, as the benefits to the United States became swamped by the costs. While policymakers at the national and global levels placed their hopes in an open and neutral trade regime, the system ultimately failed to account for more ancient instincts toward competitiveness and self-interest, especially among nations such as China that fared worse than the United States during the twentieth century. The United States finally displaced the British Empire as the preeminent global economy during the interwar period, but it should have recalled the lessons of being under the thumb of that empire a century earlier. In entrenching an indiscriminate and indefinite free trade regime, Bill Clinton, George W. Bush, and other U.S. leaders neglected the warnings of Adams and Jefferson: that “in so complicated a science as political economy, no one axiom can be laid down as wise and expedient for all times and circumstances.”⁹⁷Burtka, Don’t Trade on Me. In retrospect, these leaders failed to anticipate nations’ persistent desire to distort trade to their own advantage.⁹⁸Or, in the vein of Milton Friedman, they did not care. Perry, “In 1962, Milton Friedman Made the Case for Unilateral Free Trade as the Best and Fastest Path to Economic Prosperity.” As noted by Oren Cass, “Others have [presented] with straight faces the claim that comparative advantage holds regardless of how other countries behave. AEI’s [Michael] Strain and National Review editor Ramesh Ponnuru insisted, ‘The classical case for free trade … argued that free trade almost always benefits the country adopting it, regardless of the trade policies of other nations.’ [New York Times columnist Paul] Krugman assured that ‘the economist’s case for free trade is essentially a unilateral case: a country serves its own interests by pursuing free trade regardless of what other countries may do.’” Cass, “Free Trade’s Origin Myth.”

Domestically, the system failed to account for widening disparities between those eager and well-equipped to compete in a globalized and financialized economy and those whose fortunes were tied to more localized and material economies. As free trade took full effect, factors typically weighed when evaluating the success of economic policies were ignored or derided by those who maintained hope for a liberal utopian future. 

Fixing U.S. trade policy will require a philosophical reorientation as much as a policy shift. Both free traders and protectionists supported non-discrimination in its earliest form to protect American markets from European trade blocs. After World War II, the United States used the framework to form its own bloc against the Soviet Union and preempt the formation of alternative blocs among its former competitors in Europe. These postures were oriented toward clear strategic objectives in the U.S. national interest. But when the United States ultimately extended that paradigm to the entire world, culminating in China’s accession to the WTO in 2001, and surrendered trade enforcement to the World Trade Organization, MFN came to align with a trade ideology that prioritizes “neutral” rules over the national interest. A better trade approach will require reclaiming an outcomes-based philosophy.

Aiding U.S. allies in their recovery from war and expanding economic opportunities for developing countries may have served a strategic purpose for the United States once, but those objectives have long been achieved. Policymakers must once again assess trade policy against desired economic and strategic outcomes rather than strive for an idealistic system of perfectly neutral and open trade. No bureaucratic, multilateral system can adequately enforce open markets at the front end of foreign transactions. Nor can any discussion of “reciprocity” end at tariff rate parity or “zero for zero” tariff agreements. Any mutually beneficial trading system must instead look to the ultimate results of trade relationships, as reflected in trade balances among nations, the strength of the U.S. industrial base —including the defense industrial base —and the economic opportunities afforded to the American working and middle class. By setting these goals first and working backward to build a new paradigm, policymakers can craft a trade framework that better aligns with American interests.