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You have to hand it to Paul Krugman. Who else but the New York Times columnist and Nobel Prize-winning economist could contribute to one of the hoariest myths surrounding American trade policy, and then turn around and debunk another vital canard? And all within a week!

Two days ago, Krugman repeated a common but wildly off-base talking point long used by trade cheerleaders when he wrote that a trade critic who won the U.S. presidency “would find it very hard to do anything much about globalization — not because it’s technically or economically impossible, but because the moment he looked into actually tearing up existing trade agreements the diplomatic, foreign-policy costs would be overwhelmingly obvious.

Fears of significant foreign blowback have always been comical from an economic standpoint because so much of the rest of the world has depended on so much of its growth for so long on amassing trade surpluses with the United States. Endlessly voiced fears of “trade wars” endlessly ignore how self-destructive it would be for these foreign trade powers to engage in protracted economic conflict with their best customer.

The contention about diplomatic costs is no more serious. Of course, the Chinese would complain. But since the trillions of dollars of surpluses Beijing has racked up with America have so lavishly helped finance China’s military buildup, any trade overhaul could only enhance U.S. national security.

America’s allies would grouse also. But since most are in fact protectorates that would struggle – at best – to defend themselves without U.S. military support, which ones are likely to hit back at Washington? The Europeans, who worry about mounting Russian ambitions, but whose continued flirtation with recession is bound to keep restraining already inadequate spending? The Japanese and South Koreans, who face a Chinese adversary at least as powerful, and comparably dismal economic outlooks? And how much meaningful diplomatic retaliation could be expected from low-income, export-dependent Mexico, which more than two decades after the North American Free Trade Agreement went into effect still relies on the American market for 80 percent of its foreign goods sales?

Much more convincing was Krugman’s post five days earlier, which took on the Smoot-Hawley fallacy. As the author noted, a mainstay of the case for current trade policies is the belief that any interference with trade flows will start the U.S. and world economies down the slippery slope toward recessions. And as he has also noted, the American Smoot-Hawley tariff is widely blamed for triggering or deepening the Great Depression of the 1930s (and, he could have mentioned, the political and military horrors that followed).

So kudos to Krugman for pointing out that “trade fell a lot between 1929 and 1933, but that was almost entirely a consequence of the Depression, not a cause,” and for spotlighting research making clear that “Trade actually fell faster during the early stages of the 2008 Great Recession than it did after 1929.” Incidentally, much more data debunking the standard Smoot-Hawley claims can be found in this scholarly history of U.S. trade policy by Ohio University’s Alfred E. Eckes.

Neither of these Krugman posts proves (wittingly or not) that big changes in America’s longstanding trade strategies are essential. But if it’s this easy to shred arguments this central to the trade status quo for so many decades, it’s time to start wondering what’s left of the case for standing pat.

 

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