BY JOHN FEEHERY
APR 21 | Reprinted from TheFeeheryTheory.com

The first major law passed by the Congress under our current Constitution and signed by President Washington was the Tariff Act of 1789. Declared the Second Declaration of Independence by the local newspapers at the time, the new law put taxes on products made overseas to benefit American manufacturers.

James Madison, as a leader in the newly formed legislative branch, navigated passage of the law, attempting to balance the sectional interests of the country. Southerners largely favored lower tariffs, because they exported the bulk of their products (mostly cotton and tobacco) overseas, while Northern manufacturers favored higher duties, because they didn’t want the competition from Europe and their market was largely domestic.

Before the income tax was enacted, tariffs made up the bulk of revenues for the government.

Classical liberalism, inspired by Adam Smith, envisioned a world where barriers would be eliminated and people could freely trade their products without high taxes imposed by governments.

That classical liberalism has become a key tenet in modern conservatism. Interestingly, it is also one of the top legislative items for President Barack Obama. Mr. Obama waited until Republicans dominated the Congress before he moved on this free trade agenda, mostly because Harry Reid made it pretty clear that he doesn’t believe Adam Smith.

Free trade benefits consumers.

Walmart offers great prices to its customers because most of the products it sells are made in places where the workers make considerably less than the minimum wage. Official government policy has been to allow these products to come in to our country with minimum government interference, and as a result, the American people are able to buy underwear and plastic toys for a mere pittance.

Pew did a study last year that survey the attitudes towards trade around the globe. They found that the people who like free trade the most live in places like Uganda, Tunisia, and Viet Nam. Americans were becoming the most skeptical about the efficacy of free trade policies, along with the French and the Italians.

American consumers have grown so used to low prices that they have become spoiled, not quite realizing perhaps that those low prices are a direct result of a free trade regime that slashes tariffs at home and abroad.

This free trade regime tends to help American companies that produce complicated products, like airplanes, but tends to hurt American textile workers. It tends to help American agricultural interests, who export their products overseas, but tends to hurt other low skilled workers, who face intense wage competition from overseas.

Free trade only really works when companies can operate freely, without too much government interference. America likes to make the claim that it is not a mercantilist power, and in the great scheme of things it is not, but the government does have responsibility to stick up for its domestic industries. To somehow believe that other countries (like China, Viet Nam and Korea) are completely on board with classical liberalism is to strain credulity.

Free trade ebbs and flows. It becomes fashionable and then it falls out of fashion. It affects different regions differently at different times. The South wanted it in the 1790’s and then didn’t want it in 1990’s. The North wanted high tariffs when it was a manufacturing powerhouse, but low tariffs when it was the financial behemoth.

Free trade might seem like an inviolate theoretical principle, but in practical terms, it is much more complicated than that.

Editor’s Note: John Feehery worked for former House Speaker Dennis Hastert and other Republicans in Congress. Feehery is president of Quinn Gillespie Communications. He is a contributor to The Hill’s Pundits Blog and blogs at thefeeherytheory.com.