Reagan’s full April 1987 speech clearly laid out his pro-free-trade, anti-tariff philosophy.
Donald Trump has halted trade talks with Canada, two months after Prime Minister Mark Carney scaled back Canada’s own retaliatory tariffs even in the absence of an agreement with the U.S. — a signal of Canada’s weak hand. Trump’s pretext is that Ontario premier Doug Ford is running TV ads (and plans to run them during the Blue Jays-Dodgers World Series) with clips of Ronald Reagan denouncing tariffs, and the White House contends that the ads take Reagan out of context. Even the Reagan Library has been sucked into the controversy, claiming that the Ford ad “misrepresents” Reagan’s full remarks.
Now, any ad snipping portions of a longer speech will remove some context, but the full April 1987 Reagan speech clearly laid out his pro-free-trade, anti-tariff philosophy:
Reagan was a master of principled politics who knew how to explain what he stood for in commonly understandable terms, but he was also pragmatic about knowing when to take half a loaf and accommodate political and practical realities. Bad-faith opportunists have long tried to cherry-pick the exceptions to undermine the principles. Barack Obama, for example, was known to cite instances of Reagan raising taxes, without mentioning that he did so as parts of larger initiatives to cut tax rates and simplify taxes, or that the hikes (like other Reagan concessions) were included as deals to gain support in the Democratic-controlled Congress.
As you can see from major excerpts from Reagan’s fairly short speech, his free-trade principles were strongly grounded in both economic theory and practical economic history:
We feel both Japan and the United States have an obligation to promote the prosperity and economic development that only free trade can bring. Now, that message of free trade is one I conveyed to Canada’s leaders a few weeks ago, and it was warmly received there. Indeed, throughout the world there’s a growing realization that the way to prosperity for all nations is rejecting protectionist legislation and promoting fair and free competition. Now, there are sound historical reasons for this. For those of us who lived through the Great Depression, the memory of the suffering it caused is deep and searing. And today many economic analysts and historians argue that high tariff legislation passed back in that period called the Smoot-Hawley tariff greatly deepened the depression and prevented economic recovery.
You see, at first, when someone says, “Let’s impose tariffs on foreign imports,” it looks like they’re doing the patriotic thing by protecting American products and jobs. And sometimes for a short while it works — but only for a short time. What eventually occurs is: First, homegrown industries start relying on government protection in the form of high tariffs. They stop competing and stop making the innovative management and technological changes they need to succeed in world markets. And then, while all this is going on, something even worse occurs. High tariffs inevitably lead to retaliation by foreign countries and the triggering of fierce trade wars. The result is more and more tariffs, higher and higher trade barriers, and less and less competition. So, soon, because of the prices made artificially high by tariffs that subsidize inefficiency and poor management, people stop buying. Then the worst happens: Markets shrink and collapse; businesses and industries shut down; and millions of people lose their jobs.
The memory of all this occurring back in the thirties made me determined when I came to Washington to spare the American people the protectionist legislation that destroys prosperity. Now, it hasn’t always been easy. There are those in this Congress, just as there were back in the thirties, who want to go for the quick political advantage, who will risk America’s prosperity for the sake of a short-term appeal to some special interest group, who forget that more than 5 million American jobs are directly tied to the foreign export business and additional millions are tied to imports. Well, I’ve never forgotten those jobs. . . . We’ve still maintained our basic, long-term commitment to free trade and economic growth. . . . It’s terribly important not to restrict a president’s options in such trade dealings with foreign governments. Unfortunately, some in the Congress are trying to do exactly that. I’ll keep you informed on this dangerous legislation, because it’s just another form of protectionism, and I may need your help to stop it. Remember, America’s jobs and growth are at stake.
It is, of course, true that Reagan the realist sometimes deployed tariffs and other trade barriers. On occasion, these were fairly naked political sops; sometimes, they were intended as sticks to bring other countries to the table. Indeed, the 1987 speech refers to such efforts being deployed against Japan, which is why Reagan was eager to explain that they didn’t undermine his commitment to free trade:
As perhaps you’ve heard, last week I placed new duties on some Japanese products in response to Japan’s inability to enforce their trade agreement with us on electronic devices called semiconductors. Now, imposing such tariffs or trade barriers and restrictions of any kind are steps that I am loath to take. And in a moment I’ll mention the sound economic reasons for this: that over the long run such trade barriers hurt every American worker and consumer. But the Japanese semiconductors were a special case. We had clear evidence that Japanese companies were engaging in unfair trade practices that violated an agreement between Japan and the United States. We expect our trading partners to live up to their agreements. As I’ve often said: Our commitment to free trade is also a commitment to fair trade. But you know, in imposing these tariffs we were just trying to deal with a particular problem, not begin a trade war. So, next week I’ll be giving Prime Minister Nakasone this same message: We want to continue to work cooperatively on trade problems and want very much to lift these trade restrictions as soon as evidence permits.
The “fair trade” argument that we should open our own markets only to the extent that other countries open theirs — and at times deploy trade sanctions to enforce compliance — is reasonable enough as a general theory, although it’s often misused in practice to deal with highly asymmetrical situations. There are many countries with whom we have highly imbalanced trade because of vastly different comparative advantages in manufacturing, agriculture, and services. You can believe in free trade in theory and allow for occasional uses of trade sanctions; you can also believe in fair trade in theory and yet allow that we’re sometimes better off letting some asymmetries slide in order to promote a trade relationship that is beneficial overall.
Much of the Trump trade posture, however, is explicitly protectionist, rejecting Reagan’s entire framework of seeking an end goal of free trade, or it’s based on the anti-free-trade assumption that trade deficits in manufactured goods are somehow proof of an absence of fair trade. So you can see why Trump, even aside from his general dislike of a foreign government running TV ads targeting American voters, would be hypersensitive to this message. In fact, Trump was harshly critical of Reagan’s stance at the time for being too soft on Japan: He spent nearly $100,000 in September 1987 running a full-page ad in the New York Times, the Washington Post, and the Boston Globe arguing that Japan was ripping us off by not shouldering the costs of its own defense, a theme similar to what he says today.
It’s also a bit off-kilter to blame the Canadian national government for the behavior of Ford, the equivalent of a governor who runs his own center-right, oxymoronically titled Progressive Conservative Party. The party is not affiliated with either Carney’s Liberal Party or with the national Conservative Party of Canada. Like his late brother Rob, the bombastic mayor of Toronto, Ford cultivates an image as an independent maverick. Offending both Carney and Trump simultaneously while sticking up for free markets, Canadian nationalism, and the local interests of Ontario (which has been hit especially hard by Trump’s tariffs) is good for Ford’s brand.
Trump’s more serious grievance is that Carney is trying to strengthen Canada’s leverage by expanding its exports elsewhere, but that’s just what any country will do. Kevin Hassett notes that the suspension of talks isn’t really about the Reagan flap:
Hassett, director of the National Economic Council, told reporters at the White House on Friday that Canada has shown a “lack of flexibility” and also cited “leftover behaviors from the Trudeau folks,” referring to former Prime Minister Justin Trudeau, who had a frosty relationship with the Trump administration. “If you look at all the countries around the world that we’ve made deals with, and the fact that we’re now negotiating with Mexico separately reveals that it’s not just about one ad,” Hassett said.
Carney says he can wait for Trump to come around, and as with Trump’s move, some of this is just posturing for domestic audiences, and some is a negotiating position. But nobody should be under the illusion that Trump has the better argument in trying to appropriate Ronald Reagan’s legacy on free trade.