- Historic Sites
Land Of The Free Trade
Foreign trade—import and export alike—has been indispensable in building America from the very start, and many of our worst economic troubles have arisen when that trade wasn’t free enough. A historic overview.
July/august 1993 | Volume 44, Issue 4
Today the situation has reversed again, and foreign trade is a larger component of the American economy, in both scale and importance, than at any time since the early days of the Republic, about 15 percent and growing quickly. At the end of the twentieth century our self-sufficiency is long gone. Instead the United States has become the world’s largest exporter and importer of goods and services and the linchpin of a swiftly integrating global economy.
But there is also another reason why the history of America’s foreign trade has been very complicated: because the pressures to manipulate that trade for the benefit of particular domestic interests, rather than for the country as a whole, have always been hard for politicians to resist. After all, the relatively few individuals who greatly benefit from, say, protective tariffs—usually domestic producers and their workers—will always press the case against foreign competition with vigor, not to mention political contributions. The vast mass of citizens, who are usually only slightly harmed, however, often have no real means, and little individual incentive, to counter the pressure.
Take the case of sugar, for instance. The United States is at best a marginal producer of sugarcane, because efficient production requires a tropical climate and either large amounts of low-paid labor, as in Latin America, or vast economies of scale, as in Australia. In a free market there would be little, if any, United States production. But the American sugar market is anything but free.
Instead, a system of quotas and tariffs comfortably protects the handful of producers in Florida, Louisiana, and Hawaii. It also raises the cost of sugar to consumers by as much as 50 percent. Not even continuing exposés of the brutal exploitation of migrant workers in American canefields have budged Congress to redress this blatant latter-day mercantilism, because sugar is so small a part of any individual’s budget as to go unnoticed.
The first federal tariff, intended by the Founding Fathers to be the government’s primary source of revenue and enacted on July 4, 1789, was remarkably evenhanded. But in the years that followed, as the United States changed from an agrarian exporter of raw materials into an industrial giant, the Smithian inheritance would often be compromised for political purposes, as it had been with sugar.
Sugar, of course, is not a vital part of the American economy. But twice in our history disaster resulted from political meddling with foreign trade. It could happen again.
When the first colonists landed on the shores of what would one day be the United States, they were nearly as dependent on where they came from for the necessities of life as would be, today, the inhabitants of a lunar base. Game could offer a steady meat supply perhaps, but virtually everything else had to be brought from Europe. Weapons, cloth, tools, medicines, livestock, furniture, even enough food staples to see the colonists through the first growing season and beyond—all had to be imported. As early as 1628 a rule of thumb had developed that settlers in a new colony needed to bring with them eighteen months’ worth of provisions to be safe from famine.
There was one big problem: Those who sent the first colonists were not the officers of well-funded government agencies pursuing knowledge; they were capitalists pursuing profit. Eleven joint-stock companies were formed in the early seventeenth century to establish English colonies in Ireland and the New World, and their stockholders invested some thirteen million pounds, a huge sum by the standards of the day.
Naturally they wanted as immediate a return on their investment as possible. If the colonists were to provide it, as well as finance future imports, they had to find something to export and find it quickly. They were never quick enough to suit the investors. The backers of the Plymouth colony, for instance, severely criticized the Pilgrims not only for detaining the chartered Mayflower over the winter (they would surely have perished if they hadn’t) but, worse, for sending her back in the spring without a cargo.
The earliest schemes, not surprisingly, often foundered on the rocks of inadequate knowledge of New World realities. In Virginia the colonists at Jamestown were at first so bewitched by the prospect of El Dorado that many of them searched for gold rather than plant crops. Starvation was the result when the gold turned out to be non-existent.
The following year the Virginia Company, which had founded the colony, sent over glassmakers from Poland and Bavaria in hopes that tidewater Virginia’s abundant sand and wood (for fuel) could support a glassmaking industry that could profit from England’s rapidly growing demand for glass. Within a year the project was in ruins when the glassmakers returned to Europe, where they could make a far better living in far more comfortable surroundings. The new colony struggled desperately to survive, exporting a few furs, some timber, sassafras, and silk grass, from which mats were woven. At one point Jamestown was nearly abandoned.