Trade Is Foreign Policy and Every President Has Treated It That Way

Every so often an economist goes on television and explains, in the soothing voice of a man describing a pleasant weather pattern, that trade is "just economics." Tariffs are a mistake, sanctions are a mistake, and the proper role of government in the matter of who sells what to whom is to get out of the way. It is a lovely idea. It has one drawback, which is that no president in the history of the republic has ever actually governed that way.

Not Jefferson. Not Lincoln. Not Truman, Eisenhower, Nixon or Reagan. Every one of them used the American market, American goods and American money as instruments of power, because that is what they are. When your country is the biggest customer and the biggest lender in the world, "we will not use our wallet to protect our interests" is not a neutral position. It is a decision to disarm.

I want to make that case in order, the way a debater would, because it matters for how you judge the next argument about tariffs or sanctions that lands in your feed. Trade is foreign policy. The only real question is whether it is being used well.

The thesis in three premises

Here is the argument, stated plainly.

1. Economic relationships create dependence, and dependence creates leverage. If you rely on another country for something essential, its government can squeeze you. If it relies on you, you can squeeze it.
2. Governments that ignore this fact do not escape it. They simply hand the leverage to whoever is willing to use it.
3. Therefore trade policy is part of national security policy, and the question is not whether to use it but how, when and at what cost.

You can disagree with the conclusion, but you have to deal with the premises, and the premises have a very long record behind them. Let's walk through the record.

Jefferson's Embargo, 1807

The first big example is also the first big warning. By 1807 Britain and France were at war and each was seizing American merchant ships that traded with the other. Britain was also stopping American vessels and taking sailors off them, an outrage known as impressment. President Thomas Jefferson, who disliked war and did not want to fight Britain, signed the Embargo Act in December 1807. It closed American ports to exports and kept American ships from sailing to foreign ports. The theory was that cutting off the supply would force the warring powers to respect American neutrality.

It did not work. It hurt American merchants and sailors, especially in the shipping towns of New England, a good deal more than it hurt Britain. Congress replaced it with a narrower law in March 1809, shortly before Jefferson left office.

Notice what this history teaches, and does not. It does not teach that trade is separate from foreign policy. Jefferson reached for trade precisely because he saw it as a weapon. What it teaches is that the weapon can wound the user, that an embargo on yourself is a blunt thing, and that you need to ask what you are really giving up. Hold that thought, because the best free-trade objection is sitting right there.

The Marshall Plan, 1947 and 1948

Now the happy example. After the Second World War, Europe was starving, broken and ripe for communist parties that promised bread. On June 5, 1947 Secretary of State George Marshall gave a speech at Harvard proposing American help to rebuild the continent. Congress passed the Economic Cooperation Act, and President Truman signed it in April 1948. Over the next four years the United States gave Europe roughly $13 billion in aid.

Look at who made it possible. The Congress at the time was Republican. Senator Arthur Vandenberg of Michigan, the Republican chairman of the Foreign Relations Committee, took Marshall's idea and carried it through. That is a story Republicans should know and tell, because it is a reminder that our party has led on the world stage when the stakes demanded it. For the long argument inside the party, see Taft Versus Eisenhower and the Republican Fight Over the World.

The Marshall Plan was a trade policy and an aid policy and a security policy, all at once. It rebuilt the customers who would buy American goods. It tied Europe's recovery to cooperation among European governments. And it gave ordinary people a reason to prefer a free society over the alternative. Nobody at the time thought they were doing "just economics." They were buying a free Europe, and they got it.

Section 232: tariffs as a national-security tool

Now a quieter example, one that matters more than most people realize. Section 232 of the Trade Expansion Act of 1962 authorizes the President to adjust imports, by tariffs or other means, when the Secretary of Commerce finds that the imports threaten to impair national security. Read that again. The statute itself says the quiet part out loud: trade restrictions can be about national security, and Congress said so in 1962.

The Supreme Court has weighed in. In Federal Energy Administration v. Algonquin SNG (1976), the Court upheld a President's use of the Section 232 authority to impose a license fee on imported oil, rejecting the argument that Congress had not given him that power. Whatever you think of any particular use of Section 232, and conservatives disagree about that, the point here is the principle. American law has recognized for more than sixty years that some imports are a national-security matter.

That is why it is a mistake to say, as the economist on the screen does, that anything beyond free trade is a betrayal of conservatism. Conservatives have long wanted limits on trade with adversaries in sensitive goods. The dispute is over where the line goes, and whether a particular tariff is a scalpel or a sledgehammer. Our post Republicans were the tariff party first, from Lincoln to McKinley shows how deep the party's tariff tradition goes, and Ronald Reagan was no free-trade purist, and his record proves it shows that even the great free-market president was willing to use trade measures when national interests required.

Jackson-Vanik, 1974: trade as a human-rights lever

In the Trade Act of 1974 Congress added the Jackson-Vanik amendment, named for Senator Henry Jackson and Representative Charles Vanik, both Democrats. It denied normal trade relations to certain non-market economies that restricted the right of their citizens to emigrate. The principal target was the Soviet Union, which was blocking many Jews and others from leaving.

Here is a case where Congress used market access as a lever on another country's treatment of its own people. A President may or may not have wanted that, since presidents like flexibility. But Congress insisted, and the amendment stayed on the books for decades. It was not repealed for Russia until 2012. Whether you think it worked or not, nobody can pretend it was an exercise in pure economics.

The Cold War export-control regime

Behind the headline fights sat a quieter machine. In 1949 the United States and its allies set up a body called COCOM, the Coordinating Committee for Multilateral Export Controls, to keep strategic goods and technology out of Soviet hands. Its members included NATO allies and, later, Japan. Its list covered items with military uses: advanced computers, machine tools, electronics. The system lasted until 1994.

What I love about this example is how plain it is. Nobody argued that selling the Soviets the best machine tools was a good business opportunity that government ought to stay out of. The consensus, across both parties, was that you do not sell the other side the means to kill you. The system leaked, and it needed allies to cooperate. Which brings us to a famous failure.

Toshiba-Kongsberg, 1987

In 1987 it came out that a subsidiary of the Japanese company Toshiba and the Norwegian firm Kongsberg had sold the Soviet Union advanced machine tools used to make quieter submarine propellers, in violation of COCOM rules. The result, as it was understood at the time, was that Soviet submarines became harder for American forces to track. Washington was furious. Congress moved toward sanctions on the two firms, which were written into the 1988 trade legislation and barred them from selling to the United States for a period of years.

I tell this story for two reasons. First, it shows how an export-control regime really works: not by a heroic act of government, but by a patchwork of allied promises that is only as strong as its weakest member. Second, it shows that trade policy and the safety of American sailors were the same subject. Quieter submarines meant a bigger risk for the people who had to hunt them. You don't hear that from the "just economics" crowd.

The strongest free-trade objection

Now the other side, and it is a strong one. I mean to give it its full force.

A principled free trader would say: trade restrictions hurt the people who impose them. Jefferson's embargo is exhibit A. Tariffs are taxes on your own consumers, as we show in seven trade myths both parties repeat, tested against the record. Export controls can push customers toward foreign competitors who face no such rules. And the more you use economic coercion, the more your target looks for ways around you, which is one reason the dollar-sanctions debate keeps recurring.

The most painful modern example for American farmers is the grain embargo that President Carter imposed on the Soviet Union in January 1980, after the invasion of Afghanistan. The embargo was aimed at Moscow. It landed on the farmer in Iowa and Nebraska, who lost a market. President Reagan lifted it in April 1981. Our post Embargo, Volcker and Foreclosure Is What Really Caused the 1980s Farm Crisis tells how that history fed the farm crisis of the 1980s.

The objection also has a deep principle behind it. Free exchange between peoples is good in itself. It builds the ties that make war less attractive. A world where governments weaponize every trade relationship is a poorer and angrier world.

The answer

Most of that is right. The conclusion still does not follow. Here is why, in four points.

1. The objection proves that statecraft has costs. It does not prove statecraft is optional. Every tool of national power costs something. Armies cost money and lives. Diplomacy costs concessions. The question is whether the goal justifies the price, and who pays. The farmer who loses a market deserves to be told the truth and, where the national interest demands the sacrifice, to be treated fairly.
2. Effectiveness depends on design. Jefferson's Embargo hit his own people because it was unilateral and total. COCOM worked better because it was multilateral and targeted. The Marshall Plan worked because it was an offer, not a punishment. A tariff aimed at a narrow strategic sector is a different animal from a blanket tax on everything.
3. Refusing to use the tools does not make the tools disappear. Other countries use trade as a weapon constantly. A government that has promised never to respond has made itself the one player in the game who cannot.
4. Free trade is a means, and the end is a free and prosperous people. I'm as fond of open markets as anyone who reads Adam Smith. But when the trading partner is an adversary that holds the keys to your supply of something vital, the free-market answer is to diversify, to build at home or with friends, and to treat dependence as a risk. That is not a betrayal of the market. It is its insurance policy.

If you want the whole range of positions side by side, read free trade, tariffs or managed trade, three theories side by side, and for how sanctions work, How Sanctions Work, From a Presidential Order to a Frozen Bank Account.

The verdict

So where do I come out? Trade is foreign policy. Anyone who says otherwise is either naive or selling something. But that does not mean every tariff is wise, or every embargo is smart. The test is the same for all of them. What is the goal? Will the tool reach it? Who pays? Do our allies join us? And is Congress, which the Constitution gives the power over commerce with foreign nations, part of the decision? The best examples in our history, from the Marshall Plan to COCOM, answered those questions well. The worst, from the Embargo Act to the poorly aimed sanctions that punish farmers more than regimes, answered them badly.

A conservative should be the person in the room who asks the hard questions before the tool is used, not the one who denies the tool exists.

The bottom line

• Every president, from Jefferson to Reagan, has used trade, aid and embargoes as instruments of power. Pretending trade is "only economics" misreads American history.
• The best tools were targeted, multilateral and honest about costs, like the Marshall Plan and the Cold War export controls. The worst were blunt and fell on our own people.
• When a measure hurts American farmers, workers or consumers, say so plainly and ask whether the goal justifies it.
• Congress has the constitutional power over foreign commerce. Insist that it exercise it, rather than leaving every decision to one office.
• Judge each proposal by five questions: the goal, the tool, the cost, the allies and the exit.