Everyone knows that a key to the Democrats' big electoral win was their opposition to the Iraq war. But also, as the Wall Street Journal reported recently, "Democrats' stances against free trade helped build the party's success at the polls and could tip the balance on trade matters. The new dynamic could put a definitive end to the already troubled effort to reach a global agreement to reduce tariffs and open markets...."
Protectionists (of whatever party) believe that consumers who buy goods and services from foreigners cause domestic employment – and wages – to fall. Economists since before Adam Smith have shown that this belief is mistaken, largely because foreigners sell things to us only because they either want to buy things from us or invest in our economy.
These activities employ workers here at home and raise their wages. Mountains of empirical evidence show that protectionism is economically destructive. The facts also show that protectionism is inconsistent with a desire for peace – a desire admirably expressed by many Democrats during the recent campaigns.
Back in 1748, Baron de Montesquieu observed that "Peace is the natural effect of trade. Two nations who differ with each other become reciprocally dependent; for if one has an interest in buying, the other has an interest in selling; and thus their union is founded on their mutual necessities."
If Mr. Montesquieu is correct that trade promotes peace, then protectionism – a retreat from open trade – raises the chances of war.
Plenty of empirical evidence confirms the wisdom of Montesquieu's insight: Trade does indeed promote peace.
During the past 30 years, Solomon Polachek, an economist at the State University of New York at Binghamton, has researched the relationship between trade and peace. In his most recent paper on the topic, he and co-author Carlos Seiglie of Rutgers University review the massive amount of research on trade, war, and peace.