The whole issue of free trade is confusing and complicated, with some libertarian groups favoring agreements like NAFTA and CAFTA and other libertarians opposing them. One camp views them as the best way to remove trade barriers, the other camp views them as little more than stepping stones towards an international regime to prop up multinational corporations. Off to the side are the Democrats, who increasingly oppose free trade agreements because of their impact on Third World countries. But many times, agreement supporters attack these Democrats as protectionists in green clothing. Costra Rica is on the verge of voting up or down on CAFTA and there is the possibility that the US will take away trade benefits if Costa Rica votes it down. Democrats are stepping up to block this blackmail:

"Washington, D.C. - U.S. Representatives Raúl M. Grijalva and Linda Sánchez today announced plans to introduce legislation to make permanent trade benefits for nearly two dozen countries, including Costa Rica. This announcement comes at the culmination of a nearly two year campaign by the Bush administration to use the false threat of trade preference expiration to pressure Costa Rica into ratifying the Central America Free Trade Agreement (CAFTA). Bush’s trade representative, Susan Schwab, made this threat again on Wednesday – the last day before a three-day media blackout in Costa Rica ahead of Sunday’s referendum on CAFTA."

This gives strength to the claim that Democrats are just worried about the impact of these so-called trade agreements, as opposed to the claim that they are just protectionist at the core. The Democrats are pushing for lower trade barriers unilaterally, regardless of what Costa Rica does. Who is the true free trade party now?

This event comes at a time when I'm doing some serious reflection on how much of a priority free trade ought to be. The classical version of American history starts with a protectionist Alexander Hamilton opposing a free trade Thomas Jefferson. But in fact Hamilton opposed protective tariffs, instead he supported a reasonable tariff as a source of government revenue. His plan for the promotion of industry was far more diabolical. The following is from a paper “‘A New Thing on Earth’: Alexander Hamilton, Pro-Manufacturing Republicans, and the Democratization of American Political Economy” by Andrew Shankman, the author of "Crucible of American Democracy" I have recommended in the past. Emphasis added.

Thus far this description of Hamilton should sound familiar. Problems arise, however, when historians scrutinize the complexities of Hamilton's policies. Hamilton scholars have shown that he rejected certain policies that arguably should have been the starting point for serious efforts to promote domestic manufacturing and diversify the internal economy. In 1978 John R. Nelson showed that Hamilton never endorsed protective tariffs, though subsequent political economists deemed them essential for stimulating manufacturing. Indeed, Nelson argued that funding and assumption required extensive annual revenue that in the early 1790s could come only from imposts. Imposts designed to raise revenue depended on foreign imports, the very thing a protective tariff would curtail. Funding and assumption, and the immense need for revenue, Nelson argued, made protective tariffs structurally impossible. Because Hamilton made them impossible (and indeed Congress did not pass the nation's first protective tariff until 1816), Nelson concluded that Hamilton's support for manufacturing was not all that serious.

Students of political economy have accepted Nelson in part. Drew McCoy recognized Hamilton's opposition to protective tariffs but defended Hamilton's ambition to stimulate manufacturing. Hamilton favored bounties and premiums over protective tariffs to foster manufactures because protective tariffs led to scarcity and smuggling and caused potential trading partner nations to retaliate. Thus McCoy saw Hamilton's choice as a simple policy preference. But Hamilton's preference was not all that simple; bounties and premiums were part of a complex system of political economy that fostered conditions quite different from those that resulted from protective tariffs. Hamilton's policies encouraged consolidation, elite control of new investments, and subordination of small producers in the crafts to the new nation's commercial, financial, and speculative elites. His policies, in time, would both develop and diversify the internal economy; but his hierarchical priorities and methods contradicted the hopes of contemporary political economists, such as Matthew Carey, for a more open and dynamic economic order.

. . .

The best examples of this political economy of ordered, hierarchical economic development were Hamilton's final statements regarding how best to promote domestic manufacturing, and his conception of an expanding credit and financial structure. Hamilton's Report on Manufactures and his prospectus for the Society for Establishing Useful Manufactures (SEUM) brought together the various aspects of his political economy. The report was an enthusiastic defense of manufactures-but not protective tariffs. In the prospectus Hamilton explained that manufactures could succeed in the United States because the funded debt provided a source of what he termed capital to fund manufacturing enterprises. At the same time, successful manufactures could strengthen the value of the debt "by giving it a new and additional employment and utility." The SEUM afforded "additional employment" for the public debt because it was capitalized entirely with public debt certificates. The SEUM's charter eventually allowed it to sell $1,000,000 worth of company stock in $100 blocks and to accept public debt certificates in exchange for the entire stock sold. Given the roughly 4 percent interest born by the debt, the transfer of SEUM stock for public debt, should subscribers purchase the entire $1,000,000, amounted to approximately a $40,000 per year government subsidy. At the same time, this new investment for this portion of the debt helped raise the debt's overall value. Possession of public debt gave the SEUM an advantage that few manufacturers or craftsmen enjoyed.

Hamilton's political economy magnified the SEUM’s advantages. He proposed "to lay a duty on foreign manufactures of the material, the growth of which is desired to be encouraged, and to apply the produce of that duty by way of a bounty, either upon the production of the material itself or upon its manufacture at home, or upon both." In other words, the revenue generated by the foreign import of raw materials for manufactures, and the manufactures themselves, would be placed into bounty funds that the government could administer to the domestic manufacturers who earned them through their manufacturing output. It was much more likely that the SEUM would earn these bounties than would master craftsmen and their journeymen employees. Bounty funds would exist only if Americans voluntarily purchased foreign imports. In this context, attempting to produce enough to earn the bounties was likely to be ruinous, since production costs would be high and the market for domestic manufactures, without the aid of protective tariffs, was limited. But because of its substantial subsidy from the public funds, the SEUM could produce (at a loss if necessary) enough to earn bounties that were funded by the revenue from imports. Hamilton could allow revenue generating imposts to fund a particular manufacturing concern precisely because foreign manufactures continued to stream into the United States, doing ruinous harm to most artisans and mechanics.

The history of a power elite trying to impose centralized authority on the American economy goes back a lot farther than just the Progressive Era. But it seems that in today's corporate economy, free trade that lowers trade barriers but does nothing to, say, tear down internal subsidies in agriculture and business, would simply increase centralization in the economy.