Many who argue for free trade are stuck in the debate of the 1930s. They speak of Smoot-Hawley, tariffs and protectionism. Some make the mistake of getting drawn into the Smoot-Hawley debate. That is a mistake because you are accepting the wacko free trader’s argument framing, and then continuing to argue on their terms.

This is not just an advocacy mistake, but it is a policy mistake.

We are not in the 1930s anymore. This is a world of much more sophistication among trade rivals.

There are three levels of barriers.

Level 1: Transparent or pure barriers: These are outright import tariffs, and outright export subsidies. Easy to find and recognize.

Level 2: Non-transparent or mixed barriers: These are other government actions that are not called tariffs or subsidies, and may have other policy justifications. Value added taxes are easy to find, but have tax reasons for existing. Government loans, or even bailouts, to industries. Currency manipulation. Government ownership or industries. Government market promotion and export promotion programs. Government procurement programs. Research and development subsidies and credits. And many, many other programs designed to help business, industry and agriculture by providing value to them without business, industry and agriculture paying for them. Shall we get rid of all of these?

Level 3: Cultural and societal barriers: The manner of industry organization, cultural organization and government involvement in the organization of industry and culture also have a bearing. Japan’s keiretsu are a set of companies with interlocking business relationships. They are separate businesses acting as a conglomerate, with vertically integrated supply relationships, integrated banking relationships, integrated shareholders and board members, etc. Ditto South Korea’s chaebol. Ditto China’s communist party which owns much of the economy directly, or through its party hacks. German industry has no keiretsu or chaebol name, but acts much the same in many ways. They don’t buy on the open market. They buy within the club and within the country.

Drafting a trade agreement to address Level One is relatively easy.

Drafting a trade agreement to address Level Two is difficult. Try getting a nation to repeal all those internal economic promotion policies. And good luck to you.

Drafting a trade agreement to address Level Three is impossible. You would have to dismantle the culture of a country, and examine every minute purchasing decision and sort out the intent and rationale for it.

The question then becomes. Is this model of free trade the right one? Is it even possible to perfect on economic grounds?

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