Theme Three-International Trade Policy

A third theme has been the continuous debate over international trade policy and, thus, over the degree of integration of the United States into the world economy. Trade was in many ways the linchpin of the colonial system; the export of American commodities made possible the import of capital and machines for expansion. But support for protectionist measures, such as those advocated by statesman Alexander Hamilton just after the American Revolution, has often been strong. Until the end of World War II, the United States conducted international trade under the shield of high or modified tariffs. But protectionism contributed to the Great Depression of the 1930s, and after World War II the United States became an advocate of freer trade. Although the nation's policy has remained generally pro-free trade, by the 1970s and 1980s many U.S. manufacturing industries felt increasingly beleaguered by powerful new competition from abroad. Moreover, as U.S. trade deficits mounted, concerns that other countries indulged in unfair trade practices also increased.

Each of these themes underscores certain fundamental characteristics of the American economy. First, the economy is changing continuously, as citizens freely express their economic preferences directly in the marketplace and indirectly in the voting booth. At the same time, the persistence of these themes over time reveals threads of continuity in the dynamic U.S. economy.

In any event, Americans have often been described as pragmatists. The pragmatic test is that in addition to everything else, an acceptable theory must actually work. Clear evidence of the American people's pragmatism is demonstrated by their actions: to establish and maintain an economy soundly based on the principles of free enterprise. At the same time, Americans accept an important role for government to help create an environment with the widest possible opportunities for individual opportunity, and economic growth and progress.