FREE TRADE HIT-AND-RUN.

With the imminent installation of Donald Trump as president of the United States, it is increasingly probable that the world is set to take a measurable turn against one of the 20th century’s greatest economic achievements. For many decades the world’s leaders have at least paid lip service to the principles of open markets, free international trade and the benefits that derive from the global movement of goods and services.

The lip service was never fully translated into genuine free trade, whether through the international pacts orchestrated through the World Trade Organization or regional deals such as the North American Free Trade Agreement. Despite their limitations and many flaws, these and other trade arrangements unleashed a global trade explosion that boosted living standards of people and nations everywhere.

Internationally, world exports of merchandise soared from $2 trillion in 1980 to $19 trillion at its peak in 2014. Since 1970, imports of goods and services have increased from 14 per cent of global GDP to 30 per cent today. These numbers underscore the massive benefits of trade, much of it encouraged and made possible under freer trade regimes installed over the last half century.

No free trade, no Apple iPhone, whose parts are manufactured in scores of countries before assembly in China or wherever.

But as lip service to free trade gives way to Trumpian rhetoric against free trade, the world is at some risk of tipping into an era of trade contraction, even protectionism. Under the Trump Make-it-in-America rhetoric, already being echoed and copied around the world, the return of mercantilism looms.

The Ford Motor Co. decision to cancel a plant to build a US$1.6-billion small-car plant in Mexico is a classic auto-industry capitulation to threats of government protectionism. Trump wants cars made in America, and has threatened a “big border tax” of maybe 35 per cent on cars made in Mexico.

Whether that would be 35 per cent on the total value of the car or only on the value-added in the Mexican assembly isn’t clear. Canadian automotive analyst Dennis DesRosier says the final assembly accounts for only about six per cent of the cost of manufacturing. If the same car is assembled in Detroit, saving 700 jobs, will Ford be able to bring in parts made in Mexico or Canada?

While the net effect of the Ford decision is therefore minimal in itself, it is sure to be followed by scores of other bringthe-jobs- home moves by other automakers and firms in other industries. The incremental costs to the U. S. economy and world economic expansion could be significant over the long term.

If the principles of free trade are now off the agenda, the only alternative is protectionism. Future trade deals and arrangements, instead of being advances toward free trade, will now become vehicles for entrenching trade barriers and treats. The momentum now shifts toward reducing trade rather than enhancing it.

When top Trump appointees talk of trade, they tend to reject the idea of trade liberalization. According to The Wall Street Journal, Robert Lighthizer, nominated by Trump to be administration’s top trade negotiator, seems to think free trade should be shoved to the back burner of trade policy. In a 2011 op- ed, Lighthizer criticized the concept, saying that the “recent blind faith some Republicans have shown toward free trade actually represents more of an aberration than a hallmark of true American conservatism.”

Well, so much for Adam Smith, Milton Friedman and the other great trade theorists who have demonstrated that free trade is of greatest benefit to consumers. DesRosiers put it this way in an interview: “Donald Trump may soon be the most powerful man in the world, but Adam Smith’s invisible hand is more powerful than Donald Trump.”

Over time, that may be true. But more immediately the world faces a new movement in the opposite direction. Led by Trump, protectionism is on the rise. France’s nationalist party leader, Marine Le Pen, praised Trump’s intimidation of Ford. “Protectionism works when it’s done by a country with a committed leader and economic sovereignty — it’s good for industry and it’s good for employment,” she said Wednesday.

As the trend grows, the world stands to lose.

THE FORD DECISION IS SURE TO BE FOLLOWED BY SCORES OF OTHER INDUSTRY MOVES TO ‘BRING THE JOBS HOME.’