In today’s disputes about American economic policy, national security issues loom large. Figures on the left and right regularly invoke national security rationales for applying industrial policy to particular economic sectors or radically limiting trade with specific countries.

One question often not addressed during these debates is “What is national security?” That matters because the idea of national security has been stretched in more recent decades to embrace things ranging from social justice to DEI initiatives. Such conceptual elasticity has blurred national security’s most basic meaning.

In an effort to extract a clear answer from this ambiguity, the historian of ideas and former diplomat, Kim R. Holmes, extensively analyzed the modern meaning of national security and its permeations since the seventeenth century. Having sorted through various distinctions and identified numerous conceptual red herrings, Holmes concluded that “national security is the safekeeping of the nation as a whole. Its highest order of business is the protection of the nation and its people from attack and other external dangers by maintaining armed forces and guarding state secrets.” Holmes then stated, “Because national security entails both national defense and the protection of a series of geopolitical, economic, and other interests, it affects not only defense policy, but foreign and other policies as well.”

Among those other policies impacted by national security is trade policy. From Adam Smith onwards, trade liberalizers have been acutely aware of this, and always acknowledged legitimate national security claims as an exemption to their position that trade between nations should be as free as possible. When Smith wrote at the beginning of Book 5 of The Wealth of Nations that “The first duty of the sovereign” is “protecting the society from the violence and invasion of other independent societies,” he meant what he said.

The state’s fulfillment of this primary duty certainly has implications for trade policy. But it is not a warrant for endless government meddling in international trade. On the contrary, we should recognize how trade openness can promote America’s national security and how, conversely, economic nationalism usually undermines it.

Weakening Oneself While Making Enemies

Understanding how, in the name of strengthening nations, economic nationalism actually weakens national security requires recognizing one of economic nationalism’s original foundations: the notion that commerce across national borders resembles a zero-sum game. This was an underlying assumption of mercantilist doctrines that dominated the West from the late fifteenth century until the mid-eighteenth century. Today, such thinking manifests itself in the economic nationalist premise that other nations are entities from whom you can at best expect irregular and relative economic gains rather than as partners with whom there can be ongoing mutually beneficial exchanges.

This is why economic nationalists worry about trade deficits. When America exports more than it imports, protectionists consider this positive. Foreigners, they say, are purchasing more American-produced goods than Americans are buying foreign goods. America thus “wins.” Conversely, when Americans buy more foreign-made products than American goods, America “loses.”

Alas, such reasoning rests upon a serious misconception of the nature of trade. When two businesses in two different countries enter into a free exchange, both “win” because each secures what they want from the other. Otherwise, neither would have consented to the exchange. From this angle, trade deficits between nations are in themselves neither bad nor good. What matters is that people get what they value. Governments attempting to alter the balance of trade in their nations’ favor through protectionism are thus trying to rectify a non-problem.

Unfortunately, the story does not end there. Governments pursuing such policies not only inject serious long-term dysfunctionalities into their nation’s economy and politics by incentivizing massive rent-seeking; they risk creating serious national security problems for themselves.

That is precisely what happened when America embraced protectionist policies aimed squarely at free trade Britain following the Civil War. Not only, as the economic historian Phillip W. Magness shows, is there “considerable evidence that the harms of late 19th‐​century [American] protectionism outweighed the isolated benefits to selected industries on net.” The same protectionism damaged Washington’s already chilly relations with a naval, economic, and financial superpower with whom America—despite strong ties of language, liberal constitutionalism, history, religion, and trade—was involved in several disputes. Major diplomatic efforts were required to prevent these tensions from spilling over into war. Not coincidentally, the Great Rapprochement between America and Britain, which began in the mid-1890s, was accompanied by efforts to liberalize trade between the two great English-speaking powers.

Another instance of protectionism hurting American national security interests concerns the Smoot-Hawley 1930 Tariff Act which raised the average tariff to almost 60 percent. This produced retaliation from some of America’s biggest trading partners at the very moment when US businesses desperately needed more rather than less access to foreign markets. Especially targeted were goods of great importance to America. The trade economist Douglas A. Irwin has demonstrated how the tariff increases also further undermined economic growth at a time of severe economic regression in America. From an international relations standpoint, Smoot-Hawley’s timing could not have been worse for America. It rendered a country already crippled by the Great Depression even economically—and therefore militarily—weaker just as nation-state competition was heating up in Europe and the Asia-Pacific region.

Strength through Openness

So much for economic nationalism. But how does trade openness enhance national security?

In the first place, there is substantial empirical evidence indicating that growing trade between nations lowers the odds of serious military conflicts with such countries. This does not mean that trade openness makes it near-impossible for relatively economically integrated nations to enter into protracted hot wars with each other, as Norman Angell asserted in his 1909 book The Great Illusion. World War I disproved that claim forever when European governments decided that treaty obligations, ethnic ties, national interests, and national security trumped the economic costs associated with shattering the considerable economic interdependencies crisscrossing the continent.

Rather, it is simply to affirm Montesquieu’s observation that doux commerce’s spread across national boundaries is likely to diminish violence between countries, not least because it obliges governments to think about the economic damage that a choice for war may inflict upon their own nations in an economically integrated world. To the extent that trade openness causes some countries to hesitate before attacking other nations, it promotes the latter’s safety.

A second contribution of trade openness to national security concerns economic growth. The more outward a country’s economic orientation, the faster it grows compared to those with high trade barriers. The most comprehensive World Bank study of this question indicated that between 1950 and 1998 “countries which liberalized their trade regimes experienced annual average growth rates that were about 1.5 percentage points higher than before liberalization.” Over time, that has huge positive effects on growth. By contrast, as one detailed 2019 IMF analysis of protectionism’s effects illustrated, “tariff increases lead, in the medium term, to economically and statistically significant declines in domestic output and productivity.”

While America is less open than some other countries to trade, trade openness has accentuated the size and speed of America’s GDP growth and its associated benefits like greater productivity (including in manufacturing) thanks to foreign competition’s growth-enhancing pressures being added to those stemming from domestic competition. Trade openness also boosts growth via American companies securing reliable access to foreign markets where they can 1) acquire dependable supplies of goods at a cost lower than domestic sources and 2) sell American-made products in new markets.

In the long-term, liberalized trade makes substantial contributions to America’s ability to defend its interests and citizens.

The relevance for national security of these trade-driven growth enhancements is that wealthier nations can afford to spend much more on defense—including defense R&D—than poorer countries. Should war eventuate, wealthier nations can afford to fight for longer periods and with more sophisticated weaponry than those with fewer economic resources. That does not guarantee victory for wealthier nations, as America discovered during the Vietnam War. But it constitutes a deterrent to—and potentially fatal handicap for—belligerent but poorer countries.

The growth benefits of trade openness for America are magnified when accompanied by measures that make foreign investment easier. This expands capital inflows into America which, among other things, bolsters productivity, including in sectors like technology that presently give America significant military edges over its rivals. Economic nationalists, however, often counter that foreign investment can create national security problems. Such investments, they maintain, risk giving hostile foreign interests undue control over US commercial and industrial assets.

The difficulty with this argument is that foreign companies operating in America are subject to the same laws as American-owned businesses. If they violate commercial rules, they can find themselves fighting expensive legal cases in American courts. Furthermore, if a foreign company’s operations in America are deemed a national security threat, that company will likely be blacklisted by the US Treasury and shut out of American markets. There is a long and growing list of such businesses. In other words, America possesses the tools to address this challenge without unduly undermining foreign investment’s growth-inducing effects.

Supply Chains and Resilience

The benefits of trade openness’s growth-enhancing effects for national security are hard to deny. That may be why economic nationalists often focus on other issues when linking trade liberalization to particular national security threats. The issue of supply chain vulnerability invariably features in those discussions.

The more internationalized the supply chain, the argument goes, the more vulnerable America is to disruptions in that chain emanating from war, pandemics, natural disasters, or regime changes that turn once-friendly nations into hostile powers. Economic nationalists consequently hold that America should limit its potential vulnerabilities by trying to insulate its supply chains, especially for goods deemed essential, against such disruptions—even if that involves dramatically curtailing trade with particular countries.

On the face of it, this seems a plausible argument. Important facts, however, impair much of its cogency, one being that America’s economy is one of the least reliant upon international supply chains.

A second salient fact is emerging empirical evidence suggesting that re-shoring supply chains does not improve a country’s resilience in the wake of severe disruptions. During the Covid pandemic, economists began devoting more attention to this issue. While the research is still preliminary, one major World Bank study of Covid’s impact on resilience found that “there is generally no resilience benefit from renationalizing international supply chains” and that “there is no sector in which supply chain renationalization notably improves resilience, measured either by GDP, or by value added of the sector itself.”

There is also substantial evidence that trade openness makes it easier for businesses to adjust rapidly to domestic and international shocks by permitting them to more easily source goods from a wider plurality of nations. Likewise, trade openness allows businesses to switch their supply chain quickly when parts of it become unreliable or cost-ineffective. This has allowed American companies like Apple and Hasbro, recognizing that the cost of maintaining parts of their operations in China outweighs the benefits, to shift these activities faster to India and friendlier countries in Southeast Asia.

Naturally, there are certain goods (e.g., military technology) over which America should maintain particular controls. Entire government offices are devoted to assessing which products should be subject to export controls on national security grounds. At the same time, the trade scholar Scott Lincicome reminds us that frivolous appeals to national security to promote outright protectionist goals are becoming a real problem, most recently through more frequent invocation of the hitherto little-used Section 232 of the Trade Expansion Act of 1962. This reflects growing cross-party tendencies to reduce every trade question to a national security issue: something that, at a minimum, risks further emptying out national security’s core meaning.

Security Reasoning, Trade Logic

This brings us to a last point about trade openness and America’s national security: the manner in which inappropriate invocations of national security logic can muddle how we think about trade policy.

National security logic, particularly its military dimension, is replete with us-versus-them dichotomies. That is not surprising. The objective of military action is to deter and, if necessary, neutralize specific threats to Americans and American interests by hostile state and non-state entities. By nature, this logic is confrontational and zero-sum in outlook: America wins because Nazi Germany loses. National security reasoning is also influenced by the necessity of responding immediately to unanticipated and dramatic events like Japan’s bombing of Pearl Harbor.

The logic and promise of trade openness are quite different. Trade openness is not about defeating enemies. Rather, it’s a positive-sum enterprise through which all participants win—albeit to varying degrees and in different ways—through mutually beneficial exchanges over extended periods of time. In that sense, trade openness encourages us to think primarily about how to maximize our self-interest through trade with others in the global economy rather than dwelling solely on threats, economic or otherwise.

No doubt, particular policies adopted by other countries can hurt American economic interests. Sometimes they are designed to do so. China’s record of state-sponsored intellectual property theft is a good example. If, however, a government viewed international trade primarily through the prism of reacting to real and potential threats to the nation, it would not be out of the question for it to raise the economic drawbridge and opt for autarky.

This is not as fanciful a prospect as might be supposed. Autarkic sentiments have long pervaded economic nationalist thought. Some American economic nationalists have even suggested that a high degree of autarky should be part of America’s economic future. We know, however, that autarky, as exemplified by the policy of economic self-sufficiency adopted by Franco’s Spain between 1945 and 1955, impoverishes nations and significantly impairs their capacity for economic growth. In this sense, autarky is more than simply the economics of extreme self-harm; it also compromises a nation’s economic capacity to defend its citizens.

Grasping the differences between the respective logics informing national security and trade openness is not an argument for blindly subordinating genuine national security concerns to the imperatives of trade, let alone claiming that free trade will establish perpetual peace on earth. Rather, it is about looking at trade and national security through the appropriate lenses, distinguishing real national security challenges from fictitious ones, and grasping how, in the long term, liberalized trade makes substantial contributions to America’s ability to defend its interests and citizens. That is the type of prudence we need to make it more likely that trade openness and national security will be understood more often as complementary rather than implacably opposed.