The repeal of the Corn Laws in 1846 symbolized the abandonment of
mercantilism and the advent of the golden age of British free trade.
Although by no means constituting complete free trade, British trade pol-
icy became the closest approximation to it that the world had yet seen. ¹
The British example also contributed to the general decline of protection-
ism that occurred throughout Europe during the middle of the nineteenth
century. ² But from our historical vantage point, we can see that this
change was neither complete nor permanent; instead, it was only one
phase of the continuous cycle in which trade policy oscillates between rel-
atively free and relatively protectionist.

By the last quarter of the nineteenth century, the pendulum was already
moving the other way, and during the 1930s, Britain was carried with the
rest of the globe into a frenzy of protectionism that reduced global trade
by two-thirds, with average tariff rates reaching 45 percent, not far from
their peak prior to 1820. The cycle began again after World War II with a
global movement back toward free trade led by the United States. Signs
that mercantilist sentiment is again gaining strength have appeared since
the late 1980s, but trade levels have continued to rise, fueled by explosive
growth in the export-oriented economies of Asia that are the subject of
Chapter 7. Indeed, by the end of the twentieth century, international trade
and investment have reached a level that leads many liberals to celebrate
the death of mercantilism and conclude that globalization is irreversible.
They would do well to recall that the historical record casts doubt on any
judgment of permanent resolution of the dilemmas of trade.

In this chapter, I seek to explain the cyclical pattern seen so far by re-
turning to the central analytic question of why nations select the foreign

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