The Self-Judging WTO Security Exception

In The Wealth of Nations, Adam Smith identified only one type of government action that justified a departure from free trade: laws designed to protect national defense. Under the Act of Navigation, Great Britain adopted a trade embargo against Holland, prohibiting Dutch ships from trading with the British settlements or with the British Isles. According to Smith, the effect of these laws was to exclude the Dutch, “the great carriers of Europe . . . from being the carriers to Great Britain.” When these laws were passed, Smith wrote, while “England and Holland were not actually at war, the most violent animosity subsisted between the two nations.” Although born of national animosity, these laws were “as wise . . . as if they had all been directed by the most deliberate wisdom . . . which . . . recommended the diminution of the naval power of Holland, the only naval power which could endanger the security of England.” Of course, the navigation laws were “not favourable to foreign commerce, or to the growth of that opulence which can arise from it.” But “as defense . . . is of much more importance than opulence . . . the act of navigation is, perhaps, the wisest of all commercial regulations of England.”