“The era of free trade seems to be over. How will the world economy fare under protectionism?” This is one of the most common questions I hear nowadays. But the distinction between free trade and protectionism (like the one between markets and the state, or mercantilism and liberalism) is not especially helpful for understanding the global economy. Not only does it misrepresent recent history, it also misconstrues today’s policy transitions and the conditions needed for a healthy global economy.

“Free trade” conjures an image of governments stepping back to allo...