Global trade flows are collapsing. But it's not because protectionism is raising its ugly head. Rather, it's the meltdown of the market economy, not anti-market intrusions by governments, that is behind the meltdown of world trade.

This is a key distinction because it runs headlong against the long-standing myth that "protectionism" caused the Great Depression (rather than the other way around).

The statistics describe a shocking slump in global trade. In the U.S., monthly merchandise trade fell almost 30 per cent from July to December. Japan's exports plunged by 14 per cent in the last quarter of 2008, sparking a frightening 12.7 per cent annualized decline in GDP. China's imports declined an incredible 21 per cent in the year ending in December.

So was that just a dream we dreamed after all -- that we had a free-trade deal with the U.S. giving us secure access to their markets and their public procurement? Because we learned this week that their Congress added a Buy American clause to its huge stimulus package excluding us, causing people both here and there to panic. Or maybe what we got was free trade with a different United States, not the one just south of here?

No, Virginia, it's even weirder. This week's horror and hysteria over a U.S. move to "protectionism" like the Smoot-Hawley tariffs of the 1930s, leading to global "trade war" and disaster -- was sheer myth. The Buy American clause and the ensuing "backdown" by Congress meant nothing.