No Free Trade for You

 

When CNOOC, the Chinese oil giant - under heavy pressure from the US Government - recently withdrew its takeover bid for the American oil firm Unocal, it was simply the latest in a series of events inspired by hysteria over the rising yellow menace. While the Bush administration can, in most cases, be counted upon to reliably bang the drum of free trade, the threat of a largely state-owned corporation – fueled by the Chinese economic juggernaut – derailed its stated commitment to a relatively unrestrained global economy. And this, in the same week where the US House of Representatives approved the Central American Free Trade Agreement (CAFTA) despite the strenuous objections of many Americans, labor unions and protectionist politicians of all stripes.

Of course, those who opposed CNOOC’s takeover bid would argue that Guatemalan banana farmers offer little threat to America’s national security, something that cannot be said of the Chinese government, which owns 70 percent of CNOOC. This reasoning conveniently ignores the fact that China’s rise as an economic power and a more prosperous society is based largely on the increased export of goods to the West – especially to the United States - and the resulting increase in purchasing power that this has created for the Chinese, or at least for those Chinese living in the country’s major, thriving economic centers. For better or worse, the two economies are too intertwined to ever seriously broach the thought of war, no matter how much diplomatic posturing and chest-thumping they may undertake. Even if I hate my next-door neighbor’s guts, I’m not going to firebomb his house, if only out of concern for my own.

Nevertheless, a lot of otherwise reasonable people are trying to cast China as the new USSR. Yet, what the rhetoric on both sides – American and Chinese – disguises is the fact that the US and China are bound in a way that the US and the Soviet Union never were – or could have been - under their respective economic systems. So, to suggest that the Sino-American relationship will follow a similarly Manichean path is misguided and ignores the realities of the global economy.

It’s often said, erroneously, that no two democracies have ever gone to war. In fact, numerous democracies, unless you take an extremely narrow and until fairly recently – unrealized - view of the term have gone to war. This is true because the relationship that precludes warfare between two countries is not the nature of their political structures, but the relationship of their economic interests. 

I am reminded here of the McDonald’s Peace Formula, which holds that no two countries with a McDonalds have ever gone to war. Perhaps that’s because they’re too bloated to get up off the couch and pick up a machine gun, but I tend to think it’s because wealthy nations don’t like to threaten their prosperity by lobbing grenades at countries that buy their products and line their pockets. Military conflict between the US and China is most certainly not in anyone’s economic interests. Well, maybe the EU’s, but that’s a topic for another day.

Moreover, with particular respect to the CNOOC’s proposed $18.5 billion acquisition, even the economic implications were relatively insignificant. Oil is a valuable resource, to be sure, but Unocal accounts for less than 1 percent of global oil production, well below the typical threshold the government uses for anti-competition review. Condemnation of the CNOOC takeover bid is at best myopic and at worst hypocritical. In any case, it is not the type of incident that builds credibility when the US preaches the gospel of free trade around the globe. It does, however, suggest a new mantra: “Free Trade – but Only for the Free”. That has a nice, Rovian ring to it.

Comments

[Stacy]

I agree that it's fundamentally wrong to compare China to the USSR. The USSR was an expansionist empire driven by a universalist ideology that saw world conquest as its manifest destiny. China is inward-looking, has no ideology (anymore) and it didn't and doesn't have any expansionist tendencies (Taiwan being a special case). The Chinese mostly want to be left alone to run their own affairs.

However, history doesn't really support the contention that economic ties make war less likely. For example, in 1914 Germany and France were both democratic (for their time) and were each other's largest trading partners. They still went to war when the governments concluded that national security required it. Great Britain adopted a hostile posture toward the US for geostrategic reasons during the Civil War, when the Union would have been one of, if not the largest trading partner for the British Empire (and its only major ally in the effort to stop the transoceanic slave trade)

The US and China will fight if and when their strategic interests become opposed in such a way that one or both don't see an acceptable political solution. And that will happen regardless of how much business they did with each other the day before.

[Dawn Summers]

It does, however, suggest a new mantra: “Free Trade – but Only for the Free”. That has a nice, Rovian ring to it.

hahahahhahahaha