Advancing Human Rights in China

This article appeared in Investor's Business Daily on July 10, 1999

Trade should not be used as a weapon of war against China. Denying China normal trading status, in order to penalize its leaders for human rights violations, would be counter-productive to the values this country stands for.

Such a short-sighted policy fails to recognize the significant advances China has made since it launched its economic reforms in 1978. The growth of the nonstate sector now accounts for 70% of industrial output value. And it has given the Chinese people greater autonomy and has already weakened the power of the Communist Party.

Although much remains to be done in China to protect individual rights, isolating China from the West would be disastrous.

Without normal trade relations (NTR), the U.S. could be forced into a trade war with China, leading to higher tariffs and even a suspension of trade. This, in turn, would strengthen the position of state-owned enterprises and give hard-liners greater power and fewer incentives to give up their privileges for free trade.

Critics of the policy of engagement should consider the words of former student rights' activist Li Lu, now an investment banker in Los Angeles. According to Li, "Politically, China suppresses its people, but because the government allows some freedom in economic matters, business has become the ultimate expression of individuality." In his view, the annual debate over China's trade status "has become an utterly ineffective showcase for channeling all of the truly serious issues."

A more constructive way to change China, says Li, is to involve private enterprise in the process of bringing about greater personal freedom. Modern business enterprise depends on ready access to information, labor mobility and human capital - and, most importantly, on a sound legal system that protects property and contractual rights.

Foreign-funded enterprises, and other firms in the nonstate sector, have an incentive to create an institutional infrastructure that enhances opportunities for profitable exchange.

"If companies push for a credible legal system - the rule of law - they will create conditions for competition and revitalize the private economy," argues Li.

As the private sector grows and the state sector shrinks, individuals will become less dependent on the state and eventually call for political change. This is exactly what happened in Taiwan.

And there is evidence that Beijing is slowly moving toward the rule of law.

In March, the National People's Congress amended China's Constitution to provide for "building a socialist country of law" and recognized nonstate enterprises - including private firms - as "major components of the socialist market economy."

Those changes, influenced by commercial contacts with the West, are a first step toward limiting the power of the Communist Party and recognizing the sanctity of private property.

The growth of China's market economy has led to new ways of thinking -- ways that cannot long let communism exist.

"The market means plural ownership," said Mao Yushi, director of the Unirule Institute, a private, market-oriented think tank in Beijing. "It creates a community with many individual groups. (Before) we had only one owner -- the state -- and now we have many. Their independence comes from property rights."

He believes "economic freedom and social development are inextricably linked in China."

Denying the world's 10th largest trading nation normal trade relations with the U.S., and keeping it out of the World Trade Organization, would decrease economic freedom and erode, not advance, human rights in China.

That is not to say the U.S. should ignore the plight of dissidents, or turn away from the use of slave labor, or tolerate technology transfers that jeopardize our security.

Those issues are important, but they should be dealt with separately. Normalizing trade relations is still the best way to teach the Chinese people that the voluntary market offers a better chance for happiness, peace and prosperity than the heavy hand of the state.