To the Benefit of Both

This piece originally appeared in the National Review on September 15, 2003.

China looms as the next big thing in trade‐​policy discontent. Anunlikely coalition comprising the National Association ofManufacturers, union leaders, anti‐​trade Naderites, andconservative lawmakers critical of China’s human‐​rights record iscomplaining with growing volume about rising imports from theMiddle Kingdom.

Like the fears about Japan in the late 1980s, anxieties abouttrade with China lack a firm foundation. Despite the discomfort itcauses for certain U.S. producers, trade with China is mutuallybeneficial. Chinese workers gain from the opportunity to sell theproducts of their labor to a global market; Americans – consumersand producers alike – benefit from the low prices, variety, andcompetition of imports from China. Raising barriers to commercialengagement with China would damage our economy and underminesecurity and human rights. Most American families benefitunambiguously from trade with China. The clothing, furniture, toys,and electronics that make up a big chunk of Chinese imports keepprices down in American stores and raise the real wages of Americanfamilies, especially those with middling or low incomes. Lower‐​costparts and other intermediate goods from China – such as computerhard drives and plastic moldings – allow American manufacturers toretain their competitive edge in global markets.

Although imports from China have grown rapidly, they are nothinglike a flood. In 2002, Americans bought $125 billion worth of goodsmade in China – which represents only 10 percent of our totalimports ($1.2 trillion) and a tiny fraction of our $10.4 trillioneconomy. There is nothing wrong with Americans’ spending 1 percentof their income on products made by the one‐​fifth of mankind thatlives in mainland China.

And, despite the warning that U.S. factories are moving indroves to China, American investment in the mainland remainsmodest. Annual outflows of manufacturing investment to Chinaaverage about $1 billion, less than 1 percent of the $200 billionor so that is invested each year in our own domestic manufacturingcapacity. At the end of 2001, American companies directly owned andcontrolled $7 billion worth of manufacturing investment inChina – which amounts to less than 2 percent of the total stock ofU.S. direct manufacturing investment abroad, and far less than the$35 billion American companies own in the (tiny) Netherlands.

Critics ignore China’s own growing appetite for goods. WhileChina is the world’s sixth‐​leading exporter, it is also the world’ssixth‐​leading importer. Because of soaring domestic demand, it hasnow displaced the United States as the world’s chief importer ofsteel, and has become one of the world’s top markets for automobilesales. While America’s total exports were falling in 2002, ourexports to China rose 14.4 percent. How will the people ofChina – or India, or other developing countries – become middle‐​classconsumers if we do not allow them to participate in the globaleconomy?

So much for the economic worries. National‐​security concernsabout China are not so easily dismissed – especially those regardingtechnology‐​related exports. The U.S. government wields extensivepower to block exports of sensitive military and “dual use“technology, and the government should use that power whennecessary. We should not be selling cutting‐​edge militarytechnology to China that could then be sold to our enemies orotherwise turned against us. But that is not what really botherscritics of trade with China. What they object to are imports fromChina, believing that enriching China through trade will threatenAmerican security.

That was the view of the U.S.-China Security ReviewCommission – a panel established by Congress in 2000 to monitortrade with China – which warned in a 2002 report, “If China becomesrich but not free, the United States may face a wealthy, powerfulnation that could be hostile toward our democratic values, to us,and in direct competition with us for influence in Asia andbeyond.” This critique is flawed. First, trade with the UnitedStates has not been the most important factor in China’sdevelopment. Far more important has been China’s own internalliberalization and unilateral opening up of its economy to foreigncompetition. If the U.S. market had been closed to Chinese goods,China would still have grown rapidly in the past 25 years, althoughnot as rapidly as it actually did.

Second, even if we could slam the brakes on China’s economicgrowth, would we want to? A dramatic slowdown would cause hardshipfor hundreds of millions of Chinese families and condemn millionsof children to lives of perpetual poverty without the hope offurther education and upward mobility. A poor, stagnant, andfrustrated China would be more unstable and hostile to Americaninterests than an energetic and prosperous one. A policy ofdisengagement from China would probably create the very enemy itsproponents claim to be protecting us from.

China’s burgeoning commercial ties have already moderated itsinternational behavior. The incident surrounding the downing of asurveillance plane over China early in President Bush’s term wasresolved quickly in some measure due to China’s growing commercewith the United States. And, China is finally playing aconstructive role in policing Asia’s true problem child, NorthKorea, in part because South Korea is now among its top fivetrading partners. Its equally huge trade and investment ties toTaiwan give the Chinese government a powerful reason to avoidmilitary conflict over the island.

Conservative critics of trade with China mingle their economicand security objections to China trade with concerns about humanrights. It is true that the Chinese government systematicallyabuses the rights of its citizens to speak freely, organize,worship, and raise children. But disrupting our mutually beneficialtrade relationship in the name of protecting those rights would befutile and counterproductive. After two decades of reform and rapidgrowth, China’s expanding middle class is experiencing for thefirst time the independence that comes with owning a home,traveling abroad, and working with others in an economic enterprisefree of government control. The numbers of telephone lines, mobilephones, and Internet users have risen exponentially in the pastdecade. Tens of thousands of Chinese students study abroad everyyear. Rising incomes have allowed Chinese families to buy their wayout of the one‐​child policy. China’s economic reforms have openedthe door for greater religious activity as well. More than 100Western missionary organizations are active in China, distributingmillions of Chinese‐​language Bibles.

Trade sanctions have failed to improve human rights in suchbackwaters as Cuba, Sudan, and Burma. Meanwhile, trade, economicreforms, and growth have tilled the soil for democracy in SouthKorea, Taiwan, Chile, and Mexico. If experience is any guide, wecan encourage political and civil freedoms more effectively inChina through trade and development than through sanctions. Thebest policy to promote human rights in China would combine shiningthe spotlight of official criticism on China’s abuses withencouraging an independent civil society through commercialengagement.

A recent study by the Chinese Communist party’s CentralOrganization Department noted with concern that “as the economicstanding of the affluent stratum has increased, so too has itsdesire for greater political standing.” The study concluded thatsuch a development would have a “profound impact on social andpolitical life” in China. By maintaining normal trade relationswith the world’s most populous nation, we bolster our economy,guard our security, and encourage the “affluent stratum” that ismaking China’s rulers increasingly nervous.