Free Trade and Human Rights: The Moral Case for Engagement

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The freedom of Americans to trade and invest abroad is beingchallenged in the name of promoting human rights. ConservativeChristian activists and others seek to impose trade sanctionsagainst nations that do not protect human rights. Proposedsanctions include the Freedom from Religious Persecution Act andthe revoking of China's Most Favored Nation status.

Three fundamental misunderstandings cloud the current debateover free trade and human rights. First, cutting government aid totarget countries is not the same as raising barriers to trade andinvestment. Ending foreign aid and corporate subsidies actuallypromotes development by removing market distortions. Blockingtrade, in contrast, hurts U.S. consumers and exporters as well asthe most economically vulnerable people in the targetednations.

Second, some advocates of free trade in the U.S. businesscommunity have weakened their case by failing to acknowledge thathuman rights abuses exist. U.S. multinational firms furtherundermine their credibility by supporting government interventionthrough such agencies as the Export-Import Bank and the OverseasPrivate Investment Corporation.

Third, Christian conservatives who support sanctions betray alack of understanding of how trade promotes freedom anddevelopment. Economic reforms in China have transformed daily lifefor hundreds of millions of people who now enjoy greateropportunity, freedom of movement, material abundance, and access toWestern ideas. Trade with China benefits Americans through lowerprices, wider consumer choice, and greater returns oninvestment.

Imposing sanctions against China will disrupt this mutuallybeneficial relationship while doing nothing to improve humanrights. Like the failed embargo against Cuba, trade sanctionsisolate the victims while strengthening their persecutors.Sanctions imposed in the name of human rights also serve theinterest of domestic protectionists by limiting competition. Thebest policy for promoting freedom and human rights remains economicand moral engagement.

Introduction

The policy community has been debating an interesting question:whether, or to what extent, concerns about human rights and theright to free religious expression should affect U.S. traderelations with countries that violate human rights and restrict theright to worship. That issue is also directly connected withcompeting visions of the nature of trade relations themselves. Dothey consist solely of businesses and consumers reaping gains fromexchange across borders? Or should those exchanges be managed bygovernment regulations and subsidized by international lendinginstitutions?

Pope John Paul II, in his speech to the Vatican Diplomatic Corpsin 1995, had the following to say:

In today's interdependent world, a whole network of exchanges isforcing nations to live together, whether they like it or not. Butthere is a need to pass from simply living together to partnership.Isolation is no longer appropriate. The embargo in particular,clearly defined by law, is an instrument that needs to be used withgreat discernment, and it must be subjected to strict legal andethical criteria. It is a means of exerting pressure on governmentswhich have violated the international code of good conduct and ofcausing them to reconsider their choices. But in a sense it is alsoan act of force and, as certain cases of the present momentdemonstrate, it inflicts grave hardships upon the people of thecountries at which it is aimed. . . . Before imposing suchmeasures, it is always imperative to foresee the humanitarianconsequences of sanctions, without failing to respect the justproportion that such measures should have in relation to the veryevil which they are meant to remedy.

The recent case of India illustrates the confusion that cloudsthe issue. The Indian government's testing in May of nucleardevices in blatant disregard of the Nuclear ProliferationPrevention Act passed by Congress in 1994 raises a human rightsissue because controlling the spread of nuclear weapons isimportant to the safety and security of us all.

In response to those tests, the United States imposed economicsanctions. But let's look at the fine print. Aaron Lukas of theCato Institute pointed out in the Journal of Commerce onMay 22, 1998, that those "sanctions" are largely an end to wastefulforeign aid and corporate welfare spending. Between 1946 and 1996,India received some $50 billion from Washington. The sanctions haveended that flow of government-to-government aid. The sanctions alsoblock Export-Import Bank and Overseas Private InvestmentCorporation loans that directly subsidized private trade andinvestment. Those programs actually impeded economic progress bychanneling resources in ways the market would not otherwiseallocate them.

Those are the kinds of so-called sanctions any believer in freetrade should be glad to accept. Yet the sanctions also prohibitU.S. banks from lending to state-owned Indian enterprises and banmillions of dollars in exports, which is very difficult to justify.That is an example of U.S. involvement in the micromanagement ofinternational trade with no expectation that the sanctions willactually achieve their goal.

I cite the case of India because it shows the muddy thinkingthat dominates this debate. The first error is to confuse aid withtrade. The second error, evident within some sectors of thebusiness community, is to dismiss the issue of human rights and toremain silent, as individuals and as a nation, in the face of humanrights abuses in the belief that economic interests ought toprevail in foreign relations. A third error--currently promoted bya diminishing segment of the Christian right--is to politicizeinternational trade by making it an arena for human rightsbattles.

Trade Yes, Aid No

The debate on U.S.-Chinese trade relations, in particular, hasled to some vigorous disagreement between some conservativeChristian activists and advocates of free trade. This becomes mostvisible during the annual debate on renewing China's "Most FavoredNation" status (which means, in today's political context, normaltrade relations). The implications are broader, however, becausemany nations restrict the freedom of religious practice. Inparticular, Russia has extended full freedom of worship to onlyfour main religions while delegitimizing others. Cuba only recentlybegan to tolerate public expressions of the Christian faith.

Since the great China debate, dozens of bills that would maketrade relations contingent on the protection of human rights havebeen introduced in Congress. Included on the list of currentlytargeted countries are Burma, China, Colombia, Cuba, India,Indonesia, Iran, Iraq, Libya, Mauritania, Mexico, Nigeria, NorthKorea, Pakistan, Peru, Russia, Serbia, Sudan, Syria, Thailand,Trinidad and Tobago, Turkey, and Zaire. The United States hasimposed sanctions more than 60 times in the past five years--morethan half the total of all sanctions imposed since World WarII.

Then there is the Godzilla of all current sanctions bills, theWolf-Specter bill, which the House passed overwhelmingly thisspring. It empowers the State Department to classify countries onthe basis of perceived oppression of religious groups; a finding ofwrongdoing leads to an automatic imposition of targeted sanctions.Some of the sanctions, as well as other parts of the original bill,were cut. At present, it focuses on cutting off foreign aid orlimiting the granting of visas, and its trade sanctions aretargeted rather than across the board.

Without taking a position on the latest version of the bill, Ihave to wonder if those changes reflect a change of heart regardingthe effects of the sanctions themselves or whether they are only abow to political reality. I believe that many people who supportthis bill view it as a first step in a global social engineeringproject in which the United States becomes the world's moralarbiter. If so, the bill can only lead to worse legislation thatwill eventually be counterproductive to the cause of opensocieties, religious freedom, and international cooperation.

The bill also renews extreme sanctions against Sudan. Is thatthe direction in which the bill's supporters would like to see U.S.policy go in the future? Is the bill only a wedge for more extrememeasures to come? We must keep our eye on its trajectory.

The reasons cited for the imposition of sanctions on thecountries mentioned are various, but most relate to human rights. Ibelieve that what activists say about those countries is true;should we then trade with regimes that restrict religious freedomand violate human rights?

People on all sides of the issue agree on certain goals: we wanttyranny to end wherever it exists, and in its place we want to seethe establishment of free societies that will ensure the dignity ofhuman life and protect freedom of conscience and religion.

Some vocal Christian activists emphasize only human rights. Onthe basis of extensive documentation of torture; politicalimprisonment; religious persecution; mandatory abortions;suppression of churches; jailing of priests, bishops, andevangelists; and even murder, those activists have compared thepresent situation in China and elsewhere with Nazi Germany and theSoviet Union.

In light of those realities, many well-intentioned believerscall for a curtailment of trade relations, and some even call for acomplete trade embargo, drawing a comparison with our pastrelations with Nazis and communists. That is not a validcomparison, since our dealings with Nazis involved fighting abloody world war and engaging in aerial bombings of German cities.Our dealings with the Soviet Union involved the relentlessproduction of weapons of mass destruction and a huge and expensivemilitary buildup.

The Chinese Miracle

The pro-free-trade business interests emphasize different pointsand suggest a different agenda. They point out that China isexperiencing a historic economic boom, which was brought about by arapid transition, beginning 15 years ago, from centrally plannedsocialism to an increasingly capitalist system organized alongfederalist lines.

Supporters of free enterprise also have observed that, thoughthe Chinese leaders still maintain that China is a communist state,they have, in fact, completely redefined the term. Tax rates havebeen slashed (and in some regions are actually lower than those ofthe United States), industries have been privatized, labor marketshave been freed in relative terms, housing ownership is encouragedand growing, and joint ventures with Western companies areincreasing rapidly.

The Chinese stock market invites wide public participation,while industrialism and technological progress are proceeding at abreakneck pace, especially in the south. With more shipping lanesopening up each month, the northern region of China has begun toshare in the boom as well. The results have been astounding: in onegeneration, China has moved from a society totally dominated by oneof the world's most murderous regimes to one of increased materialprosperity, freedom of movement, rising commercial opportunity, andrelative abundance.

Proponents of free enterprise also point out that the UnitedStates has benefited from Chinese economic growth. As a result ofour trade relations with China, American consumers enjoyhigh-quality consumer goods of all types, from high-tech productsto clothing. Browse any U.S. shopping center and you will findpicture frames, calculators, napkins and napkin holders, glassware,party favors, containers, kitchen appliances, toys, puzzles, shoes,paper products, electric fans, cosmetics--to name a few items--allfeaturing the "Made in China" label. American consumers have accessto those items at low prices, and the import boom has freed capitaland labor in this country to concentrate on producing items inwhich we have a comparative advantage as a nation: financialservices, computers, software, agricultural goods, detergents,tires, vehicles of all sorts, furniture, building supplies, andmany other things that are available for export to China and othernations.

Moreover, one can no longer say that many classes of goods aremade solely in one country. Computers can feature Americanmicrochips and software, Japanese communications packages, andChinese electronic parts. The same is true of cars, clothing, andfoodstuffs. The recently announced merger of Daimler-Benz andChrysler is a case in point. What will happen to the "buy America"campaign with respect to the new cars produced by a German-Americancompany? All of those products provide good examples of how tradecan benefit people of all societies.

Business Turns a Blind Eye

The Christian right and supporters of free enterprise view thepresent situation in radically different ways. What strikes me,however, is how each side seems unable to concede that the otherside can contribute to a fuller understanding of presentrealities.

In many cases, those in favor of free enterprise have turned ablind eye to human rights abuses for fear that mentioning themmight endanger the growth and expansion of trade. They frequentlyexhibit little concern about religious persecution and tend toregard human rights activists and religious leaders as belligerentsor idealists who don't understand the "real" world.

The same is true of government leaders. In particular, theClinton administration's dealings with China have beencharacterized by a moral blindness to the reality of suffering andpersecution in China. Jimmy Carter, writing in the New YorkTimes last year, exhibited the same myopia. That is hardly anew phenomenon. U.S. government officials in the Roosevelt, Truman,Nixon, and Carter administrations befriended Stalin, Khrushchev,and Brezhnev, hoping to win their favor but showing little concernfor the millions who suffered under their rule. Truly, the Americancorporate lobby is capable of deep cynicism and disregard for thebasic freedoms of the mass of people living under authoritarianregimes.

Worse, rather than trade on a purely commercial basis, manycorporate interests seek special privileges and subsidies. Thoseinclude loans from the Export-Import Bank, which underwritesforeign investments at taxpayer expense, and investment guaranteesfrom the Overseas Private Investment Corporation, which alsooperates at taxpayer expense. They have lobbied for World Bankinfrastructure development loans, support from the InternationalMonetary Fund, subsidies from the United Nations and its myriadaffiliates, and much more.

To them, free trade is bound up with such guarantees. Thebusiness lobbies that work hard against economic sanctions rarelymention those extra perks, or if they do speak about them, theysupport them. Foreign aid, loan guarantees, and subsidies are notfree trade but the opposite: government planning. Such subsidizedinvestment comes at the expense of the American people, who areultimately responsible for those loans and guarantees. It is theheight of naiveté for American business to believe that thegovernment should intervene in the trade process on their behalfbut that political intervention will not backfire against theirinterests.

For any true free trader, such tax-funded interventions anddistortions are anathema. I support the immediate cutoff of all IMFloans and the abolition of all government programs that subsidizeforeign trade, beginning with regimes that engage in political andreligious persecution, but certainly not limited to them.

Fortunately, such loans and aid are not what sustains theinternational economy. Most of our trade with the world is notsubsidized; it reflects the common interests of manufacturers,consumers, shippers, entrepreneurs, and bankers in all countries.By all means, cut off privileges and subsidies, but do not damagethe genuine commercial relations that have so improved the lives ofpeople around the world.

Economics 101 for Christians

I've discussed the selective vision and moral blindness ofcertain business interests. Now, I will address the economicmisunderstandings of conservative Christian activists. Trading witha country is not the same thing as placing a moral imprimatur onthe government of that country. Some Christian activists havedemonstrated an embarrassing lack of understanding of that basicfact.

To say, "I support trade sanctions on country X," really means,"I think that American consumers ought to be punished by highertaxes for their desire to buy products from country X. Americanproducers ought to be forced by their own government to investsomeplace where they are less likely to make money. The U.S.government, not markets, ought to determine where and what peoplebuy and sell across borders with their own money. Moreover, thepeople in country X ought to be denied essential goods and servicesand the right to enjoy the fruits of the international division oflabor."

Let us be honest about the economic consequences of sanctions,although passionate advocates of sanctions evidently do not thinkmuch about economics. For instance, in the debate about trade withChina, not once have I seen in their writings any discussion of theChinese economic miracle and what it means to the people of China,including the Christian church in China. Not once have I seen anacknowledgment that the Chinese government has allowed anunprecedented increase in the freedom to own property, to work, toengage in enterprise, to pursue economic interest, to own a home,to build a business, and to keep profits.

Indeed, in the writings of conservative Christian activists, thewords "profit" and "economic interest" have been used as if theywere the devil's own words. One expects such anti-business rhetoricfrom the left, but it is disconcerting when it comes fromconservatives. Not once have I heard discussed what the explosivegrowth in material prosperity and the new freedoms that have madeit possible mean for China's future. Every day, we hear more newsof China's path to reform. In a few years, for example, more thanhalf of its state-run industries will be in private hands.

How can we act as if China is one huge prison camp, when the farmore complex reality is there for anyone to see? Members of theAmerican business community who frequently deal with China--amongthem Christians who devote their lives to serving others througheconomic endeavors--are dismayed at what is being written and saidby some conservative Christians involved in the debate. An economicmiracle is taking place --a historic chance that the Chinese peoplewill be made permanently free to pursue their individualdreams--and yet all some people can talk about is thumbscrews andprison bars. Like socialists of old, they have even taken todisparaging economics itself.

That is a huge error. Sanctions against Cuba have done little toencourage freedom of expression there. But the influx of outsideinfluence that came with the pope's visit in January 1998 didsucceed in opening up Cuban society somewhat. I was fortunateenough to be there during that time. Not once did I hear an averageCuban, struggling to make ends meet under extraordinarily difficultcircumstances, call for the extension of U.S. sanctions, a goodindication of how unsuccessful sanctions have been.

Most of the countries likely to be hit by the Wolf-Specter billon religious persecution are prime markets for future exports. Butthe export of goods also means the export of influence, both on thepeople and on the regimes in question. We shouldn't embrace billsthat would limit our influence; we should embrace strategies thatstrengthen our influence, while at the same time fostering thedevelopment of private networks that can circumvent officialchannels.

Handmaidens of Protection

In addition, advocates of sanctions seem unaware of the rolethey unwittingly play in the protectionist cause. Leaders of someindustries in this country would like to use the power of the U.S.government to gain an unfair advantage in trade. They areprotectionists who seek profits, not by serving the consumer, butby shutting others out of the market with import quotas, tariffs,and lawsuits against importers. Since the Industrial Revolution,protectionists have brought about high prices, economicinefficiencies, recessions, depressions, and wars, all of whichconsolidate the central power of the state.

Protectionist interests sell out free enterprise principles andseek special protection from the government at the expense ofconsumers. Keeping the protectionists at bay has always been a highpriority of all believers in human liberty and human rights.

Whether they know it or not, conservative religious activistswho call for trade sanctions and favor cutting off commerce withforeign nations are playing directly into the hands of theprotectionist lobbies. They are tools of the worst of the Americancorporate class--a class that enriches itself at everyone else'sexpense. Protectionism and sanctions are not only bad economics,they are also the politics of business and corporatecorruption.

Conclusion

Christians are right to pray for persecuted people around theworld. We are right to engage in civic activism. We are right tosend missionaries to serve their needs. Indeed, during the ColdWar, Christians, together with human rights activists, exertedpressure in every way they knew. And though many of the captivenations are now free, and religious toleration has arrived in manyformer communist states where evangelization is under way,persecution still persists in practically every country where thegovernment continues to operate in an authoritarian andtotalitarian manner.

It is time for both sides to concede that their opponents havesome valid arguments. I see no advantage for either side in denyingthe reality of human rights abuses or in pretending that embargoesand trade wars have any constructive role to play in ending them.There is no moral justification for withholding vigorous protest ofinhumane policies because they may threaten commercial relations,but neither will anything be gained by linking free trade withaccommodation to Hitler. When we speak about our trade relationswith foreign countries, I see no reason why we cannot do it withboth moral passion and economic understanding.

There is room for consensus on the question of how trade policyand human rights policy intersect, but it's going to require somegive and take on both sides. We can start with multinationalbusiness dropping its support for tax-subsidized trade programs,and with human rights activists trying to understand the role ofbusiness, and especially the role of free trade, in enhancing thematerial well-being of all people and the promotion of humanrights.

In conclusion, Ronald Reagan's words are worth recalling: "Thefreer the flow of world trade, the stronger the tides of humanprogress and peace among nations."

Robert A. Sirico

The Rev. Robert A. Sirico is co-founder and president of the Acton Institute for the Study of Religion and Liberty, based in Grand Rapids, Mich. (Rsirico@acton.org). This Trade Briefing Paper is based on remarks he delivered at a Cato Institute Policy Forum on May 27, 1998.