With China vs. the United States, Spot the Capitalist
It is hard to say who would have been more surprised – Milton Friedman or Karl Marx. On one side at the Asia-Pacific Economic Cooperation (APEC) meeting stood the advocates of free trade – China and Vietnam, both officially Communist. On the other stood the country seeking to frustrate freer trade, the long-time advocate of free enterprise, the United States. The world has changed – and not for the better.
It is tempting to think that the ‘conversion’ of long-time command-and-control economies like China represents the most important development in the free trade issue. Chinese leaders were certainly encouraging at APEC in Hanoi this past weekend, with Chinese Vice Minister of Commerce Wang Shou Wen saying that China is committed to supporting a global multilateral trade system and making joint efforts to prevent protectionism and reduce trade risk. “China attaches importance to trade growth… We think multilateral trading system is a very effective tool to mitigate risks associated with trade,” Wang said. APEC host Vietnam was at least as promising, with the country’s Prime Minister, Nguyễn Xuân Phúc, endorsing open trade in his welcoming address to the conference.
But it is hard to see China’s position as genuine support for free trade, rather than simply a regional power play. The Trump Administration’s decision to pull out of the Trans-Pacific Partnership (TPP) in January may have left the field open, and China has been trying to fill the vacuum. Working through the Regional Comprehensive Economic Partnership (RCEP), China President Xi Jinping has been cementing his country’s emerging role as Asia’s dominant power, eyeing a significant opportunity to build new alliances in a region strained by tensions over territorial claims in the South China Sea and East China Sea. The United States has not been deliberately excluded, but joining RCEP would require a major U.S. about-face. It would need to reach a free-trade arrangement with the Association of Southeast Asian Nations (ASEAN), then apply to join the RCEP. Under these circumstances, the United States would appear to be dancing to China’s tune; TPP was intended to be the opposite, representing the key aspect of President Obama’s pivot to Asia, intended to provide a counterweight to China.
But rather than seek to maintain the lead in the drive for free trade, the United States has sacrificed that position. While U.S. Trade Representative Robert Lighthizer voiced the usual support for “free trade”, he emphasized that the Trump Administration means that in the context of “fair trade.” What is meant by that is clear from the U.S. demand for removal from the conference action statement of a call to “reaffirm our commitment to achieving free and open trade”, elimination of a reference to the benefits of globalization, and insertion of the word “fair” in references to trade. The wrangling is similar to what has been seen at gatherings of G20 and G7 financial leaders, where statements were toned down to fit the new U.S. agenda. Opponents of free trade have been hiding behind the ‘fair trade’ banner for decades now. It makes one wonder: If protectionism is so good, why is everyone so anxious to deny they believe in it?
The first thing to keep in mind is that free trade opponents are not just looking for a fair deal. They’re looking for a mercantilist advantage. But the goal of free trade isn’t to export more than you import; the goal is to facilitate the overall creation of wealth, by fostering competition, opening import alternatives, providing consumer choice, and ensuring conditions the economy needs – secure access, stable relationships, a positive business environment and a large base of workers.
The United States – like all economies – needs these things more than ever. And the world needs U.S. trade leadership as much as ever.
