Cordell Hull most famously served FDR as secretary of state, but was most valuable then and after for his clarity about what advances peaceful foreign policy. Hull was clear that barriers to trade are barriers “to lasting peace.”
At the American Energy Security Summit which took place earlier this week at the Hamm Institute for American Energy, FedEx founder Fred Smith mentioned Hull and trade numerous times. Smith paraphrased Hull’s crucial corollary to the above quote about armies crossing borders when goods don’t. Politicians would be wise to abide Smith’s common sense.
Nothing could be more basic than trade as the source of peace. If it’s true that self-interest drives so much of what we do, it’s only logical that open lanes of trade would exist as the greatest foreign policy notion ever conceived by mankind. Think about it. Who among us would go out of their way to aim guns and bombs at our best customers? When our customers enrich us by virtue of being customers, the incentive to war with them shrinks powerfully.
Smith was making this point with regard to China. Trade doesn’t just enhance those who engage in it as producers get in return for what they produce, it’s more than that. If Americans view China as a military threat, the obvious answer is openness to Chinese plenty. For one, the open country benefits the most simply because abundant inflows free the individuals in the open country to pursue the work most associated with their unique skills and intelligence. Put more happily, Chinese producers boost the U.S. economy (and by extension create the means for a more powerful U.S. military) when they direct so much of their production stateside.
Second, the more that Chinese producers are reliant on American consumers, the much more expensive the hideous notion of war with the U.S. becomes. Every day that the Chinese get up and go to work in order to meet and lead the needs of the American people is yet another day that the Chinese become more and more reliant on American prosperity for their own.
Which is why U.S. officials would be very wise to reduce barriers to Chinese production regardless of what the Chinese do. The latter enriches us, strengthens us, and in obvious ways takes a bull’s eye off of us. Of importance, Smith didn’t stop with merely encouraging the openness to foreign production that promotes “lasting peace.”
Smith added that assuming the Chinese don’t do as we should do, that their protectionism and mercantilism won’t work. Precisely. If we fear China’s military might, we should if anything sit back and allow them to weaken themselves by pursuing the very protectionism that will shrink their economy in concert with the very planned economic activity that always and everywhere slows growth given the basic truth that dynamic activity cannot be planned.
Smith is a skeptic about China’s future prosperity and power not because it’s moving toward an open and free economy, but precisely because he thinks it’s not. It’s a reminder of a simple truth that trade is not war, rather it once again enriches those who engage in it. Central planning and government funding of economic activity doesn’t improve the economic outlook of those funded and planned by politicians, rather it harms them.
Which means there’s only one answer for the U.S.: if we fear China we must beat China by remaining free, and pursue peace with China by remaining open to it. History is clear here. Smith knows it, as did the FDR cabinet member who informs some of his thinking on trade.
