How Adam Smith Would Handle China

by Patrick J. Buchanan – July 24, 1998

As America was annexing the Philippines in 1898, preparing to send a U.S. army to crush Filipino resistance to the new American empire, William Graham Sumner gave a speech titled, “The Conquest of the United States by Spain.”

“(W)e are submitting to be conquered by her on the field of ideas and politics,” said Sumner. “If we believe in liberty, as an American principle, why do we not stand by it? Why are we going to throw it away and enter upon a Spanish policy of domination?”

Today, someone should write a speech titled, “The Conquest of the United States by China.” For consider how we are corrupting ourselves, chasing the receding rainbow of “the China trade.”

Scientists at U.S. satellite companies have gone up to the line, maybe over it, in helping China perfect rockets that can carry nuclear warheads. U.S. corporations like Boeing have become lobbyists and apologists for Beijing. Republicans, who once prided themselves on standing with the Reagan Doctrine of containment-and-rollback of the Evil Empire, now prattle about how trade will transform China.

Through trade, they say, we will build a Chinese middle class that will demand change; political reform will follow economic reform. The core doctrine of this free-trade cult: “Commerce shall make you free!”

So, retailers lobby Congress to ensure their access to cheap toys “Made in China,” unaware those toys are produced in factories run by the Peoples Liberation Army. Do they not know what the PLA does with its dollars? It buy weapons to deal with a Seventh Fleet that will one day have as its sailors the very boys getting all those toys. Irony of ironies, many of the gifts American Christians give one another on the birthday of their Savior are made in factories using the forced labor of Chinese Christians, imprisoned for their faith.

We are not changing China; China is changing us.

By year’s end, China will have run up $200 billion in total trade surpluses with America in the Clinton era. At whose expense has this windfall come? Communist China’s gigantic trade surpluses with the United States — now running at $1 billion a week! — have come at the expense of Free China (Taiwan) and Free Asia, which have been crowded out of U.S. markets by the Mainland’s conscript labor.

Between 1992 and 1997, China’s sales of footwear to the United States soared by $4 billion a year; South Korea’s fell $1.3 billion. China’s sales of toys and sporting goods soared $6 billion. Taiwan’s fell by $700 million. China’s sale of telecommunications parts and equipment rose $157 million. Japan’s fell by that sum. China’s sale of parts for radio broadcast receivers rose $1.1 billion a year from ’92 to ’97, Japan’s, South Korea’s and Taiwan’s fell as much.

The United States has shifted purchases away from friends and allies to people who behave like enemies. Why is a Republican Party that presided over America’s victory in the Cold War endorsing a trade policy that favors Asian Communists over Asia’s democrats?

House Republicans who enjoy sporting Adam Smith ties should read a little more Adam Smith. In at least four cases, the father of free trade wrote, it must be “advantageous to lay some burden upon foreign (imports),” i.e., impose tariffs. Among Smith’s reasons were “the defense of the country,” “for the encouragement of domestic industry,” for “revenge” and “retaliation” on nations that impose tariffs on one’s own exports — and to break open foreign markets.

Today, tariffs and taxes on U.S. exports entering China average around 30 percent. If the GOP were true to Smith, it would strip China of MFN and impose on Beijing the same tariff levels Beijing imposes on us — both as retaliation, and to crack open the Chinese market to U.S. farmers and manufacturers. In 1997, we sold China a pathetic $13 billion worth of goods — less than we sold to Singapore — while we bought some 7 percent of China’s entire GDP.

What would an Asian trade policy rooted in Smith’s ideas and the national interest entail?

First, overturn MFN. Second, place upon China the same tariffs Beijing imposes on us. Third, shift that $63 billion in U.S. purchases last year from Communist China to Free China and Free Asia. Help our friends out of their crisis with trade, not IMF aid. Fourth, negotiate with the Pacific Rim, so that its trade surpluses are used to buy U.S. farm products and weapons to keep the U.S. defense industry humming, and to enable Free Asia to depend less on us, and more on itself, for its future security — against a predatory China.

Call it an America First, friends second and adversaries last trade policy.