Peace and Free Trade

by Don Boudreaux on May 13, 2008

in Cooperation, The Profit Motive, Trade

Here’s a letter that I sent today to the Wall Street Journal:

Mark Helprin correctly
points out that as the Chinese grow more prosperous their military will
grow more mighty ("The Challenge From China," May 13).  He advises that
Uncle Sam dramatically increase the size of his own arsenal.

of this suggestion’s merits or demerits, the more vital course is for
Uncle Sam to immediately eliminate all trade and investment
restrictions with China, and for politicians to stop threatening
further restrictions.  Such moves would speed the integration of
China’s economy with our own.  Being economically integrated means
being economically reliant on each other – a happy recipe for
prosperity and peace.

Want evidence?  See the important work of
economists Solomon Polachek and Carlos Seiglie
.  Their empirical
research leads them to conclude that "international cooperation in
reducing barriers to both trade and capital flows can promote a more
peaceful world."*  Want more evidence?  Ask yourself how likely are
even a well-armed Canada or Japan to have any interest in shooting
their countless customers and suppliers throughout the U.S.?  The
answer, of course, is no more likely than we are to want to shoot our
customers and suppliers throughout those countries.

Donald J. Boudreaux

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sethstorm May 13, 2008 at 6:07 pm

No, that's just another attempt at justification for giving up our nation's sovereignty.

We would only continue to receive more junk.

BoscoH May 13, 2008 at 6:35 pm

I think what Seth is saying is that allowing the subjects of the US Government to decide on their own whether they want to trade, invest, or seek finance from the subjects of the Chinese government undermines the sovereignty of the United States.

I'd explain more, but I have to go to WalMart and the Apple Store to pick up junk for numerous May birthdays among my family and friends. Zai Jian.

sethstorm May 13, 2008 at 6:58 pm

I think what Seth is saying is that allowing the subjects of the US Government to decide on their own whether they want to trade, invest, or seek finance from the subjects of the Chinese government undermines the sovereignty of the United States.

Well, if the government was driven by business in the first place to globalize, that is force as well.

Get them out of government, and correct the damages made by business. That means undoing the damage caused by actively undermining the option to keep activity in the United States.

If the option to keep things in the United States is being undermined, is there really a choice?

save_the_rustbelt May 13, 2008 at 7:32 pm


I hope none of your family members got the adulterated heparin from China. The Chinese denied any responsibility.

It may have been deadly, but it was however, cheap.

Sometimes cheap is not the same as inexpensive.

tiger May 13, 2008 at 7:36 pm

I argue this point with friends who are concerned about China and security. I remind them that Chinese factories turn out 60-70% of all the goods sold in Walmart. Why in the world would you bomb their customers? The answer is you wouldn't. I'll make a prediction: In the next 25 years China will become more integrated and actually be a partner for security with the US and NATO. The better to protect their customers from harm so they can buy lots and lots of Chinese goods.

thom p May 13, 2008 at 8:47 pm

I believe there are moral reasons that can justify any discontinuation of economic relations between American and China. The conditions of labour, the environmental damage to the planet to do oversees shipment and garbage, and the widening gap between the rich and the poor.

However, this is the case with almost every production-heavy country exporting to America. If the government is willing to raise its morals beyond the aforementioned foibles, then I applaud them.

Kevin Hilferty May 13, 2008 at 11:19 pm

thom p, I disagree with you on your moral case against free trade between the US and China. Trade increases wealth of both nations trading together through gains from the division of labor. It is by this increasing of wealth alone that will allow for better increases in labor conditions, betterments of the environment, and increasing the standards of living for the poor. Under-developed nations simply cannot afford similar conditions as the United States just yet, but with wealth from trade they will be able to in good time. Yes, we can have both peace and prosperity all through free trade.

Craig Glackman May 14, 2008 at 1:20 am

How long will it be before the cost of these "cheap" Chinese goods will be equal to aor higher than our own goods? Where then will we and they seek "cheaper" goods?

Destroy the unions and we will see many "cheap" goods made in the US.

Craig Glackman May 14, 2008 at 1:21 am

How long will it be before the cost of these "cheap" Chinese goods will be equal to aor higher than our own goods? Where then will we and they seek "cheaper" goods?

Destroy the unions and we will see many "cheap" goods made in the US.

whisker May 14, 2008 at 2:29 am

Sethstorm's "option to keep activity in the United States" will prevent Americans from buying, say, Chinese tea, especially if Seth can make it instead. Presumeably he'll back his option up with force, or tax the foreign stuff as it comes in…I think I can feel another tea party coming on

John Dewey May 14, 2008 at 6:25 am

Craig Glackman: "Destroy the unions and we will see many "cheap" goods made in the US."

Is it the unions that prevent U.S. manufacturers from producing low cost goods? Or is it the immense power that they exercised through elected officials for so many years? And the power that those elected officials exercised over private enterprise in the form of costly regulation?

I'm not sure we can blame unions for all productivity problems. Southwest Airlines is the most unionized of all the U.S. airlines. Yet the productivity and cooperation between all workgroups at LUV is legendary.

Consider UPS and the United States Postal Service. Both are heavily unionized. Yet the former is acknowledged in the industry as the best-engineered and thus most productive while the other is a joke.

Of course, those are service industries that do not compete with low-cost third world labor. But my point is simply that unions are not always the cause for a company being uncompetitive.

For labor-intensive goods production, the difference in costs between third-world nations and the U.S. is the difference in standard of living for workers, which I don't think is driven by unionization. We should be happy that the U.S. economy can generate both well-paying jobs for its workers plus enough disposable income that U.S. consumers can take advantage of all the inexpensive goods our international trading partners can provide. Though we may right now be recovering from a very brief recession, we certainly live in the best of times.

Libertarian May 14, 2008 at 6:49 am

Mark Helprin's column was depressing. Why are we Americans so paranoid? Who the hell wants to "attack" us????? And it now sounds like being the "most powerful" nation on earth isn't good enough, we also need to be the wealthiest, and that the growth of China's economy is somehow a threat??? Why? Free trade is a tide that lifts all boats. Can't we understand that by now? My head hurts.

vidyohs May 14, 2008 at 10:39 am

Reason Magazine

Union Rules

Be afraid, be very afraid.

vidyohs May 14, 2008 at 11:24 am

A rational person asks, "Why would anyone want to bomb their best and most numerous customers?"; "Why would anyone want to attack us?"

It is obvious that most of the patrons of this cafe are rational; however, you make a mistake in assuming that the leadership of
China is necessarily rational in the same way that you are.

Look at the real history of communsim and pay attention to the fact that it was never about equality for all, not a worker's paradise, and that the leadership had all they wanted or needed. A sacrcfice of thousands of workers and peasants did not really affect their standard of living. Stalin lived very well in a land raped and plundered where people starved in mass numbers due to his irrational policies.

Look at present day China, the leadership is still the communist party, and that party maintains very tight control of the populace. You wish that as the Chinese people grow more wealthy that the leadership will also grow more rational about their political control and urge to dominate their environment.

Wish: wanting something to happen with no reasonable expectation that it will.

Hope: wanting something to happen with reasonable expectation that it will.

Who here can really hope that the Chinese leadership will go quietly into the sunset as communists and convert to a republican or democratic republic form of government?

You may wish it.

Think about who really controls the Chinese people, the manufacturing/production facilities, and the process of trade. You should know, if you've been paying attention, that the Chinese military is one of the largest owners of manufacturing/production resources in China. Who controls the military in China?

As China grows in wealth, what section of the society is benefiting the most? That section that has control now, not the individual in the street. Oh, they are letting some trickle down to the street, but enough to spur revolution? Not likely.

Don't make the mistake of applying rational hope to irrational political ideologs.

Fabio Franco May 14, 2008 at 12:18 pm

Some crazy Chinese leaders may be willing to wipe out America to populate it with their own people:

Speech by Mr. Chi Haotian, Minister of Defense and vice-chairman of China’s Central Military Commission:

“Only by using special means to “clean up” America will we be able to lead the Chinese people there. This is the only choice left for us. … Only by using non-destructive weapons that can kill many people will we be able to reserve America for ourselves.”

See here.

Frederick Davies May 14, 2008 at 4:48 pm

Every time people talk about the benefits of free trade in the political sphere (greater interest in peaceful co-existence, for example), I am reminded how Britain and Germany were each other's best trading partners at the turn of the XX century, how big the British market was for German products then, how the Germans saw Britain as the model to emulate… how these facts did not stop them from tearing each other apart in WWI; how it did not stop them slaughtering millions of their best customers in the Western Front. Sorry, but if politicians meddle in the economy at their peril (and ours!), economist also meddle in politics at great risk.

Aaron May 16, 2008 at 6:41 am

Would you bomb your customers? No, you wouldn't.

But the people who make the decisions to bomb other countries are not the the same people who own the toy factories.

China doesn't even have a democratic system whereby toy factory owners could influence the decisions.

For a US example:

Would you make it harder for your customers to enter your store? No, you wouldn't. Buy Department of Homeland Security can increase visa requirements if it pleases, driving away tourists, investors, students, etc.

Aaron May 16, 2008 at 6:43 am

p.s. Maybe the toy factory choice wasn't very good since some of them knowingly used toxic paint on products for children.

John Dewey May 16, 2008 at 11:46 am

Aaron: "But the people who make the decisions to bomb other countries are not the the same people who own the toy factories."

That may or may not be true. But consider which Chinese persons authorized purchases of U.S. government debt, in an attempt to keep exchange rates favorable to Chinese exporters. Those are likely the same people who would make the decision to bomb other countries.

China's actions continue to demonstrate not aggressive hostility towards the U.S. but rather a dependence on our purchases.

Regardless of what may be the ultimate goals of China's leaders, employing millions of Chinese to produce goods for the U.S. just reduces the likelihood that China would risk economic upheaval through hostile action against the U.S. I think that was Don's point.

vidyohs May 16, 2008 at 7:04 pm

An excellent point John Dewey, but my point and I believe supported by Fabio Franco, is that reducing the likelihood does not = eliminating the likelihood.

Our counterpoint was simply that irrational people frequently make irrational decisions. A lesson taught to us by the old fable about the Goose who laid the Golden Eggs. It was irrational to cut her open expecting to get all the future eggs. And, to some irrational people control and power is better than peace and wealth.

We have no quarrel, just live on opposite sides of the same street.

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