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Press Release

    Issue Analysis 66 - The Sanctification of Sanctions

    10/30/1997

    The following is an excerpt from a speech delivered at a Citizens for a Sound Economy Foundation "Congressional Staff Education Luncheon" on September 15, 1997.

    For many years, there has been a vigorous debate about what role human rights should have on U.S. trade policy. This debate has led to some intense disagreements among conservative Christian activists and free trade advocates. While there may be significant debate on specific trade issues, everyone can agree on the central goals: the collapse of tyrannies wherever they exist, and the construction of free societies that will ensure the dignity and safety of all human life.

    The debate over China. In particular, the debate over the United States' trade policy with China embodies the most contentious issues involved in discussing this topic. On the one hand, some very vocal Christian activists have emphasized human rights. Based on extensive documentation of religious persecution, mandatory abortion, suppression of churches, jailing of priests and even torture and murder, these activists have compared the present situation with Nazi Germany and the former Soviet Union. In light of these realities, many well-intentioned people have called for the curtailment of trading relations to force the Chinese government to behave more humanely. Some have gone so far as to call for a complete cut-off of trade. These activists sometimes present their case to the exclusion of economic rights. This is a critical oversight.

    Meanwhile, free trade advocates emphasize different points entirely, and suggest a different agenda altogether to prompt the Chinese government to act as a responsible member of the international community. They point out that China is experiencing an historic economic boom. If measured by the degree of progress in a short period of time, China is undergoing one of the greatest economic booms in history. This has been brought about by a rapid transition, beginning about 15 years ago, from centrally planned economic socialism to an increasingly federalized capitalist system.

    Moving away from central planning. Free trade advocates quickly point to the fact that although the Chinese leadership still governs under the pretense of a communist state, it is clearly moving away from the kind of centralized economic planning that has characterized communist governments in the past. While the Chinese government employs the rhetoric of socialism, it has continued the experiment with capitalism. Tax rates have been slashed. (In some regions of China, taxes are actually lower than in the United States!) Industries have been privatized. Labor markets have been freed (in relative terms). Housing ownership is encouraged and growing. And joint ventures with Western companies are increasing at a rapid rate.

    Meanwhile, the Chinese stock market is booming, while industrialism and technological progress is proceeding at a break-neck pace, especially in the Southern region. The shipping lanes are opening up month-by-month, and the Northern region has begun sharing in the economic progress as well. The results have been astounding. In the course of a generation, life in China has moved from total domination by a murderous regime to one of increased material prosperity, freedom of movement, rising commercial opportunity and relative abundance. While there are certainly some political problems that remain today, the change has been remarkable. The Chinese population now has a whole host of social and economic options that were not previously available.

    It should be noted that the United States has shared in China's economic growth as well. Thanks in large part to our current trade policy, American consumers have access to thousands of consumer goods at low prices. Lower prices mean that consumers save on the products they use every day. In addition to lower prices, the current trade relations mean that capital and labor in our country can be freed up to concentrate on producing those goods and services that provide the U.S. with a comparative economic advantage. Each day, computer software, automobiles, agricultural goods, building supplies and many other goods and services are made available for export to countries all over the world, including China.

    Moreover, with the increased globalization of commerce, it is no longer possible to say that products are made solely in one country or another. Computers can feature American microchips and software, Japanese communications packages and Chinese electronic parts. The same is true for cars, clothing and foodstuffs. All of these products provide a classic example of how trade works. This needs to be kept in mind in order to understand the moral and human dimensions of trade. People of the world cooperate to their mutual benefit and to the benefit of society as a whole.

    As presented, the two approaches to policy -- that of the Christian and human rights activists and that of the free enterprisers -- seem to be radically different. Neither side seems able to conceive that the other has a contribution to make toward a fuller understanding of the present reality: trade benefits the citizens of both countries. It is not the American government that trades with the Chinese government, it is the American people that trade with the people of China.

    America's cynical corporate lobbying community. While the Christian and human rights advocates demonstrate their cynicism with calls to cut off all trade, the American corporate lobbying community has shown itself capable of deep cynicism and disregard for religious persecution and other human rights abuses as well. It fears that all talk of these human rights abuses and religious persecution might endanger the growth and the expansion of trade, and thus refuses to engage in the discussion to place trade on a firm moral foundation.

    Even worse, rather than being satisfied to trade on a purely commercial basis and allowing the mutual advantage of international commercial operations to bring about its own results, many corporate interests have sought special privileges and subsidies. These include loans from the Export-Import Bank and investment guarantees from the Overseas Private Investment Corporation (OPIC), both of which underwrite foreign investments at taxpayers expense. They have lobbied for World Bank infrastructure development loans, support from the International Monetary Fund (IMF), subsidies from the United Nations (UN) and its myriad of affiliates and much more. This is not free trade. This is subsidized investment that comes at the expense of the American people, who are ultimately on the financial hook for these loans and guarantees.

    The Chinese government and American corporations have hardly been the only beneficiaries of these subsidies. We will never know how long tyranny is prolonged as a result of such direct government loans and investment guarantees. Certainly, these subsidized forms of trade allowed other oppressive regimes to buy themselves time at the height of many economic crises. In the past, many of these tyrannical rulers have sought and acquired massive economic aid to prolong their rule.

    Ironically, even as American producers and consumers are denied their rights to trade with the people of various sanctioned countries -- to import and export at will -- these other distorted and subsidized forms of trade continue at a rapid rate. For any true free-trader, taxpayer-funded interventions and distortions of this kind are anathema. I have no hesitation in calling for an immediate cut-off of all IMF loans and abolition of all government programs that subsidize foreign trade -- beginning with regimes that engage in political and religious persecution.

    Most China trade is not subsidized. The trade subsidies and interventions are not what sustain our growing trade relations with China. The vast quantity of our trade relations there are not subsidized. They reflect the mutual interests of manufacturers, consumers, shippers, entrepreneurs and bankers in both countries. By all means, cut off privileges and subsidies. However, I see no advantage accruing to anyone from injuring the genuine commercial relations that have so improved the lives of the Chinese and American peoples. Again, I would like to emphasize that the U.S. does not trade with China. American business people trade with Chinese business people.

    MFN. U.S. trade with China is almost always referred to in the context of China's Most Favored Nation (MFN) trading status. The issue of granting MFN has caused a large amount of confusion in the heartland of America. Many people opposed to the continuation of American commercial relations with the Chinese people have tried to hold this phrase up in its literal meaning. In truth, out of all of the nations of the world, only a handful of rogue states do not have MFN status. Many trade experts have stopped using the designation "MFN" because it no longer makes sense. The more correct phrase would be "normal trading relations." That is what we should seek to have with the Chinese. To take away MFN status is, in fact, tantamount to a trade war or a prelude to a trade war.

    In the most recent round of debates in Congress, opponents of continued normal trade relations demonstrated an embarrassing lack of understanding of this basic fact. For some reason, there continues to be an apparent unwillingness to concede that MFN means little more than normal trading status. Yet, it is profoundly misleading to imply that, by granting MFN, the U.S. is somehow condoning all of the activities of governments wherein persecution does exist. MFN merely allows American consumers, producers, investors, shippers and entrepreneurs to do business with their counterparts in other countries, if they so desire.

    Economic misunderstandings of Christian and human rights activists. Every day we hear more news about how China is on the path to reform. All you have to do is pick up The Washington Post or The New York Times to see this. For example, we recently learned that up to ninety percent of state-run industries will be in private hands in a few years. One would think that these activists have little concern for the economic well being of the Chinese people themselves and of Chinese believers in Christ. How can we act as if all that China consists of is one huge prison camp? The far more complex reality is there to see for anyone who takes the time. There is an economic miracle taking place before our eyes: an historic change that will permanently enable the Chinese people to freely pursue their individual dreams.

    Rarely in their writings do trade opponents mention the Chinese economic miracle, and particularly what it means to Chinese believers in Christ. Missionary actions are enhanced by the ability of people to go in and out of the country. Rarely has there been an acknowledgment that the Chinese government has allowed an unprecedented increase in the freedom to own property, to work, to engage in enterprise, to pursue economic interests, to own homes, to build businesses, to build churches and to keep profits. Indeed, in their writings, trade opponents often use the words "profit" and "economic interests" in a seemingly derisive fashion.

    In my conversations with some of these conservative people (who in other contexts believe in free trade), I hear the rhetoric of the left. Like socialists of old, some have even taken to disparaging economics itself, as though profit were intrinsically evil. These opponents completely ignore the connection between this explosive growth in material prosperity with its accompanying new freedoms, and the positive future of China and, in particular, evangelism in China.

    There are industries in this country that would like to use the power of the U.S. government to gain an unfair advantage in trade. There are protectionists who seek profits not by serving consumers, but by shutting others out of the market with import quotas, tariffs, lawsuits against importers and the like. In the course of the past century since the industrial revolution, protectionists have brought about high prices, economic inefficiencies, recessions, depressions and all-out wars -- all of which consolidate the central power of the state. Protectionist interests are a classic example of businesses who sell out free enterprise principles and seek special protection from the government at the expense of consumers.

    Fighting protectionism is a moral issue. It has always been a high priority of all believers in human liberty and human rights to keep the protectionists at bay. Protectionists selfishly war against the civilized conduct of commerce and drag whole nations into belligerent relations with foreign peoples. This is a moral issue. Whether they know it or not, some conservative activists who have been calling for trade sanctions, and who favor cutting off commerce with foreign nations, are playing directly into the hands of these protectionist lobbyists. They are tacitly operating as tools of the worst of the American corporate class -- a class that enriches itself at everyone else's expense.

    There is no moral justification for withholding vigorous protest of inhumane policies because they may threaten commercial relations. But neither is there anything to be gained by linking Chinese trade with accommodating Hitler and the Holocaust. When we speak about our relations with China, I see no reason why we cannot do it with both moral passion and economic understanding. Unfortunately, much of the proposed legislation supported by trade opponents would impose a variety of economic sanctions that could conceivably lead to wholesale trade wars and embargoes.

    The failure of unilateral economic sanctions. In addition to hurting the interests of American consumers and producers, this would do little to end religious persecution. For example, freedom of religious expression in Cuba does not seem to have received a big boost because of our embargo. While there might be other reasons out there for continuation, it stretches plausibility to say that the embargo is helping the cause of religious minorities there. Proponents cite the case of South Africa as an example of workable sanctions. But, let's recall the South Africa case was one that was pushed by a global, moral consensus. It was this consensus, more than anything else, which was responsible for the end of apartheid. In fact, the most liberal institutions in South Africa were market institutions that resisted the apartheid hiring restrictions.

    For the most part, however, the countries targeted by current sanctions proposals being discussed are not highly developed countries, they are not very capitalistic, they are not exporting raw materials, and there is no world consensus on behalf of their economic strangulation. Far better to cut off economic aid, encourage trade to thrive and use moral pressure to change their internal policies. People who decry religious persecution in foreign countries ought to spend less time lobbying Washington for protectionist policies, and more time drawing world attention to the plight of religious minorities wherever they may be persecuted by government, including, I might add, right here in the United States.

    Export of influence. Most of the countries likely to be hit by legislation of this kind are prime candidates to become consumers of our exports. But, the export of goods also means the export of influence -- influence on people and on the regimes in question. We should not embrace laws that would limit our influence. We should embrace strategies that strengthen our influence, while at the same time allow for the development of private networks of exchange that can circumvent official channels.

    What is the best means for fostering a free economy and society? Is it through isolationist trade policies that shut the door to all economic exchange? Or is it a continuation of the dynamics of free enterprise, which has allowed an unprecedented increase in contact between China and the West? The victory of free enterprise over Marxists economics has brought about unprecedented new freedoms for the average Chinese individual and unprecedented new wealth for millions upon millions of Chinese people. This revolution is a direct result of the government giving up its control over major sectors of Chinese economic life. This is a good development. A continuation of free trade will secure this revolution, allow institutions to form that will dilute the power of authoritarianism and bring about even more contact with our brethren in China.

    I know that there is room for consensus on this question of how trade policy and human rights policy intersect, but it is going to require some give-and-take on both sides. We can start with multi-national business dropping its support for tax-subsidized trade programs, and with human rights activists beginning to study and understand the role of business in the promotion of human rights.

    Father Robert Sirico is the president and co-founder of the Acton Institute for the Study of Religion and Liberty. He serves on the Michigan Civil Rights Commission and is a member of the American Academy of Religion. His work in economics has been recognized by his induction into the Mont Pèlerin Society, founded by Nobel laureate Friedrich von Hayek.