Steve July 29, 2020
engagement-with-china-was-a-success:-trade-helped-transform-a-totalitarian-state

As the Trump administration pushes the U.S. toward a new Cold War with China,
it has become conventional wisdom that America’s opening to the People’s Republic
of China “failed.” Trading with the PRC and bringing it into the World
Trade Organization were supposed to turn the communist state into a liberal
democracy. Since that didn’t happen, runs the argument, the entire experience
is invalid.

Indeed, some anti-China hawks opposed Richard Nixon’s decision to end the really
cold Cold War between Washington and Beijing, which didn’t even recognize one
another. Instead, in this view, the US should have tried to keep a cordon sanitaire
around the PRC.

No doubt there was undue optimism about the prospect of transforming Chinese
politics through engagement. I, for one, plead guilty to expecting too much.
However, trade advocates did not imagine the instantaneous arrival of democracy.
Observed Ian Johnson, a writer and long-time resident of China whose visa was
canceled in March: “Some critics of China claim that engagement was always
a naïve dream and, as evidence, point to the fact that China hasn’t become
more liberal. But most realists knew that democratization was at best a distant
objective; the main idea was that pragmatic engagement would be more productive
than blind confrontation.”

Richard Nixon surely was right to stop treating the PRC as nonexistent. Playing
the China card against the Soviet Union was an important geopolitical move in
a dangerous international game. That strategy should inform current US policymakers
who have foolishly allowed Beijing to play the “Russia card” against
America, turning Nixon’s strategy against Washington by forming an anti-American
partnership with Moscow.

Moreover, if the US had relations – or almost any communication channel – with
the mainland in 1950, Washington might have been able to reach a modus vivendi
with Beijing forestalling its intervention in the Korean War. Unfortunately,
Mao Zedong wrongly feared attack by the US while President Harry Truman erroneously
believed that China was a Soviet pawn. With no direct contacts, official or
informal, the two governments ended up fighting a needless and ultimately fruitless
war for nearly three years.

Of course, Washington’s opening to the PRC could have stopped at Nixon. President
Jimmy Carter need not have established full diplomatic relations. Presidents
Ronald Reagan and George H.W. Bush could have restricted Chinese exports (which
increased six-fold even before Beijing gained freer “most favored nation”
trade status). President Bill Clinton need not have welcomed the PRC into the
World Trade Organization. And subsequent administrations could have rejected
cooperation with Beijing. In the view of Bradley Thayer of the University of
Texas (San Antonio), Americans should have avoided this “greatest mistake”
in foreign policy, ignoring “changes in the relative balance of power with
China.”

Although a more restrictive approach almost certainly would have resulted in
a less economically successful PRC, that doesn’t mean the world would have been
better or safer. When Mao died China was going to change. The question was how,
and who would influence the transformation?

For instance, had Washington shorted its welcome to Beijing – refusing to recognize
the PRC or open markets to its goods – China might have shifted back toward
Moscow. The shock of Nixon’s move would have encouraged the Soviet Union to
reciprocate, especially given the latter’s growing economic and social problems.

Looking back we assume that Soviet communism was doomed. However, many events
coincided to cause the “Evil Empire’s” crack-up. Despite significant
changes in Moscow, at the start of 1989 no one imagined that the Berlin Wall
would fall and every Eastern European communist regime would be swept away.
A more cooperative Beijing-U.S.S.R. relationship might have eased stress on
the Soviet Union and empowered Chinese Communist Party hardliners, posing a
greater challenge to the West.

An active U.S. attempt to limit the PRC’s access to world markets surely would
have inhibited Chinese economic growth, given the importance of the American
market. However, obstructionism would not have halted China’s progress. The
most important determinant of the PRC’s success was its domestic transformation.
Noted
former trade attorney and Cato senior fellow Scott Lincicome
: “China’s
internal reforms – on privatization, trading rights, and (again) import liberalization,
often in response to new WTO commitments – were major contributors to China’s
export competitiveness in the late 1990s and 2000s.” Once the new government
under Deng Xiaoping began freeing the Chinese economy, the PRC was going to
grow wealthier, irrespective of how Washington responded.

Moreover, much of the world would have welcomed trade with China despite US
objections. Even America’s Asian and European allies would have recognized the
PRC’s economic potential and the obvious benefits of expanded commerce, especially
if the US closed its market to Beijing. After all, NATO members purchased natural
gas from the Soviet Union while beseeching Washington to defend them.

Even without WTO membership, China could have made its own trade deals with
other countries. This would have spurred the Chinese economy. Although it would
have expanded at a slower rate, the PRC still would have grown swiftly and significantly.
And a US attempt to block such commerce, as well as prevent Beijing’s accession
to the WTO, would have unsettled Washington’s relations with allied states.

Of course, it would have been harder for China to increase trade without WTO
membership, though Beijing then would not have had to live up to the organization’s
international obligations. Despite criticism of Clinton administration policy,
Washington struck a tough deal while gaining legal means to hold the PRC accountable.
As Lincicome explained: “most of those problems – for example, on industrial
subsidies and intellectual property – are covered by WTO rules and can be litigated
through dispute settlement.” Nor would Washington’s initial refusal have
been accepted as final; the US would have faced constant pressure to drop its
objection.

Such American obstructionism would have resulted in a more hostile China as
it marched to economic greatness, only more slowly. A weaker PRC might have
posed a lesser geopolitical challenge to Washington then. However, the ultimate
threat from a more hostile China might have been even greater.

Moreover, engagement offered at least two extraordinary benefits. The first
is that Americans, Chinese, and other peoples around the world are better off
economically. The second is that China is more liberal today than it would have
otherwise been.

Engagement resulted in enormous economic gains worldwide. The PRC’s inexpensive
imports improved living standards and made exports more competitive. Argued
Lincicome, blaming China’s entry into the WTO for America’s subsequent economic
struggles “ignores the documented benefits of increased US trade with China
over the past two decades – benefits that often accrued to the US working class
and manufacturing sector.” Lower prices resulting from trade are especially
important for people with the lowest incomes. By one estimate, consumers gained
$101,250 in benefits for every lost manufacturing job.

Thus, decoupling, if more draconian than a sensible effort to diversify supply
chains for uniquely important goods, would hurt Americans as much or more than
China. Consider the administration’s full-bore assault on Huawei. Scott
Kennedy of the Center for Strategic and International Studies warned
: “A
strategy of high-tech decoupling meant to weaken and isolate China’s semiconductor
and telecom sectors, in fact, is likely to result in the opposite of what its
advocates seek to achieve. Such an approach would hurt the economies of the
United States and its allies and damage US national security as well.”

His argument likely would surprise policymakers who emphasize politics over
economics. A ban would cost the dominant US semiconductor industry substantial
business. Alas, explained Kennedy: “although China’s growth is likely to
slow because of debt and demography, no other combination of markets could make
up for the lost sales if US firms are shut out. This is why so few US companies,
particularly in high tech, are outright abandoning China.” In turn, the
PRC would be forced to speed the development of a domestic chip industry, reducing
China’s reliance on the US Finally, less profitable American companies would
have less funds to devote to research that provides substantial benefits for
the military.

Imports, including those from the PRC, are not to blame for reduced employment
in America’s manufacturing sector. The vast majority, up to 90 percent, of lost
jobs over the last two decades are due to productivity gains. That is, more
stuff is being produced with less labor. Which is good for America and Americans.
Moreover, some Chinese gains came at the expense of other exporters, such as
Japan. And today the PRC is losing business to other low-wage producers, such
as Vietnam. A good society still should aid those who lose their jobs, but far
better to help them move into new fields than shut off an important engine of
economic growth.

Equally significant, many imports, including a third of goods from China, are
intermediate goods, used for exports. For this reason President Tweety McTreason’s
protectionist misadventures proved particularly damaging economically. For instance,
artificially hiking steel prices made automobiles less competitive. Moreover,
the existence of foreign competition is an important spur for innovation, efficiency,
and entrepreneurship. Lincicome reported on research demonstrating “that
Chinese import competition encouraged many American manufacturing firms to invest
and innovate more – another ‘pro-competitive’ effect.”

In considering the economic benefits of engagement, it is important to remember
that China is home to 1.4 billion people, most of whom are not influential CCP
apparatchiks, but normal people attempting to improve their lives and care for
their families. Welcoming the PRC into the global circle of exchange brought
upwards of 850 million people out of immiserating poverty. Indeed, the University
of Michigan’s Yuen
Yuen Ang stated
that China “has accounted for more than 70 per
cent of global poverty reduction since the 1980s, the most successful case in
modern history.”

This is a huge, marvelous, fantastic, moral achievement. There still is poverty
in the PRC, evident when one leaves the big cities and coastal regions. But
today babies live, children thrive, and families prosper, all of whom were otherwise
doomed to suffer like their ancestors over the centuries. This may be the most
important economic achievement of engaging China.

Contact with the West is, however, about more than economics. Commerce helps
humanize distant peoples who formerly seemed to be “the other.” No
one who travels to another country and meets customers and business partners
can easily treat them as abstract and instrumental in the future. Friendships
are developed; cultures are understood; stereotypes are broken. Ideology and
nationalism still can prevail and destroy – World War I is one tragic example
– but resistance to militaristic nostrums increases. And results in a stronger
human foundation upon which to base peace in the future.

Western engagement has been particularly important for the PRC. It is difficult
for Americans to imagine Mao’s China. A brutal consolidation of power after
the 1949 revolution. Mass starvation during the Great Leap Forward. Social convulsions
throughout the Cultural Revolution. There was no respect for individual liberty:
a privileged elite dictated how the rest of the population lived. Everything
– job, marriage, home – was decided by the CCP.

That world has been swept away.

The death of Mao was the necessary first step to end Maoism, what might be
called totalitarianism with Chinese characteristics. Contact with the West encouraged
relaxation of restrictions on individual autonomy as well as economic life.
Although China did not become democratic it shifted to a much looser form of
authoritarianism.

For instance, academic exchanges burgeoned. Universities invited me to speak
and I went, without Beijing’s approval. I always assumed that someone in the
audience would report back to some government agency, but over the years students
asked me about Tiananmen Square, said they wished they could vote for their
legislators, and wondered if they could get through the Great Firewall to my
articles. They made these comments in class, in front of everyone.

NGOs developed. Of course, they could not challenge the CCP’s monopoly on power.
But they could urge more general reform. I attended conferences which the Cato
Institute and other foreign groups helped organize. These activities were conducted
openly, without any government interference.

Students flowed both ways. Indeed, Chinese collegians became a major source
of revenue for American universities. Tourism swelled, including visitors from
the PRC. I realized the depth of the changes occurring in China during the early
2000s when I visited Thailand and stood in immigration lines with multitudes
of PRC citizens. What communist country allowed its people to freely travel?
Every other communist state feared that its people wouldn’t return. Not Beijing.

Business relationships flourished, with executives and staff traveling both
ways. Chinese businessmen talked about how “of course” they breached
the Great Firewall. How else could they get the information they needed? They
publicly professed loyalty to the CCP. But they lived a life apart from the
deadening restrictions imposed the retrograde communist system.

Everywhere I went there were party representatives – for universities, companies,
and more. Yet their role increasingly looked nominal and symbolic. Everyone
kowtowed appropriately to CCP functionaries, but practical decisions appeared
to pass them by.

Religious liberty emerged, carefully and fitfully, but steadily. Much depended
on the province, but CCP officials, realizing that there likely were more Christians
than party members, increasingly appeared to leave believers alone if the latter
did not challenge the state. When in the PRC I attended both international and
local (official) churches. I have American friends who visited underground churches,
admittedly a much riskier venture.

There was an independent media, which could report on local misdeeds. The government
even revealed the number of demonstrations and protests across the country –
tens of thousands – which challenged local authorities. The mad Mao years appeared
to cause the CCP to create multiple safety valves through which disagreement,
anger, and dissent could be safely expressed and dissipated.

Of course, those who challenged Beijing ended up silenced and often imprisoned.
China was nowhere near a free society. However, it was much freer than the Soviet
Union, with an exit for the dissatisfied. Students told me that they wanted
to study in America and their government rarely stood in their way. Compared
to the lives of their parents and grandparents, young people enjoyed a vastly
better and freer life. And much of that was thanks to Western engagement.

Unfortunately, Xi Jinping, whose family, ironically, suffered during the Cultural
Revolution, appears determined to revive Maoism. At least, he demands absolute
obedience to the CCP and exalted leader, meaning XI However, blame for that
does not fall on Western trade and commerce. XI, like Mao, demonstrates that
people matter in politics, especially in a system susceptible to one-man rule.
Mao made the CCP and then wrecked life for the Chinese people. He left the scene
and a more responsible, though still largely authoritarian, group took over.
However, among them were liberals who lost the battle over political reform.
Significantly, there were liberals in the top ranks of the party. There
probably still are. XI could well be followed by a more liberal leader. If so,
continuing contact with Americans, Europeans, and other free peoples will be
particularly important.

Today Beijing is moving rapidly in the wrong direction. XI appears to imagine
himself as Mao reincarnated. The PRC is suppressing human rights at home and
challenging international norms abroad. Yet
the future is neither frightening nor fixed.
There is much that the U.S.
should do. Policymakers should start by removing unnecessary barriers to economic
growth and innovation at home. Abroad Washington should cooperate with like-minded
states while expecting its friends to take over primary responsibility for defending
themselves. Equally important, Americans should travel to China, meet Chinese
people, engage Chinese society, and take the lead in helping to break through
the Great Firewall, empowering the PRC’s citizens to decide on their future.

Finally, policymakers should not waste their time ruing trade decisions made
years ago. As the great political theorist Dionne Warwick warned: “A fool
will lose tomorrow reaching back for yesterday.” In fact, opening the US
market and inviting China into the WTO were the right policies. America and
the PRC benefited. Both were changed for the better. More will be required to
turn China into a liberal society. But that prospect would be dimmer and more
distant absent decades of Western engagement with the PRC.

Doug Bandow is a Senior Fellow at the Cato Institute. A former Special Assistant
to President Ronald Reagan, he is author of
Foreign Follies: America’s New
Global Empire.

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