China Trade Offs
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MARGARET WARNER: Can economic engagement advance America’s foreign policy interests? Joining us to debate that question: Daniel Tarullo, professor of law at Georgetown University — he served in the Clinton administration as assistant to the President for international economics. Alan Tonelson, research fellow at the United States Business and Industry Council, a lobbying and research group. Susan Schwab, dean of the University of Maryland School of Public Affairs — she served as an Assistant Secretary of Commerce in the Bush administration. And Robert Borosage, director of the campaign for America’s future, an advocacy and public policy group. Welcome all. Is the president right, when he says America can promote its foreign policy aims by engaging economically with a country like China treating it economically almost as if it were an ally?
DANIEL TARULLO, Georgetown University: I don’t know that he’s treated it as an ally. His argument is to treat China like he’s treated most other countries in the world. The point, Margaret, here, I think, is that this was a vote principally about China and U.S. relations with China, not so much a generalized proposition for the rest of the world. This was a question as to whether the U.S. needed to have some balance in its relationship with China, which has been and will continue to be contentious.
MARGARET WARNER: But how do you feel about the general proposition?
DANIEL TARULLO: In a general sense I think you have to look case to case. In general, free trade agreements, which take proper account of domestic interests, probably do strengthen U.S. foreign policy interests. But I think the relationship is neither direct nor immediate. It takes time to play out, and there are other important factors to take into account.
MARGARET WARNER: How do you see it, Bob Borosage?
ROBERT BOROSAGE, Campaign for America’s Future: Well, I think the China deal is an example of more situational ethics than a doctrine, that is the President wanted it for human right and the corporations want it be for more trade and investment. And the President squared the circle by saying the one would lead to the other. I think clearly Daniel is right, there’s no necessary connection between the two. It depends on the rules and how the rules set up.
Reflecting on history
MARGARET WARNER: What does history teach us out whether it works?
ROBERT BOROSAGE: Well, we traded — many companies traded with Hitler and didn’t seem to have an effect on him. We traded for many decades with a dictatorship in Indonesia with Suharto’s regime, and it didn’t seem to have much of an effect there. Companies are really in the business of business; they want make profits. They’re happy to have disciplined work forces that don’t have rights, if that works for them. They’re happy to cut deals with corrupt regimes if that works for them. In the long run, I think Cain said we’re all dead; it’s very hard to anticipate, and it depends a lot on different circumstances.
MARGARET WARNER: How do you see it?
SUSAN SCHWAB, University of Maryland: I think economic and commercial interests have been part of the U.S. foreign policy since the beginning. And I think it’s always a question of balance and priorities. During a Cold War era, traditional national security concerns took precedence. And economic and commercial interests were a second class citizen — not even at the policy-making table. In a post-Cold War world, I think one can make the argument that there are links. History tells us that economic sanctions per se have tended not to work.
MARGARET WARNER: That is using our economic clout in a negative way?
SUSAN SCHWAB: In a negative way, other than under very specific circumstances, and there are examples where economic sanctions have worked, but they are few and far between. As a general matter they don’t work very well. And there are also examples where economic liberalization has preceded democratization. Taiwan, Korea, even Chile are examples of that. But you’re going to find examples, it is on a case-by-case basis, but the two are so intertwined in this day and age, you can’t pretend that you can disassociate one from the other.
MARGARET WARNER: Do you think there’s a general proposition here, or case by case?
ALAN TONELSON, U.S. Business & Industry Council: Margaret, I think there’s no general proposition. And it seems to me that Susan is right. You need to strike the right balance between economic interests and your other foreign policy aims. In this administration, I don’t see a lot of balance striking whatever. What I see is an attempt to enable or to require trade policy to do a lot of the heavy lifting that we have usually relied on for, with various other foreign policy instruments — our national, our national military forces, whatever moral suasion had lain behind the human rights policy. And I think they’re taking at very best a livable gamble and I think we’re going to be very sorry about this indeed.
MARGARET WARNER: So you don’t buy even Dick Armey’s proposition, that freedom is contagious and that once you open up these countries economically, that repressive regimes ultimately can’t last?
ALAN TONELSON: I see very little evidence of this in history, other than cases where the United States militarily occupied a militarily defeated nation, like post-World War II Japan, or a nation like South Korea or like Taiwan that was completely encased within the American military alliance system. There are two weak links in this chain: One, the idea that economic freedom will produce a wide range of positive behaviors in foreign countries. And second, that even if these countries do become freer politically, that they’ll become easier for the United States to actually deal with, that they’ll become friendlier, which completely forgets that national interests, the national interests identified by other countries are based on a wide variety of economic and political and geo-strategic considerations. This administration has forgotten that.
ROBERT BOROSAGE: We’re also not talking about economic freedom in the China deal. We’re talking about the freedom of companies to go in and invest, and to make profits. But workers in China don’t have the freedom to organize, that’s an economic freedom. So there’s a whole range of freedoms that relate to the economy that are not unleashed or contagious in China.
Differences since the Cold War
MARGARET WARNER: All right. Let’s go back to the general proposition. What do you think history teaches us in terms of the various examples that have been raised here? Is it the Cold War or the absence of the Cold War that makes the difference? Is it, as Alan Tonelson said — it depends whether the country is defeated after a war and so weak that we essentially take it over? When does it work to use economic engagement as a way of bringing a country to our democratic values or free market values?
DANIEL TARULLO: Margaret, as everyone on this panel agrees, it’s hard to draw general propositions. But if there’s one correlation which I think holds reasonably well over time, it’s that increasing a affluence in a country does produce some pressures for liberalization, not necessarily democracy, but liberalization — political as well as economic.
MARGARET WARNER: Let me just clarify that with you, though. You mean because it helps create a middle class, which then starts pressing for —
DANIEL TARULLO: An educated middle class that doesn’t have to have as its principal concern getting tomorrow’s meal on the table, and gives some freedom to think about other things. I wanted to step back a second, though, in connection with your historical question, and say that I think the issue here is again U.S.-China relations. History is littered with examples of established powers failing adequately to deal with rising powers. Bob alluded to Nazi Germany a few minutes ago. Britain failed to deal with then-Germany in the late 19th and early 20th centuries. If we fail to deal with China today, we are going to inevitably end up in a confrontation of some sort in the not too distant future. And I what I think this vote was about in the minds of many members, not those influenced by commercial concerns, but many other members, was about trying to figure out how to manage what’s going to be an indefinitely difficult relationship.
SUSAN SCHWAB: I think, I agree with Dan. But I would say for want of a better phrase, looking forward to history. The situation has changed. There’s some different factors at work here. One is technology and means an ease of communication. One is the influence of markets. Markets are so much more influential now in the world than they’ve ever been before.
MARGARET WARNER: What do you mean, markets?
SUSAN SCHWAB: Markets, every day, every hour there are millions, billions of dollars in capital sloshing around the world — efforts to control things that in the past were controllable, like markets, more often than not meet with failure — and then of course globalization and – you know — the integration of economies, and relationships, very, very complex economic relationships. So I’m not sure we know, going forward, whether, you know, to what extent history is a guide. But with the ease of communication that comes with technology, you know, with the Internet, with fax machines, with access that individuals in China and elsewhere — that they never had before and that affluence ends will help bring to them, one presumes that there will be greater demands made on leadership.
2000s vs. 1930s
MARGARET WARNER: That is an interesting point — that this isn’t the 1930’s.
ALAN TONELSON: Well, it’s certainly interesting, but again it leaves out so very much. As, in fact, Susan knows probably better than anybody else on this particular panel, for all the talk about the triumph of free markets, there are markets and there are markets. There are many different forms of capitalism around the world today. And countries strongly disagree in many respects about how to organize their societies: What kinds of social protections to provide to their own people, how to basically arrive at a sustainable balance of power between public and private sectors. There is a strong disagreement between East Asians, generally speaking, West Europeans, generally speaking, North Americans, generally speaking. And just to use one example, Japan is a nation that we commonly call capitalist and free market. Those who study Japan carefully know that the brand of capitalism practiced there has nothing to do, almost nothing to do with the American brand, and Japan is an excruciatingly difficult country to deal with, and will remain so.
MARGARET WARNER: But let’s look at the basic proposition to close up here, that if the United States can find a way to make more countries democratic and free market-oriented, that that is ultimately always good for the United States, that it creates a more secure, prosperous world and ultimately more secure in sort of a national security way, do you buy that?
ROBERT BOROSAGE: I think everybody would agree that the more democracies, the greater the zone of peace, the greater possibility for freedom, and therefore the greater possibility for development. I don’t think that’s the question. The question is: how do you get there?
MARGARET WARNER: So it’s the means?
ROBERT BOROSAGE: I agree with last year’s President Clinton, when he argued that labor rights and environmental protections and greater controls over capital and creating rules around this new global economy were essential if we were going to be able to further democracy and make this economy work for most people in the world.
MARGARET WARNER: What do you think on that point?
DANIEL TARULLO: On that last point I think Bob raises an important one, which is that, as I said earlier, this is about China and not about trade policy. I think a lot of questions remain on the minds of the American people as to whether an untrammeled trade policy — which just looks to promote exports — is in the economic interest of the country as a whole. More attention to social values and more attention to compensating those who are hurt at home are going to be necessary in order to sustain at home the kind of engagement abroad, which the China vote reflects.
MARGARET WARNER: And Susan Schwab, if you believe as you do, why not for instance open up to Cuba as well; if there’s no longer any point in using sanctions, if the way to open these country is to open economically to them?
SUSAN SCHWAB: I would say that’s just a question of pacing and politics, I would agree with you.
ALAN TONELSON: I think the real question here is what’s the most efficient and effective way to promote American national security interests, American economic welfare, and the values that the American people prize. And I think if we look at it systematically and very unsentimentally, we’re not going to conclude that the best way to do this is to try to make the world that large — this very unruly turbulent world, significantly more peaceful, more democratic. This country is strong and wealthy enough to get by quite nicely by nurturing its own strength, its own power, and dealing with the world as it is and is likely to be for as long into the future as anybody around here can see.
MARGARET WARNER: All right. We have to leave it there. Thank you all four very much.
DANIEL TARULLO: Thank you, Margaret.