Friday, July 29, 2005

Another Front Opens for Protectionism?

From today's US Tokyo Embassy Press Release: a few extracts:

China No Threat to United States in Africa, U.S. Official Says

By Jim Fisher-ThompsonWashington File Staff Writer

Washington - Despite perceived rivalries, the United States and China are cooperating at a number of levels to end conflict and advance development in resource-rich Africa, a top U.S. State Department official told Congress July 28.

Principal Deputy Assistant Secretary of State for African Affairs Michael Ranneberger told the House Africa Subcommittee that "as a natural result of its [economic] growth, China is increasingly involved in the global marketplace, seeking new markets for its goods and reliable sources of energy." Both goals are "reflected in China's increased engagement across sub-Saharan Africa," he said.

Ranneberger said, it is important to note that "in many respects China's engagement is essentially classic Adam Smith [author of The Wealth of Nations, which launched the economic doctrine of free enterprise], value-free capitalism in action. It's worth noting, too, that while we refer to 'China,' Chinese engagement also involves a wide range of private enterprises, semiprivate businesses, and local government entities that engage in trade not directly linked to official Chinese government policy."

He said, "There are of course times when our interests and China's will need to be the subject of dialogue," especially about its growing military support to the repressive regime of President Robert Mugabe of Zimbabwe. "Certainly, the [Bush] administration will continue to work hard to address common challenges - regional and global, economic and political - with China. And in those areas where we have differences, we strive to handle these issues in a candid and open dialogue," Ranneberger said.


From the questions it is clear that Congress men and women are raising vague concerns of a different nature to the overtly protectionist concerns of allowing a country open access to the US markets where it may take a large slice of US domestic activity.

Concerns raised about China competing with US traders in Africa are about a country competing with US interests in third countries. What exactly the US (or any other country in the same position) can do directly about foreign competition in third countries is not clear, other than mistakenly retaliate against the foreign competition being successful in the US. That is the danger behind such concerns.

International trade is about trade with and among many foreign countries. As long as it is one-way trade (the home country with foreign countries), the protectionist clamour is clearly seen for what it is; the age old whine of domestic producers about their customers being able to buy cheaper goods from foreigners (thus raising the real wages of domestic consumers, i.e., what they can buy per dollar, or pound, or euro) to the disadvantage of domestic producers who prefer to charge them more (i.e., lower the real wages of domestic consumers), not necessarily to make greater profits, though that is not precluded, but sometimes just to break-even (which suggests they should get out of that business and use their capital for something more productive).

But when rival foreign countries (in this case China – in aircraft manufacture it is Europe) threaten competition in third countries, the whine of domestic producers shifts a gear to see sinister intent behind the foreign competition, which is soon picked up and articulated by domestic politicians.

That China has an appalling human rights record, is a communist dictatorship and has a growing military presence, lends the protectionist groans a smidgen of justification in the eyes of legislators.

It is from such roots that the 19th-century imperialist adventures of Europe grew from. That is a real danger. A much better response from the US would be to unilaterally abandon its domestic agricultural subsidies and other existing protectionism measures and thus enable nascent markets in Africa to grow from trading with the US (and China and whomsoever else). The enrichment of Africa and the reduction of poverty would do more for US competitive trade relations and their success than any of the dark adventures to which Congress could drift if the protectionist drums increase their beat.

Adam Smith understood this. Do the people who quote him also understand this and is Congress listening when Adam Smith’s name is quoted?


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