Saturday, August 06, 2005

More Paranoia about China - and HP sauce

In a letter in the Financial Times (5 August) from a Mr Erik B. Cooper, Denver, Colorado, US, we have another, albeit articulate, example of the current paranoia about China. This time it’s about China’s failed attempt to buy Unocal, a US oil company. Mr Cooper writes:

“Although China has liberalised its economy to a certain degree, it is still a communist country. Coincidentally, CNOOC is primarily owned by the Chinese government, and Fu Chengyu, the CNOOC chairman, is a senior communist official. To give a communist government access to deep-water drilling technology, as well as strategic US petroleum assets, would be an obtuse strategy. Even Adam Smith realised that national security concerns play a great deal in formulating free market policies.”

Adam Smith did indeed consider defence to be more important than opulence (Book V, “Wealth of Nations”) and praised the then Navigation Acts as “wise” and in the interests of commerce. The Acts prevented foreign merchant ships carrying cargoes from the US Colonies to Britain and forced merchants to ship in British ships, crewed by British sailors. This ensured a plentiful supply of sailors for the Royal Navy and British ships should war break out. He considered the cost of these policies worth while as they helped defend Britain in the war-time. He didn’t, incidentally, think the wars that Britain was dragged into were always wise or necessary.

If indeed it is an interest of the USA to prevent foreign ownership of businesses this would bring into line with present intentions in France where the recent suggestion of a hostile bid for Danone, a well-known food manufacturing firm, famous for HP Sauce, has led to government ministers talking about introducing laws to prevent foreign bids, ostensibly if they are hostile, but given that existing managements seldom welcome take-overs, it would provide an ideal legal cover for evading them by declaring them ‘hostile’.

Adding Chinese bids to a list of prohibitions (a ‘hostile’ government?) is another turn of the screw towards rampant protectionism.

If HP Sauce is within the security interests of France, Unocal’s tiny oil percentage is within the security interests of the US and the annual trade with CAFTA countries (less than the monthly trade with China) is also included, we can see unwelcome trends in both Europe and US towards the inevitable excuses for protectionism.

If successful - and paranoia feeds on itself - it could ‘solve’ the oil crisis by dampening economic growth in both continents by spurious ‘security’ driven protectionism in defence of HP sauce, vegetables, clothing and oil. Then we would all be worse off.


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