The Way To Peace With China?

Don Boudreaux:

Mark Helprin correctly points out that as the Chinese grow more prosperous their military will grow more mighty ("The Challenge From China," May 13). He advises that Uncle Sam dramatically increase the size of his own arsenal.

Regardless of this suggestion's merits or demerits, the more vital course is for Uncle Sam to immediately eliminate all trade and investment restrictions with China, and for politicians to stop threatening further restrictions. Such moves would speed the integration of China's economy with our own. Being economically integrated means being economically reliant on each other - a happy recipe for prosperity and peace.

Want evidence? See the important work of economists Solomon Polachek and Carlos Seiglie. Their empirical research leads them to conclude that "international cooperation in reducing barriers to both trade and capital flows can promote a more peaceful world."* Want more evidence? Ask yourself how likely are even a well-armed Canada or Japan to have any interest in shooting their countless customers and suppliers throughout the U.S.? The answer, of course, is no more likely than we are to want to shoot our customers and suppliers throughout those countries

Donald J. Boudreaux

While I am sympathetic to Dr. Boudreaux's perspective, I wish I shared his level of confidence in increased trade as a solution to peace with China. I suspect both the American government and (particularly) the Chinese government would be willing to sacrifice economic growth to accomplish certain goals. Specifically, the Chinese government has a strong incentive to do away with any challenge to their authority by any means necessary. Thankfully, American politicians are generally held accountable for policies that are obviously harmful to American people. Chinese politicians are not held to account to the same degree. This gives Chinese politicians far more latitude than their American counterparts to engage in economically destructive policies that help secure their political positions. (Think of Tiananmen Square.) This could eventually include going to war with the US over Taiwan or other interests.

Three things are almost certain to happen the more the US trades with China:

1. China and the US will both become more wealthy,
2. the Chinese and American economies will become increasingly interdependent, and
3. the Chinese military will grow stronger.

I hope the positive effects of increased economic interdependence grow faster than the negative effects of a stronger Chinese military. Unfortunately, I think Dr. Boudreaux's analogy to Canada or Japan breaks down on one key dimension -- both Canada and Japan are not only economically intertwined with America, but are also largely dependent on the US for military defense. Neither country would be able to challenge or survive an open military conflict with the Untied States. This may not be true of a future China. Historically, the threat of Communism aligned Japanese, Canadian, and American foreign policy interests. This also has not been the case with China.

I do believe that tighter economic integration with China will have more benefits than costs with regards to our relationship with China and help keep peace between our two nations. I believe human rights are in part a luxury good, which means as China becomes more wealthy, their human rights abuses are likely to decrease. What concerns me is that China's population is getting wealthy at very unequal rates. The income disparity is far greater than income disparity in the US, with many Chinese peasants arguably having standards of living that are not much better than they were hundreds of years ago. Human rights may improve in wealthy areas, but unless significant economic growth also reaches the Chinese countryside, human rights violations may continue well into the foreseeable future in rural areas.

If the Americans are concerned about maintaining peace with China and the development of human rights, I fully agree that increased trade is one of the best things the US government can do towards encouraging both of these goals. I also think it's important for American politicians and policymakers to watch the Chinese government with a very watchful eye. Unless there is a significant change in current Sino-American relations, America would be well-served to maintain its military advantage over China. Increased trade is one strong incentive towards maintaining peace between the two nations. So is a potential enemy who has more guns than you.