Go easy on free trade as top security concern
Obama and Romney see trade as the main issue in foreign policy, which helps explain why three free-trade pacts just passed Congress. But trade isn't always a matter of security. Its main purpose is creating wealth and expanding the economic pie.
No longer is trade just good economics, forcing companies and workers to innovate and be more productive. Now it is also central to national security, perhaps even more than the military.
Secretary of State Hillary Rodham Clinton, for example, gave a speech today in New York in which she said security is not just facing down a military foe but “is shaped in boardrooms and on trading floors – as well as on battlefields.”
She even seemed to characterize market-manipulating tactics of other countries as hostile acts. She cited China, the world’s second-largest economy, as unfairly using government-controlled enterprises and financial institutions to boost exports.
“Today we see [Chinese] hybrid companies masquerading as commercial actors but actually controlled by states and acting with strategic consequences,” she said.
One particular act by China has woken up the Obama administration to viewing trade as critical. In the past year, Beijing has cornered the world market for certain elements, called rare earths, that are essential to high-tech products from cellphones to military drones.
Mitt Romney, the leading Republican presidential contender, is making a similar attempt to reframe trade as America’s prime interest in foreign policy. He accuses President Obama of being weak against “cheating” trade competitors and promises to punish China for its currency manipulation – a tactic that Mr. Obama opposes. Mr. Romney would also create tight communities of nations that practice free trade and honor patents and copyrights, almost like closed camps.
Free-trade pacts are already a way of locking in like-minded nations that agree on the rules of open commerce. The European Union and the North American Free Trade Agreement are good examples. These treaties can further boost trade when the World Trade Organization fails to do so – as it often does.
One danger in treating trade as a security issue, however, is that it can easily turn a trading “enemy” into a war enemy. War rhetoric is a risky metaphor.
Another concern is that such economic nationalism may lead to trade isolationism. Opposing more free trade is based on an assumption that a country can go it alone in a globalized world.
“You can’t call ‘time out’ in the global economy,” Ms. Clinton said. “Our competitors aren’t taking a time out, and neither can we.”
Trade is not a zero-sum game that assumes there is a defined limit to wealth and that each nation must try to take the biggest slice of a never-expanding pie.
Patience is needed by America as other countries wake up to the fact that trade only broadens the world’s economy. Those who treat trade as simply a beggar-thy-neighbor tactic only damage the historic trend toward wealth creation.
It took communist China from 1949 to 1979 to even start becoming a trading nation. Now it must learn not to corner certain markets in mercantile ways, such as using government to undercut foreign competition or give an unfair leg up to state-run companies.
Europe, too, has had to shift its open-market compacts to accommodate nations like Greece, which bent the eurozone’s free-market rules with excessive domestic spending that brought Athens to the brink of a debt default.
As the 2012 election campaign heats up, both political parties must avoid translating the ideals of trade into war talk.