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Ron Paul's Freedom Report
A publication of the Foundation for Rational Economics and Education
Volume 5, No. 4, JUNE 2001
A New China Policy
President Bush deserves much credit for the handling of the spy-plane crisis. However, he has received significant criticism from some of his own political supporters for saying he was "very" sorry for the incident. This seems a "very" small price to pay for the safe return of 24 American military personnel.
Trade with China should be credited with helping to resolve this crisis. President Bush, in the diplomatic handling of this event, was able to avoid overly strong language and military threats, which would have done nothing to save the lives of these 24 Americans.
This confrontation provides an excellent opportunity for us to reevaluate our policy toward China and other nations. Although trade with China, for economic reasons, encouraged both America and China to work for a resolution of the spy-plane crisis, our trading status with China should be reconsidered. What today is called free trade is not exactly that. Although we engage in trade with China, it is subsidized through the Export/Import Bank to the tune of many billions of dollars - the most of any country in the world.
We have been careless over the last several years in allowing our military secrets to find their way into the hands of the Chinese government. At the same time we are subsidizing trade with China, including sensitive military technology, we are also building up the Taiwanese military and continuing to patrol the Chinese border with our spy planes. It's a risky, inconsistent policy.
How Would We React?
How would we react if we had Chinese airplanes flying up and down our coast and occupying the air space of the Gulf of Mexico? We must realize that China is a long way from the U.S. and is neither capable, nor showing any signs of, launching an attack on any sovereign territory of the United States.
Throughout all of China's history, she has never pursued military adventurism far from her own borders. That is something that we cannot say about our own policy. China traditionally has only fought for secure borders, predominantly with India, Russia, Japan, and in Korea against the United States, and that was only when our troops approached the Yaloo River.
It should not go unnoticed that there was no vocal support from any of our allies for our spy missions along the Chinese coast. None of our allies bothered to condemn the action of the Chinese military aircraft, although it technically was the cause of the accident. Don't forget that when a Russian aircraft landed in Japan in 1976, it was only after many months that we returned the plane to Russia - in crates.
Although there is no doubt that we technically have legal grounds for making these flights, the question really is whether it is wise to do so or necessary for our national security. A strong case can be made that our national security is more threatened by our patrolling the Chinese coast than if we avoided such flights altogether.
It's Time for Reassessment
After half a century, it's time to reassess the need for such flights. Satellite technology today gives us the ability to watch and to listen to almost everyone on earth. If there is a precise need for this type of surveillance for the benefit of Taiwan, then the Taiwanese ought to be involved in this activity, not American military personnel. We should not threaten and intimidate other countries in order to achieve some vague psychological reassurance that we're still the top military power in the world. This is unnecessary and may well represent a weakness rather than strength.
The Taiwan Relations Act, which essentially promises that we will defend Taiwan at all costs, should be reevaluated. Morally and constitutionally a treaty cannot be used to commit us to war at some future date. One generation cannot declare war for another. Making an open-ended commitment to go to war, promising troops, money and weapons is not permitted by the Constitution.
It is clear that war can only be declared by a Congress currently in office. Declaring war cannot be circumvented by a treaty or agreement committing us to war at some future date. If a previous treaty can commit future generations to war, the House of Representatives, the body closest to the people, would never have a say in the most important issue of declaring war.
We must continue to believe and be confident that trading with China is beneficial to America. Trade between Taiwan and China already exists and should be encouraged. It's a fact that trade did help to resolve this current crisis without a military confrontation.
Concern about our negative trade balance with the Chinese is irrelevant. Balance of payments is always in balance. Every dollar we spend in China must come back to America - maybe not buying American goods, as some would like, but they do come back and they serve to finance our current account deficit.
Free trade, it should be argued, is beneficial even when done unilaterally, providing a benefit to our consumers. But we should take this opportunity to point out clearly and forcefully the foolishness of providing subsidies to the Chinese through such vehicles as the Export/Import Bank. We should be adamantly opposed to sending military technology to such a nation, or to any nation for that matter.
It is interesting to note that recent reports reveal that missiles, coming from Israel and financed by American foreign aid, were seen on the Chinese fighter plane that caused the collision. It should be equally clear that arming the enemies of our trading partners doesn't make a whole lot of sense either. For American taxpayers to continue to finance the weaponry of Taiwan, and to maintain an open commitment to send our troops if the border dispute between Taiwan and China erupts into violence, is foolhardy and risky.
Don't forget that President Eisenhower once warned that there always seems to be a need for a "monster to slay" in order to keep the military industries busy and profitable. To continue the weapons buildup (something we are always engaged in around the world) requires excuses for such expenditures - some of these are planned, some contrived, and some accidental.
When we follow only a military approach without a trade component in our dealings with foreign nations, and in particular with China, we end up at war, such as we did in the Korean War. Today, we are following a policy where we have less military confrontation with the Chinese and more trade, so relations are much better. That is why a crisis like the one we have just gone through is more likely to be peacefully resolved to the benefit of both sides. But what we need is even less military involvement, with no military technology going to China and no military weapons going to Taiwan.
We have a precise interest in increasing true free trade; that is, trade that is not subsidized nor managed by some world government organization like the WTO. Maintaining peace would then be much easier.
We cannot deny that China still has many internal moral, economic and political problems that should be resolved. But so do we. Their internal problems are their own, and we should not impose our views on them in dealing with these issues. But we should be confident that engaging in free trade with them and setting a good example are the best ways for us to influence them and get them to come to grips with their problems. We have enough of our own imperfections in this country in dealing with civil liberties. We ought not to pretend that we are saintly enough to impose our will on others in dealing with their problems. Needless to say, we don't have the legal authority to do so either.
During the Cuban missile crisis, resolution was achieved under very dangerous circumstances. Quietly, President Kennedy agreed to remove the missiles from Turkey that were pointed at the Soviets, making the point that American missiles on the Soviet borders were not unlike the Soviet missiles on the American borders. A few months later, quietly, the United States removed these missiles, and no one suffered. The Cold War was eventually won by the United States, and our national security was not threatened by the removal of those missiles.
It could be argued that the fact that our missiles were in Turkey and pointed at the Soviets was more of a threat to our national security than a deterrent to our enemies, because that motivated the Soviets to put their missiles in Cuba. It would do no harm to our national security for us to quietly, in time, stop the potentially dangerous and unnecessary spy missions that we have pursued for over 50 years along the Chinese border.
James Bamford recently wrote in The New York Times of an episode that occurred in 1956 when Eisenhower was president. On a similar spy mission off the Chinese coast, the Chinese Air Force shot down one of our planes, killing 16 American crewmen. In commenting on the incident, President Eisenhower said, "We seem to be conducting something that we cannot control very well. If planes were flying 20 to 50 miles from our shores, we would be very likely to shoot them down if they came in closer, whether through error or not."
We have been pursuing these missions near China for over 50 years. It's time to reconsider the wisdom and the necessity of such missions, especially since we are now engaged in trade with this nation.
Bellicose and jingoistic demands for retaliation and retribution are dangerous, and indeed are a greater threat to our national security than relying on satellite technology for gathering the information that we might need. A policy of peaceful, non-subsidized trade with China would go a long way to promoting friendly and secure relations with the Chinese people. By not building up the military arsenal of the Taiwanese, Taiwan will be forced to pursue their trade policies and investments with China, leading to the day when the conflict between these two powers can be resolved peacefully.
Today it looks like there's a much better chance of North and South Korea getting together and solving their dispute than was the case in the 1950s, when we sent hundreds of thousands of troops and millions of bombs to resolve the conflict, which was unsuccessful. We should have more confidence that peaceful trade is a much stronger weapon than all the military force that we can provide.
That same argument can be made for our dealings with Vietnam today. We did not win with weapons of war in the 1960s, yet we are now much more engaged in peaceful trade with the people of Vietnam. Our willingness over the past hundred years to resort to weapons to impose our will on others has generally caused resentment rather than respect of America.
It is now time to reassess our entire foreign policy of worldwide military intervention. Staying neutral in world conflicts, while showing a willingness to trade with all nations anxious to trade with us, will do more to serve the cause of world peace than all the unnecessary and provocative spy missions we pursue around the globe.
Free Trade
TUESDAY, APRIL 24, 2001
The following statement was delivered by Dr. Paul on floor of the House of Representatives
I commend to the attention of members an editorial appearing in today's Wall Street Journal which is headlined "Free Trade Doesn't Require Treaties." The column is authored by Pierre Lemieux, a professor of economics at the University of Quebec.
Professor Lemieux seems to grasp quite well what few in Congress have come to understand - that is, "The primary rationale for free trade is not that exporters should gain larger markets, but that consumers should have more choice - even if the former is a consequence of the latter." Mr. Lemieux went on to point out that the leaders of the 34 participating states in the recent Quebec summit "are much keener on managed trade than on free trade and more interested in income redistribution and regulation than in the rooting out of trade restrictions."
The professor's comments are not unlike those of the late economist Murray N. Rothbard, devotee of the methodologically superior Austrian school, who, with respect to NAFTA, had the following to say:
"[G]enuine free trade doesn't require a treaty (or its deformed cousin, a `trade agreement'; NAFTA is called an agreement so it can avoid the constitutional requirement of approval by two-thirds of the Senate). If the establishment truly wants free trade, all it has to do is to repeal our numerous tariffs, import quotas, anti-dumping laws, and other American-imposed restrictions of free trade. No foreign policy or foreign maneuvering in necessary."
In truth, the bipartisan establishment's fanfare of "free trade" (and the impending request for fast track authority) fosters the opposite of genuine freedom of exchange. Whereas genuine free traders examine free markets from the perspective of the consumer (each individual), the mercantilist examines trade from the perspective of the power elite; in other words, from the perspective of big business in concert with big government. Genuine free traders consider exports a means of paying for imports, in the same way that goods in general are produced in order to be sold to consumers. But the mercantilists grant privilege to the government business elite at the expense of all consumers, be they domestic or foreign.
Mr. Speaker, again I commend Mr. Lemieux's column and encourage the recognition "that free trade is but the individual's liberty to exchange across political borders."
[From the Wall Street Journal, April 24, 2001]
Free Trade Doesn't Require Treaties
(By Pierre Lemieux)
MONTREAL.
The decades preceding World War I were a period of globalization that was at least as extensive as today's. To the extent that the proposed Free Trade Area of the Americas (FTAA) moves this continent to ward freer trade, it would help recover the lost promise of the pre-1914 world. But the Quebec summit sent conflicting messages, none of them revolutionary.
The leaders of the 34 participating states showed that they are much keener on managed trade than on free trade, and more interested in income redistribution and regulation than in the rooting out of trade restrictions. "The creation of a free trade area is not an end in itself," said Canadian Prime Minister Jean Chrétien.
With excruciating political correctness, he added: "We have focused on a global action plan of co-operation to reduce poverty, protect the environment, promote the adoption of labor standards and encourage corporate responsibility." The participants' "Plan of Action" contained measures that range from tobacco regulation and gun control to the monitoring of financial transactions.
What of the "no passport" world celebrated by Keynes? In Quebec, as at other international trade meetings, state representatives behaved as agents of their country's exporters. You give us this "concession," thAey intone, and we will allow your exporters to enter our markets in return. Yet this misrepresents grossly the nature of trade and a free economy.
The primary rationale for free trade is not that exporters should gain larger markets, but that consumers should have more choice - even if the former is a consequence of the latter. By presenting themselves as members of an exporters' club, trade negotiators lay themselves open to attack by those who claim that free trade only works to the benefit of corporations.
Economists have known for centuries that free trade can be promoted without free-trade agreements. A country's inhabitants would obtain many of the advantages of free trade if only their own government would stop imposing restrictions on imports. Behind the veil of financial transactions, products are ultimately exchanged against products, so that the more imports that come into a country, the more will foreign demand grow for its exports. Or else, foreign exporters will have to invest in the country, thereby creating a trade deficit; nothing wrong with that either.
In other words, if you want free trade, just trade. Much of the pre-World War I free trade was, indeed, due to Britain's unilateral free-trade policies.
Trade agreements are only helpful to the extent that they help tame domestic producers' interests, support the primacy of consumers, and lock in the gains from trade. Such treaties should not aim at reducing competition by pursuing other goals, of the sort embraced by the heads of state at Quebec. That would amount to no more than managed trade, the pursuit of which, paradoxically, might be said to unite both the leaders present and the mobs demonstrating against them.
William Watson, a Canadian economist, has noted in the Financial Post that the demonstrators who don't trust governments to negotiate free trade come, contradictorily, from political constituencies generally known for their blind faith in government. As for the small group of anarchists, they apparently do not realize that closed borders, and the prohibition of capitalist acts between consenting adults, actually increase state power.
On one stretch of Saturday's march, demonstrators wore large bar codes taped to their mouths, as if free trade meant turning them into speechless numbers. How droll! These demonstrators were certainly, and perhaps proudly, carrying in their wallets government-imposed Social Security numbers, drivers' licenses and Medicare cards, which, surely, have made them numbered state cattle. Another fabulous irony: American would-be demonstrators complained about being denied entry into Canada, while their entire message is predicated on tighter borders.
Once we realize that free trade is but the individual's liberty to exchange across political borders, it is easy to see that forbidding it requires punishment or threats of punishment. You have to fine or jail the importer who doesn't abide by trade restrictions. In FTAA debates as in other trade issues, a source of much confusion is the failure to realize that free trade is a consequence of individual sovereignty.
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