Exclusive: The Chinese Version of ‘Free Trade Imperialism’
by WILLIAM R. HAWKINS
January 19, 2010
The China-ASEAN Framework Agreement on Comprehensive Cooperation went into effect with the New Year. It was drawn up in 2002 but delayed so countries and business firms could prepare and adjust to the new arrangements. The agreement has been widely reported as one of “free trade” between China and the six original ASEAN members, Brunei, Indonesia, Malaysia, Philippines, Singapore and Thailand. Average tariffs will be cut below one percent. The smaller countries believe they will benefit from improved access to the large Chinese population and fast growing economy, and this may be true for certain sectors. The Beijing regime, however, has many ways other than tariffs to control the flow of goods and capital, and to structure a division of labor between China and the ASEAN in ways that serve Chinese national interests.
Zuo Liancun, an economics professor at Guangdong University of Foreign Studies, told the London Daily Telegraph, "On the Chinese side, the sectors that will benefit the most are light manufacturing, such as electrical and electronic goods, clothes, footwear, porcelain and so on. For South East Asian countries, they will sell more agricultural products and natural resources.” A story in China Daily on the agreement opened by citing, “Trucks loaded with vegetables and fruits thronged border markets.”
The terms of trade envisioned by Beijing, where it exchanges manufactured goods for food, fuel and natural resources to support its industrial development, is the old colonial model of the imperialist age. Historians John Gallagher and Ronald Robinson famously called it “free trade imperialism” and “informal empire” when discussing its use by the British Empire in the 19th century. “In both the formal and informal dependencies in the mid-Victorian age there was much effort to open the continental interiors and to extend the British influence inland from the ports and to develop the hinterlands. The general strategy of this development was to convert these areas into complementary satellite economies, which would provide raw materials and food for Great Britain, and also provide widening markets for its manufactures,” wrote the two scholars. Political and military intervention often followed to protect the favorable economic relationship.
Industry groups in Indonesia and the Philippines see the danger and have been pressing their governments to keep tariffs on vulnerable sectors until at least 2012. "These sectors aren't ready to compete with imported Chinese products. If the government implements free trade now, these industries are surely going to die," said Indonesian lawmaker Airlangga Hartarto. He cited 12 sectors including textiles, petrochemicals, footwear, electronics, steel, auto parts, food and drinks, engineering services and furniture. Sofjan Wanandi, chairman of the Indonesian Employers Association, was quoted in the Wall Street Journal (January 12th) saying,. 'We're totally unable to compete and we'll have to close our factories.”
Indonesia's government has sent a letter to ASEAN asking for a one-year delay, until January 2011, in imposing zero tariffs on a number of goods, including textiles, steel and chemicals, to give local businesses more time to adjust. But it is unlikely the organization would grant a waiver to just one country, or that China would agree to any change in terms. Nor would one more year would make any difference. If Indonesia integrates its economy with China, it will be locked into a subservient position.
Beijing’s strategy will be to keep the ASEAN countries underdeveloped by knocking down their industries so they will be dependent on exporting raw materials to serve Chinese industry, the basis for Beijing’s rise to great power status. Only Singapore, which has a high-tech sector and sharp financiers, is likely to benefit and then only it if can keep possession of its intellectual property. Beijing would like to pull Singapore, which has a free trade agreement and close military ties with the U.S., into its orbit.
Beijing has been pursuing the same strategy in Latin America, Central Asia, and Africa, backed by investments in mining, oil drilling and the construction of ports and transport systems to move resources from these lands to China. Beijing has been willing to exploit weak local economies and desperate (and in some places, corrupt) governments to accept short-term commercial gains at the expense of long-term development.
Australia has been locked in a battle with China since last summer over Beijing’s attempts to gain control of major mines on the southern continent. And Brazil, seeing how China has exerted its influence in Argentina, has taken steps to limit Beijing’s penetration of its economy. Brazil wants to become an advanced industrial power which puts it into competition with China.
The simple classical liberal theory of “free trade” as a mutually beneficial form of international cooperation that will promote peace does not describe everything, or even most things, that use its rhetoric in the real world of geopolitics. Trade remains part of the global struggle for wealth and power, and is, in turn, shaped by it. Beijing understands this and has fashioned its economic strategy accordingly. The United States has not, and in a policy vacuum has allowed China to pursue an imperialist agenda in America, dumping manufactured goods into the U.S. market to support industrial growth in China. The massive financial reserves from the resulting trade surpluses are used to make strategic purchases and to exert political leverage.
Beijing is actively shaping its future place in the world. America, in contrast, is adrift, increasingly being acted upon and, at best, only reacting in an ad hoc manner to initiatives launched elsewhere. Too many conservatives, who supposedly have national security and independence as top priorities, have gotten lazy and fallen for liberal notions about the “invisible hand” always working for the best. But doing nothing means what is done is done by others. In the real world, the hands guiding world events are quite visible and are increasingly Chinese.
FamilySecurityMatters.org Contributing Editor William R. Hawkins is a consultant specializing in international economic and national security issues. He is a former economics professor and Republican Congressional staff member.