PrintThe Push to Trade with Enemies
Treasury Secretary Janet Yellen’s attempt in Beijing to separate commerce from geopolitics, to promote private trade and investment even with nations that present threats to American security which include control of strategic industry and resources is an error at best. Secretary Yellen is not alone in pushing this notion based on classical liberal sophistries backed by the influential business lobbyists who inhabit the Washington swamp.
The Center for Strategic and International Studies (CSIS) is a major component of the Establishment, heavily funded by corporations and liberal foundations. It has put out a paper casting as illegitimate the U.S. stand that national security issues are exempt from World Trade Organization rulings favoring “free trade” in all things. The first principle of the WTO is “A country should not discriminate between its trading partners, and it should not discriminate between its own and foreign products, services or nationals.” One wonders why any citizen would vote for a leader who proclaimed that he would not treat his constituents any differently than strangers on the other side of the planet, even if those strangers meant his constituents harm. And the term “trading partner” explicitly avoids making any distinction between friend and foe. Trading with the enemy is not only condoned, it is considered a violation of WTO rules not to trade with enemies.
The WTO was created in 1995 at the height of the post-Cold War euphoria when intellectuals proclaimed the “end of history” and a new world order of eternal peace. This notion has been around since the end of the Seven Years War in the mid-18th Century. Between then and the 21st Century, this idea has only generated disappointment time and again. It is not an idea universally embraced. One bit of realism did slip into the WTO. Article XXI Security Exemptions declares nothing prevents "any contracting party from taking any action which it considers necessary for the protection of its essential security interests." The U.S. has always held that WTO dispute panels are precluded from examining the reasons or "validity" of the invocation of Article XXI. It is the core sovereign right to determine what is in a nation’s security interests. It has been standard for every trade agreement to include this right, but there has been a movement, which CSIS endorses, to allow foreign parties to challenge (and this negate) this right.
For example, the 1994 Agreement on Government Procurement (a direct globalist assault on national policymaking) includes Article XXIII which states “1. Nothing in this Agreement shall be construed to prevent any Party from taking any action or not disclosing any information which it considers necessary for the protection of its essential security interests relating to the procurement of arms, ammunition or war materials, or to procurement indispensable for national security or for national defense purposes.” Yet, section 2 takes this right away by allowing its use to be challenged as “unjustifiable discrimination between countries…or a disguised restriction on international trade.” A dispute panel of foreign judges would then decide if a nation had “legally” invoked a security measure, thus eliminating the most vital element of sovereignty as being inferior to the petty desires of merchants.
Congress rejected this attack on national security and sovereignty when considering the World Shipbuilding Agreement in 1996, a measure aimed directly to a strategic industry vital to U.S. naval supremacy and containing an assault on sovereign decisions. Article 2 stated "This Agreement excludes: military vessels and modifications made or features added to other vessels exclusively for military purposes. This exclusion is subject to the requirement that any measures or practices taken in respect of such vessels, modifications or features are not disguised actions taken in favor of commercial shipbuilding and repair inconsistent with this Agreement." Naval shipbuilding could thus be challenged by foreigners as illegitimate. President Bill Clinton signed this agreement, as he supported all these globalist notions. In this case, Congress sought to amend it. A package offered by the House Armed Service Committee passed by a bipartisan majority 278-149. Included was an amendment I drafted as a Republican staffer stating that “Nothing in this Shipbuilding Agreement shall be construed to prevent the United States from taking any action which it considers necessary… or from invoking its sovereign authority to define for purposes of exclusion… any dispute challenge.”
Though the GOP controlled the House, most of the votes for the amendments came from jobs-focused Democrats in defiance of their own President. GOP members only backed the amendments 121-109. In those days, too many Republicans thought they represented Corporate America rather than the United States. They failed to understand that the Big Business lobbyists who camped in their offices represented transnational interests with no allegiance to their nominal homeland. President Donald Trump turned this thinking around, but it is too early to tell if his nationalism will hold control of the party. The WTO rulings against national security measures which CSIS heralds were against President Trump’s efforts to shield key American industries from foreign assault, particularly from China, our leading Great Power rival. The economic battle between the U.S. and China is expanding under President Biden with strong support in the GOP House which created the Select Committee on the CCP. The WTO was an idea whose time never really came and whose ideology is clearly not appropriate today.
Preserving America’s freedom to act is not enough; it must act. Our shipbuilding industry was allowed to atrophy for decades. Meanwhile, China with a weaker economy but leaders who think strategically, created the world’s largest shipbuilding industry which is outbuilding the U.S. Navy every year.
CSIS is known for its analysis of conflict. It wants an outcome in Ukraine that “ensures Ukraine’s territorial integrity and independence and inhibits Russia’s ability to continue threatening its neighbors in the future.” It sees China as “conducting an aggressive and unprecedented campaign … [to] weaken the United States and its partners” but like the Establishment in general, CSIS shies away from advocating anything decisive that would disrupt business ties. We must show a “willingness to cooperate and compromise.” A hopeful evolution may be the new book Beijing Rules: How China Weaponized Its Economy to Confront the World by Bethany Allen-Ebrahimian. One of her points is how Beijing “has leveraged its dominant role in the global economy to coerce companies and governments around the world to align with its political preferences.”
It is alarming how merchants who pride themselves as transnationalists above geopolitics have been coerced (or seduced) to become agents of China. In the business journal Barrons, Yale economist Stephen Roach claimed “China Hawks in Congress are going too far” in trying to block American capital from financing Chinese arms producers. This at a time when Beijing has an announced policy of military-civilian fusion of industry. Daryl Guppy is a former board member of the Australia-China Business Council now working with China’s state media. In the South China Morning Post, he attacked his homeland for strengthening its security ties with the U.S. at the expense of China. He calls this the “death knell of Australian diplomacy” defining diplomacy, as most liberals do, as appeasement. In the real meaning of diplomacy, a core objective is the building of coalitions that can mobilize superior strength against common enemies. In that regard, Australia is part of the trend seeking U.S.-led collective security against China’s aggressive behavior casting threats in all directions.
Influencers like Roach and Guppy are far more dangerous than the left-wing “antiwar” protests China likes to cite as a sign of weak American resolve. If Thucydides knew 2,000 years ago that “War is not so much a matter of weapons, but of money, for money furnishes the material for war” there is no excuse not to understand that today when crafting an integrated national and international economic strategy.
William R. Hawkins is a former economics professor who served on the professional staff of the U.S. House Foreign Affairs Committee. He has written widely on international economics and national security issues for both professional and popular publications.
