Engaging in philosophical economics can be very exciting for those with the right charts and graphs, which is why it can be vexing for those who only care about bottom lines. Your ability to explain the superiority of supply-side whatever will only go so far with a businessman whose eye is fixated on his ledger. Moral arguments, let alone nationalistic ones, won’t register. Which is why China’s attempt to purchase UNOCAL, an American oil company, is such an interesting story.
Who for a moment could believe that our good friend China (good enough to have high trade status with, anyway) would be rejected a month after it made gestures toward wooing an American oil company? Its bid was in fact much higher than that of the already entrenched Chevron. Hasn’t it enough on its hands with Kim Jong Il next door, and his sunglasses? Or, to be frank, China’s got cheap (read: slave) labor and friendly banks — so friendly that it needn’t worry about market pressures. Why not get in on it?
Reflect on what particularly China is known for. Communism, which these days is more benign to those who know the least about it; human rights violations; copyright infringement; arms build-up. It’s difficult to fear an ideology you don’t understand, shed tears for someone you don’t know (particularly since forced abortion, to some, would mean killing something non-human), and get mad about stolen movies which seemed exorbitantly priced to begin with — but the arms build-up should give you a moment of pause to calculate just how big an army the Chinese have.
The China National Offshore Oil Company is a 70% state-owned facility (and 30% state-employee owned). Nevermind the access that China would have to an already scarce natural resource, consider that any profits skimmed would be absorbed by a brutal regime with a proven record of threatening U.S. allies in the Pacific. More than before, dollars would pay for Chinese arms, often purchased illegally. After all, why is China running training exercises simulating an invasion of Taiwan? That little island is wondering the same thing you are, and so is Japan and South Korea.
Certainly, the PRC makes plenty of money off the United States, but since when have T-shirts been the strategic economic resource that determined the direction of global trade policy? The U.S.’s only domestic source of rare-earth minerals is UNOCAL-owned, and that company’s oil is a precious commodity. Even if China wasn’t planning on using UNOCAL’s rare-earth minerals (it already has access to plenty elsewhere), its command of an important resource would be congestive.
Benjamin Schwartz in June’s Atlantic argues that the U.S. must not overestimate the significance of these actions — China has reason to expand given the nature of U.S. dominance in the Pacific region. Yet Schwartz forgets two things: 1. U.S. dominance in the Pacific is not oppressive, but rather has promoted free trade and economic growth; and 2. If Tibet or Hong Kong are any sign of how much better the region will be under the aegis of our favorite People’s Republic, one hopes that Taiwan’s populace is well-armed — not only for its sake, but for everyone else’s.
Chinese expansionism is a reality worth observing, and Americans will grow more aware of it as time passes. This was, after all, China’s first attempt at acquiring an American producer. UNOCAL ultimately went with Chevron’s lower bid for numerous reasons, but the efforts most notable were those taken by legislative and political bodies, particularly those of the U.S.-China Economic and Security Review Commission and the Center for Security Policy. That pressure needs to be maintained as a resource-hungry China looks elsewhere, particularly Marathon Oil Corp.
Hawkish economic policy does not necessarily imply protectionism — free markets are the substance of our dynamic civilization. It is this belief in the free market that requires such skepticism towards Beijing. After all, a government that terrorizes its own citizens and steals U.S. secrets and property can hardly be trusted as a fair trading partner. So for all those who religiously adhere to the principle of free trade, a question: Would you buy a used car from a man who just beat up his wife in front of you? And then stole your car?
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