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Some Perspective on China, Trade, and the Military
Those who believe in a greater level of government intrusion in trade and the economy often don the cloak of economic nationalism, using the specter of some economic bogeyman waiting in the closet to sentence us to commercial servitude. Believing that the government knows better than individuals what products should be made available in the marketplace, that American companies should be protected from competition, and that greater efficiency and productivity are a net negative to the quality of life, the protectionists conjure up images of shuttered factories and abject poverty to justify higher taxation and regulation of the American economy. Phrases like "fair trade" and "level the playing field" are used to suggest that the government's purpose is not to protect liberty but rather to ensure that individuals make the "right" decisions, to decide winners and losers in the commercial marketplace. They suggest that American companies can't compete without some sort of big government solution that raises prices and restricts choices for consumers.
Currently, the economic bogeyman of choice is the People's Republic of China. Capitalizing on recent examples of poor quality control on some products carrying a "made in China" label, particularly public health concerns regarding imported toys, the threat of Chinese domination is a favorite of the intrusive-government protectionists. Using the so-called "trade deficit" as a starting point (typically a meaningless parameter, as detailed in previous Semper Libertas entries), the managed-trade aficionados paint a dire picture of a Chinese economy growing relentlessly, soon to eclipse that of the United States.. Along the road to economic superiority, the Chinese military machine will begin to eclipse American military might, so the narrative goes. No longer possessed of either economic or military superiority, America would end up relegated to near-Third World status. A dire, shocking picture indeed, and one no patriotic American could support.
The picture changes, however, when one leaves behind emotion and begins collecting facts. According to the CIA World Fact Book, the estimated 2007 Chinese and American Gross Domestic Products (GDP) are $2.879 trillion and $13.75 trillion, respectively. The Chinese economy (as is common in "developing" or "emerging" economies) has been growing like gangbusters — growth of over 11% is estimated for 2007 and is forecast to average 7.5% over the period 2006-2010. Compare that to the conservative forecast for GDP growth in the United States of approximately 2.5%.
Based on both countries maintaining those rates of growth for the foreseeable future, the Chinese economy would surpass that of the USA in ... 32 years. Keep in mind that even this three-decade sprint is dependent on the Chinese GDP continuing at a blistering pace and the American economic growth estimated in a fairly conservative manner (average economic growth in the United States since 1948 is 3.1%). So in a near-worst case scenario, it would take three decades for the Chinese economy to catch the American economy in terms of size. How many forecasts for three decades hence are believable? It would seem that the economic threat posed by the People's Republic of China is dramatically overstated.
But what about military spending? The protectionists are saying that the Chinese are using all the gains from the supposed "trade surplus" they run to increase their military. Seems scary indeed, until once again emotion is replaced with fact. Again consulting the CIA World Fact Book reveals that currently the Chinese spend approximately 4.3% of GDP, while the military budget of the US is approximately 4.06%. Assume then that both the Chinese government and the American government maintain the same level of military spending relative to GDP over the course of the 32 years it would take for their economy to catch ours in our worst-case scenario: over that 32 years, the US will have spent nearly $12 trillion more on its military than will China! Suppose the USA becomes more parsimonious and trims its military budget to 3% of GPD: we're still outspending over the 32 year period of $4.6 trillion. That's a lot of tanks, soldiers, defense systems, etc. That's a big step towards continuing military supremacy.
Of course, continued trade with China would dampen the military threat even more: rarely do countries choose to make war with their best customers. A global economy based on trade and commerce encourages peace and prosperity, disincentivizing war. Those who would advocate isolating the American economy from the rest of the world in the name of security would actually be promoting a less secure America instead. Those who advocate a greater intrusion of government in the marketplace to "protect" American businesses would be promoting a less prosperous America instead.
Let's let facts prevail over emotion in the debate over trade and commerce. "Fair trade" is when consenting parties engage in a peaceable, voluntary exchange absent from fraud or coercion. Government should be protecting individuals against that fraud or coercion, and does so best by reducing its interference in the marketplace.
Currently, the economic bogeyman of choice is the People's Republic of China. Capitalizing on recent examples of poor quality control on some products carrying a "made in China" label, particularly public health concerns regarding imported toys, the threat of Chinese domination is a favorite of the intrusive-government protectionists. Using the so-called "trade deficit" as a starting point (typically a meaningless parameter, as detailed in previous Semper Libertas entries), the managed-trade aficionados paint a dire picture of a Chinese economy growing relentlessly, soon to eclipse that of the United States.. Along the road to economic superiority, the Chinese military machine will begin to eclipse American military might, so the narrative goes. No longer possessed of either economic or military superiority, America would end up relegated to near-Third World status. A dire, shocking picture indeed, and one no patriotic American could support.
The picture changes, however, when one leaves behind emotion and begins collecting facts. According to the CIA World Fact Book, the estimated 2007 Chinese and American Gross Domestic Products (GDP) are $2.879 trillion and $13.75 trillion, respectively. The Chinese economy (as is common in "developing" or "emerging" economies) has been growing like gangbusters — growth of over 11% is estimated for 2007 and is forecast to average 7.5% over the period 2006-2010. Compare that to the conservative forecast for GDP growth in the United States of approximately 2.5%.
Based on both countries maintaining those rates of growth for the foreseeable future, the Chinese economy would surpass that of the USA in ... 32 years. Keep in mind that even this three-decade sprint is dependent on the Chinese GDP continuing at a blistering pace and the American economic growth estimated in a fairly conservative manner (average economic growth in the United States since 1948 is 3.1%). So in a near-worst case scenario, it would take three decades for the Chinese economy to catch the American economy in terms of size. How many forecasts for three decades hence are believable? It would seem that the economic threat posed by the People's Republic of China is dramatically overstated.
But what about military spending? The protectionists are saying that the Chinese are using all the gains from the supposed "trade surplus" they run to increase their military. Seems scary indeed, until once again emotion is replaced with fact. Again consulting the CIA World Fact Book reveals that currently the Chinese spend approximately 4.3% of GDP, while the military budget of the US is approximately 4.06%. Assume then that both the Chinese government and the American government maintain the same level of military spending relative to GDP over the course of the 32 years it would take for their economy to catch ours in our worst-case scenario: over that 32 years, the US will have spent nearly $12 trillion more on its military than will China! Suppose the USA becomes more parsimonious and trims its military budget to 3% of GPD: we're still outspending over the 32 year period of $4.6 trillion. That's a lot of tanks, soldiers, defense systems, etc. That's a big step towards continuing military supremacy.
Of course, continued trade with China would dampen the military threat even more: rarely do countries choose to make war with their best customers. A global economy based on trade and commerce encourages peace and prosperity, disincentivizing war. Those who would advocate isolating the American economy from the rest of the world in the name of security would actually be promoting a less secure America instead. Those who advocate a greater intrusion of government in the marketplace to "protect" American businesses would be promoting a less prosperous America instead.
Let's let facts prevail over emotion in the debate over trade and commerce. "Fair trade" is when consenting parties engage in a peaceable, voluntary exchange absent from fraud or coercion. Government should be protecting individuals against that fraud or coercion, and does so best by reducing its interference in the marketplace.
As always, right on the money
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