From: AdmrlLocke@aol.com Sent: Tuesday, August 04, 1998 5:09 PM Subject: GrammNet: My Trade Column GrammNet Issue 8/4/98 Dear Friend of Liberty, Following is my column on trade, and particular on trade with China, from the Sunday, July 26th issue of The Quad-City Times. Sincerely, David B. Levenstam, CPA, MT, MA To subscribe to GrammNet, email me at AdmrlLocke@aol.com, with a message to the effect that you'd like to subscribe. ---------------------------------- China and Trade By David B. Levenstam, CPA, MT, MA Lately there seems to be nothing so misunderstood by politicians and political activists as is trade. Yet there's almost nothing so important in our lives. Trade, as the word denotes, is simply a voluntary exchange between two parties made for the benefit of each. Most of us trade our labor for compensation in money and other benefits. In turn, we trade our money to the supermarket--with which most of us run a perpetual trade deficit--for food. If not for trade, poor souls like me would walk around barefoot and starving, since we know neither how to make shoes nor grow food. We literally survive on trade. Trade takes place between individuals and firms, not between countries. That's why a major export from firms in America to individuals and firms in Japan is computer chips, while a major export from Japanese firms to individuals and firms in America is also computer chips. Likewise automobiles. If trade took place between countries, it would make little sense for "America" and "Japan" to trade items like computer chips back and forth. But firms and individuals in each country trade with each other when they can get what they want from someone overseas better than from someone closer to home. In other words, individuals and firms trade across national boundaries because it benefits both sides of each trade. In the case of China, it means that Chinese individuals buy food and agricultural equipment, for instance, from American farmers and manufacturing firms. It benefits Chinese individuals by preventing them from starving, and benefits American farmers, investors, and employees by allowing us to buy items like shoes, cars, and college educations. In turn, Chinese individuals earn salaries by working to make products, some of which individuals and firms in America buy in order to get a better price than we could elsewhere. Paying lower prices for those goods allows us to spend more on things like health care and computers. So if the U.S. government erects trade barriers--for instance, by imposing taxes on Americans who buy from Chinese individuals--it hurts not only Chinese individuals, but also Americans. Federal imposition of taxes on your purchases in turn invites the Chinese government to retaliate by imposing taxes on purchases by Chinese individuals of food and goods made by American individuals and firms. In short, trade sanctions hurt American individuals and firms as well as Chinese individuals. What's not so clear is whether trade sanctions hurt the Chinese government. The U.S. government has imposed a total economic embargo on Cuba over my entire life, helping Castro impoverish Cuban individuals, but in no way preventing him from imposing an absolute tyranny on them for four decades. In South Africa, by contrast, where Western trade sanctions came little and late, Western firms helped transform South African blacks into an affluent and well- educated middle-class which, as in the West, demanded and eventually received representation. In China today, a middle-class generated in part by trade with American firms and individuals is the most powerful force not only for economic reform, but for political reform as well. "Most-Favored Nation" status isn't an evaluation of the government of a nation. It's simply normal trade status, with as little U.S. government infringement of our liberty as it ever allows us. Renewing MFN status for China simply means that American individuals and firms will be able to trade with Chinese individuals subject to the minimum interference currently allowed by each government. Renewing MFN means that both American and Chinese individuals will have the greatest opportunity to feed, clothe and educate themselves and their children. The question isn't whether the Chinese government is bad or not. It is. The question is whether hurting American farmers, businesses and their employees is an effective--or moral--way of punishing the Chinese government. It isn't. Denying MFN status to China will simply impoverish Chinese individuals, hurt American farmers, firms and their employees, and strengthen the tyrannical power of the Chinese Communist government.