Wednesday, May 24, 2000

Peter Foster
National Post

Today's vote by the U.S. Congress about granting China "permanent normal trade relations" ostensibly turns on the issue of human rights. Opponents of the deal point out that China is an ugly regime whose rights performance has not improved as trade has increased in recent years. The deal's backers declare that, in the long run, trade and the economic development it promotes have always led to more open and democratic political systems.

Many of those who oppose the deal -- especially the union movement -- are in fact primarily concerned about losing jobs to a low-wage competitor. Equally hypocritical, however, are many of the deal's corporate supporters, for whom the trade-leads-to-democracy argument is merely rationalization.

One of the reasons the U.S. business community is overwhelmingly supporting congressional ratification is that it is afraid of losing out to foreign competitors, including Canada. But whatever the real motives of supporters and opponents, should the relationship between trade and human rights be at the centre of the debate? Should governments punish private companies doing business with regimes they don't like? Should they meddle in "ethical" issues other than those that involve national security?

Human rights concerns were much less of an issue when Canada negotiated a similar deal with China last November (China has negotiated bilateral deals with virtually all WTO members ahead of its own hoped-for membership). However, Pierre Pettigrew, the International Trade Minister, was eager to divert criticism about human rights. "Trade does lead to development," he said. "Development does lead to better human rights. This is the conviction we have."

However, Mr. Pettigrew's Chinese counterpart, Shi Guangsheng, declared, somewhat running ahead of himself: "This is the World Trade Organization. This is a trade agreement. A trade agreement. Therefore, it will not have anything to do with human rights."

This dismissive reply is to be expected, but despite the long-term historical accuracy of Mr. Pettigrew's statement, trade and investment don't always lead to development and better human rights. Just look at Cuba: Canada has been more or less proudly trading with that island prison since the 1959 revolution, but where are the economic development and human rights advances (unless, of course, you regard rudimentary health care and educational indoctrination as worth sacrificing freedom for)?

There are no necessary flow-through benefits to people under repressive regimes when privately owned Western companies deal with dictatorships. Indeed, the danger is -- as in Cuba -- that trade and investment in areas closely supervised by the dictatorship merely provide the funds to bolster the regime's internal repressions and external aggressions without "infecting" its people with democratic values.

Further into the overgrown field of Ottawa's political hypocrisy, Foreign Affairs Minister Lloyd Axworthy, according to a report in the Post last week, is seeking additional powers to ensure that Canadian companies behave "responsibly" abroad. Apparently Mr. Axworthy has in mind Ottawa's lack of ability to punish Calgary-based Talisman for its investments in Sudan. But what the Sudanese government might do with oil revenue surely pales beside what China might do with the proceeds of freer trade. Where does trade with China fit in with Mr. Axworthy's idea of responsibility? Can we expect him to put pressure on Power Corp.?

One source of some surprise in the proposed U.S.-China deal is how much China appears to be "giving up" in terms of both tariff and non-tariff barriers. Is the Chinese government one of the few in the world history to have absorbed the lesson of Ricardian trade economics: that the unilateral reduction of trade barriers is not a "concession," and that its greatest beneficiaries are the people of the country lowering the barriers? Or do they have something else in mind?

Given that China's leadership recently suggested that Communist party "cells" should be a key human resource requirement of all companies operating in China, one has to wonder if economic efficiency and individual welfare are its prime objectives. Nevertheless, the Chinese approach is economically bang on. Moreover, given the absence of charismatic Communist leadership, the country's huge size and diversity, and the fact that many of the people have seen the fruits of private enterprise, trade is indeed likely to be far more deadly to this regime -- and thus more beneficial to the people -- than it has been so far in Cuba.

The alleged longer-term human rights benefits of freer trade have still to be viewed in the context of those presently languishing in Chinese jails for dissent, although their lot is unlikely to be improved by refusing Beijing trade rights. The one major non-trade concession that China will get if Congress approves normal trade relations is that U.S.-China trade will no longer be subject to annual political review in Washington. This may relieve short-term political embarrassment, but in the longer term, and in China's circumstances, trade is likely to be much more of a force for reform than lectures from Western politicians.