September 15, 2000

September 15, 2000 | Commentary on Foreign Aid and Development

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"Anti-globalization" protesters spring up like mushrooms at every gathering of even moderate proportions these days. They kept bored reporters entertained at this summer's stage-managed political conventions. They are watching closely as the Senate debates permanent normal trade relations (PNTR) with China. And with the International Monetary Fund meeting in Prague this October, the toadstools of anti-progress will no doubt flourish once again this fall.

No matter what the event, though, their complaints echo a familiar refrain: Free trade harms poor countries. But the international evidence suggests the opposite. Free trade, a major component of globalization, increases economic opportunities and raises standards of living. It is a central element of any free society.

Countries with the freest economies generally follow a capitalist model of economic development, remaining open to international trade and investment. These countries include the United Kingdom and many of its former colonies, from Hong Kong, Singapore and New Zealand in the East, to the United States, Australia and Canada in the West. Chile, which benefits from a diverse European heritage and from bilateral trade agreements with Mexico and Canada, is one of several South American countries where a capitalist free market is yielding positive results.

A commitment to free trade, though, can transcend a country's form of government. Economic freedom flourishes in countries as diverse as Bahrain (an Arab monarchy), Singapore (an authoritarian city-state), the United States (a constitutional democracy), and Switzerland (a federal system of territories encompassing at least four different cultures).

Societies that promote economic freedom create their own economic dynamism and foster a wellspring of prosperity that benefits every citizen. Consider El Salvador, which saw its economy nearly ruined by the Cold War conflicts of the 1980s. A commitment to free-market policies over the last decade has resulted in low tariffs, low tax rates and strong property rights-and an economy that rivals Canada and Chile in terms of freedom.

As economic growth occurs, poor people benefit just as much as-and in some cases more than-the wealthy, according to World Bank economists David Dollar and Aart Kraay. With a sound infrastructure based on economic freedom, assured property rights, a fair and independent judiciary, the free flow of capital, and a fair system of low taxation, poor countries create an environment friendly to trade and inviting to foreign investors.

It is in this context that the PNTR vote comes into its proper focus. Many who oppose PNTR for China (often the ones who protest globalization in almost any guise) scoff at the idea that engagement and trade will really bring democracy to mainland China or motivate Beijing to improve its human rights record. Some question whether the Chinese can even be democratic, calling to mind similar doubts expressed about the Germans after World War II.

Fortunately, we have a test case to try out the validity of this theory: The Republic of China on Taiwan (ROC). Until 1970, real per capita income in the People's Republic of China largely mirrored that of Taiwan, which had had its own an authoritarian government since fleeing the mainland in 1949.

In the late 1960s, however, the ROC government began implementing reforms. It guaranteed private property and set up a legal system to protect it, reformed the banking and financial sectors, stabilized taxes, gave public lands to private individuals, and allowed the free market to expand. These policies launched Taiwan, one of Asia's famous "tigers," into the industrialized world. The result for Taiwan has been an astounding record of economic growth, with its GDP per capita far outstripping that of the People's Republic of China.

Taiwan's success demonstrates that if China opens its market, economic and political freedom will have a real chance to develop. Such an outcome would be in America's best interest because it would enhance regional stability, increase prosperity for the Chinese people, and open China's immense market to U.S. producers and consumers.

The example set by Taiwan, El Salvador and other nations was not lost on members of the House of Representatives when they voted in May to approve PNTR. Whether their confidence in economic freedom will find reflection in a similar level of support in the Senate remains to be seen, but it's not too soon to ask the anti-globalization crowd what argument they plan to use when faced with a freer, more prosperous China. Empty slogans and giant puppets start to wear thin after a while.

Denise Froning is a former trade policy analyst in the Center for International Trade and Economics at The Heritage Foundation (www.heritage.org).

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Originally published in The Washington Times (09/15/00)