Trade and Freedom in China: A Reality Check

Human Rights Violations Cannot Be Dismissed on Any Grounds

China’s authoritarian government regularly and systematically ignores universally recognized rights. It is beyond dispute that the Communist Party detains individuals for expressing political opinions and for practicing religious beliefs that are viewed to be subversive to the control of the central authorities.

Apologists for Beijing often try to raise an argument based on moral relativism or a suggestion that China’s underdeveloped economy is a mitigating factor. However, violations of human rights cannot be dismissed on grounds of cultural differences or of stages of economic development.

Ironically, it can be argued that overseas Chinese are responsible for the limited outcry over Beijing’s abuses. Although ethnic Chinese around the world exhibit pride in their heritage, they avoid critical assessments of what that culture has brought the country of their origin. It would appear that individuals of Chinese descent are less moved by persecution of their ethnic brethren than were African Americans who led the anti-apartheid movement.

Instead, there are assertions that the best way to improve human rights in China is through trade and investment. Multinational corporations are portrayed as an important engine of change that will generate a “multiplier” effect to improve the lot of Chinese citizens. It is partially true that foreign trade and investment in China can contribute to prosperity for some people in a few parts of China. However, the impact of external economic influences cannot raise the standard of living of most Chinese in an extensive or substantial manner.

On the one hand, economists offer little evidence to identify or quantify multipliers of any sort that generate an appreciable impact. Even if multipliers have worked elsewhere, it is far-fetched to expect them to operate in China’s economy. First, there are large disparities of income between urban and rural areas due to uneven economic development. Second, these gaps can be expected to widen until China develops the physical infrastructure needed for a unified, national economy. As it is, the poor communication or transportation networks do not provide adequate links between the commercial centers of the hinterland.

On the other hand, after 20 years of economic reform and hundreds of billions of dollars in foreign investment, foreign-invested enterprises employ less than 1 percent of the Chinese labor force. Given the slowdown in foreign direct investment into China, this proportion is unlikely to rise significantly.

Encouraging Democracy?

The belief that trade will democratize China has been supported by political theorists ranging from Aristotle to Seymour Martin Lipset, who argued that democracy is more sustainable only after a country reaches a threshold level of economic development. There is some evidence to support the belief. Taiwan’s presidential election might be treated as a case where economic development encouraged democratization.

However, the object is not merely about the right to vote, itself a necessary and sufficient condition for a regime to call itself a democracy. Rich Singapore considers itself a democracy despite its petty repressions and government-orchestrated attacks on political opposition figures. Many other developed Asian economies have political systems that are paragons of “illiberal” democracy and lack the trappings of a civil society.

There is little evidence that prosperity provides the impetus for the formation of civil institutions. A mature civil society will have mechanisms for contract negotiation, the non-arbitrary application of the rule of law to protect individual rights and private property, a commitment to open and competitive economies as well as accountable and transparent political governance. Most Asian countries score low on this list.

The middle class may indeed be a necessary element of the formation of civil society that serves as a counterbalance to government abuse. However, an emerging, prosperous bourgeoisie is not sufficient to moderate authoritarian rule. Co-optation of the middle class and the implementation of government-sponsored organizations can supplant or forestall voluntary and spontaneous arrangements.

Encouraging Meritocracy?

There are also claims that international companies will inspire the cadres to operate as if they were in a meritocratic setting. Most multinational corporations face the hindrance of having a local joint partner, most of whom have acquired their wealth and power through connections to the Party. With so few opportunities for individuals to work in private-sector firms, there are still strong incentives for many others to seek their fortune by joining the Communist Party or working for a state-owned enterprise.

Because of the severe restrictions on the development of private-sector initiatives by both domestic and foreign interests, few state-owned enterprises are forced to face open competition. So there is little pressure on them to introduce better employment practices to increase productivity and improve product quality. It will be a long time before there are enough self-made entrepreneurs to join with employees in foreign-based corporations to be an effective force to influence political outcomes. Therefore, it is a stretch to believe that foreign influences can accelerate and expand the middle class and contribute to China’s democratization.

Proponents of China’s entry into the World Trade Organization or of permanent normal trade relations rely on similar exaggerations. The pressure on social change is likely to be so slight and take so long that these initiatives will have little influence over China’s authoritarian government.

In light of the small impact that can be expected, it seems that it is time for a reality check on what changes can be expected in China. In the end, the issue is not whether free trade is a good thing—it is. It’s whether trading with China will civilize the communists (it may) and how long it might take for the benefits to take hold there. It’s likely to be a very long time, especially if the communists remain in power.