by Robert C. Sage

Created on: August 05, 2007

The real question here is should the US decide trade policy based on politics or on economics? It is not merely a question of China, but also Cuba, Vietnam, Iran, Venezuela, North Korea, Burma, Libya, Sudan and all of the countries whose politics are different from those of the US and our friends. Fundamentally, does America want its economic power to be a positive force for international understanding, peace, prosperity and the opening of repressive regimes or do we actually believe the right to trade fairly with us should be given only to our friends?

Why should we try to penalize the people of any country based on the political stance of a government that they may or may not support? Private citizens have every right to make personal decisions based on politics, if they so desire, but nation states should act in the interests of all citizens. America, as the world's most powerful nation has a responsibility to be a good role model and not encumber its businesses with political burdens that disadvantage them versus the French, British, German or Japanese, etc. The practice of trade policy discrimination based on politics is akin to discriminating based on religion or other irrelevant factors.

If this were purely a question of trade policy amongst American states, I believe imposing higher tariffs and duties due to political differences would be outlawed. Imagine the uproar if a red state refused to allow the goods from a blue state to cross its borders, solely based on politics! Clearly, the use of trade policy as a form of attempted coercion to force others to agree with our political policies is misguided, inappropriate and often counterproductive.

Allowing politics to rule trade policy results in the inane Machiavellian situations like the Iran Contra debacle, wherein the US government violates its own politically based policies in order to further others. Why should VP Cheney have to play intellectual gymnastics in order to justify his controversial and secret decisions to grow business relations with Iran while CEO of Halliburton and now be attempting to marginalize bilateral economic relations? Clearly, American business should be encouraged to trade everywhere as much as possible, based on economic factors for the benefit of all concerned.

Removal of China from "most favored nation status" which is a misnomer for ordinary trade relations could have profound impacts on American economic health. What if China simply dumped even half of the US dollars from its foreign currency reserves and stopped buying our bonds? The federal reserve would likely have to reduce our own foreign reserves and plead with allies to pick up the slack in order to minimize the increase in interest paid on our federal debt.

Of course, China could chose to respond in any number of ways, including instructing state-affiliated business to avoid buying American goods. In terms of American economic health, returning to the cold war with China would be most shortsighted. It is long overdue for America to stop playing politics with US trade policy.

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