Written by Frank Li
As the trade war between the U.S. and China escalates, there is no better time than now to truly understand the issue of “free trade” from both perspectives: China and the U.S.
In this post, I will focus on China, while my next post will focus on the U.S.
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1. What is “free” trade?
“Free” trade is to trade without coercion. It has nothing to do with tariffs, government subsidies, or currencies, which are all sovereignty issues, unique to each sovereign nation.
People and nations had been trading freely for thousands of years (e.g. via the Silk Road), before the phrase “free trade” was coined.
2. What is “free trade”?
Below is an excerpt from Wikipedia – Free trade.
Free trade is a trade policy that does not restrict imports or exports; it is the idea of the free market as applied to international trade.
Most nations are today members of the World Trade Organization (WTO) multilateral trade agreements. Free trade is additionally exemplified by the European Economic Area and the Mercosur, which have established open markets. However, most governments still impose some protectionist policies that are intended to support local employment, such as applying tariffs to imports or subsidies to exports. Governments may also restrict free trade to limit exports of natural resources. Other barriers that may hinder trade include import quotas, taxes, and non-tariff barriers, such as regulatory legislation.
3. Where did “free trade” come from?
Below is an excerpt from Wikipedia – Free trade – History.
The notion of a free trade system encompassing multiple sovereign states originated in a rudimentary form in 16th century Imperial Spain.[22] American jurist Arthur Nussbaum noted that Spanish theologian Francisco de Vitoria was “the first to set forth the notions (though not the terms) of freedom of commerce and freedom of the seas.”[23] Vitoria made the case under principles of jus gentium.[23] However, it was two early British economists Adam Smith and David Ricardo who later developed the idea of free trade into its modern and recognizable form.
In short, “free trade†appears to be mostly for empires after 1492, when Christopher Columbus discovered the “new†world. For more, read: History 2.0.
4. China and “free trade”
China had the largest economy in the world for most of the first 18 centuries of our 2-millennium-old calendar. Because of that, despite the West’s expansion after 1492, by 1800, China still enjoyed its own prosperity so much that when a British envoy asked the Chinese Emperor to open China’s market to the West for “free trade”, the Emperor famously asked back: “China has everything it needs. Why should we buy anything from you?“
“Opium” was the British answer, and war was the British way to open up China for “free trade”!
5. The Opium Wars
Below is an excerpt from Wikipedia – Opium Wars.
The Opium Wars were two wars in the mid-19th century involving China and the British Empire over the British trade of opium and China’s sovereignty. The clashes included the First Opium War (1839 – 1842) and the Second Opium War (1856 – 1860). The wars and events between them weakened the Qing dynasty and forced China to trade with the other parts of the world.[1][2] The victorious British were successful in inducing an opioid crisis in China, which seriously undermined Chinese society[citation needed].
In 1820, China’s economy was the largest in the world, according to British economist Angus Maddison.[3] Within a decade after the end of the Second Opium War, China’s share of global GDP had fallen by half.[4] In another research paper published by Michael Cemblast of JP Morgan[citation needed] and updated by the World Economic Forum, similar conclusions were reached—i.e. China was the largest economy in the world for many centuries until the Opium Wars.[3] In China, the period between 1839 and 1949 is referred to as the Century of Humiliation.
6. The “century of humiliation”
Below is an excerpt from Wikipedia – Century of humiliation.
The century of humiliation, also known by permutations such as the hundred years of national humiliation, refers to the period of intervention and imperialism by Western powers and Japan in China between 1839 and 1949.[1]
The term arose in 1915, in the atmosphere of rising Chinese nationalism opposing the Twenty-One Demands made by the Japanese government and their acceptance by Yuan Shikai, with the Kuomintang and Chinese Communist Party both subsequently popularizing the characterization.[2]
Bottom line: At the end of World War II in 1945, China was impoverished, totally!
7. China’s comeback
China’s comeback can be simply credited to two remarkable individuals:
- Mao Zedong, who unified China in 1949. It was such a great feat that only a handful of emperors achieved it in China over the past 2,000 years.
- Deng Xiaoping, who peacefully transformed China from communism to state capitalism. Yes, China has lifted more than 600 million people out of abject poverty over the past four decades, in a fashion (e.g. speed and scale) totally unprecedented in human history, for which Deng should be recognized as the greatest peaceful transformational leader in human history!
Today, China is not only the biggest advocate of “free trade” in the world, but also the biggest “free” trader (i.e. trade without coercion) in the world.
For more, read: What is China’s State Capitalism, Anyway?
8. Discussion
Trade and prosperity go hand in hand.
China has a long history of “free” trade with the world, going all the way back to the “Silk Road“.
Unfortunately, China adopted a “closed-door” policy before 1492, when Columbus discovered the “new” world. As a result, the West thrived, while China languished. For more, read: Spanish & British Empires vs. China.
Worse yet for China, it became a total victim of “free trade” throughout the Century of Humiliation!
Fortunately for China, it’s back!
With its comeback, China has not only re-established itself as an economic powerhouse in the world, but also proven to be arguably the greatest country in human history. Two facts:
- China has the longest continuous civilization in human history.
- Throughout human history, great civilizations have come and gone, with one major exception: China – come, almost gone, and come again.
Now, look at the image below.
For those who are still doubtful about China, two basic questions:
- Maybe communism is not that bad, if you keep calling China “a communist country”?
- Maybe China is no longer communist per se?
Two informative readings:
For those westerners who “have seen†it before (e.g. Japan in the 1980s), two informative readings:
In summary, China likes “free†trade (i.e. trade without coercion), but not necessarily “free trade†as defined by the West, which leads to the next huge topic …
9. History 2.0
The western notion of “free trade” must be questioned, together with many other notions, such as “democracy” (History 2.0: Western Liberal Democracy is a Big and Fat Lie!) and “human rights” (Human Rights: Yet Another Big and Fat Western Lie!).
In short, it’s time to re-examine the history, thus History 2.0!
10. Closing
This post is focused on China. Hopefully it has helped you better understand China, especially in terms of “free” trade and “free trade”.
Stay tuned for my next post, which is focused on the U.S.
Now, please sit back and enjoy the video below.
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