August 09, 2005

Rule of Ambiguous Socialism in Congress

Political sword-brandishers have blocked the attempt by a Chinese entity to legally purchase Unocal, an oil company based in the US, when a false controversy caused CNOOC to drop its bid. The clearest losers are the shareholders of Unocal, who in aggregate lost a billion dollars (Unocal is going to Chevron for $17.6 billion now). But the victims of the process are the free market and the ethical consistency of the United States government.

The free market operates under the assumption that individual property owners will do as they wish with their own assets and that in the end more efficient and prosperous outcomes will result than if a small number of central authorities made the decisions. A number of factors aid the free market. The biggest is that a person with interest in an endeavor will seek to maximize the benefits to himself. Less acknowledged but also quite important is the diffusion of authority from a small grouping like a parliament or a price control board to all the individual actors in an economy; if some of the actors make mistakes, it won't harm the others, but if a central authority makes a bad decision everyone else has to pay for it.

In this case, the excited fears about China - a country with whom we are not at war and engage in theoretically normal trade relations - petitioned the government to intervene in the free market. They wanted to violate the rights of the buyers and sellers for a political reason, even though no crime was even suggested. The free market doesn't always come to the right decisions and it's not guaranteed to even come to the best decision; it is designed to come to the most just solution, wherein the actual agents of a financial transaction are the only ones with say over what is to be sold and for how much.

How can the US argue for free trade when we oppose it in such high-profile circumstances? This seriously damages our credibility and when we go to the table in WTO negotiations or future FTA wranglings we'll be chained to another instance of blocking free trade. It makes it appear as though free trade is an excuse to get US interests into other countries without allowing reciprocal access for foreign businesses - exactly what the anti-globalization far-left already argues (the anti-globalization far-right argues more the opposite, that it lets foreigners have an unfair advantage).

The real tragedy is the idea that somehow blocking CNOOC acquisition of Unocal was a threat to national security. Unocal is largely an Asian operation already, so it made sense that the Chinese would want Unocal to fund their economic expansion. Unocal only accounted for less than one percent of US oil consumption. If the Chinese stopped Americans from buying that relatively tiny amount, how could that really be considered a national security risk?

Better yet, let me ask which is more reasonable: 1) Chinese economic interests, in the middle of a continuing, progressively-larger economic expansion that has enormous demands for basic materials like energy and cement, decided to buy a largely-Asia-based oil producer that's based in the US, or 2) the Chinese government, in a fit of secretive and malignant deception, decides to spend billions of dollars in order to deprive US consumers of less than one percent of their oil consumption, even though the demand would easily be met by other energy companies?

The Chinese government has a criminal past and a shady present, but we ought to be encouraging the growth of an economically vibrant China as a precondition for a strong middle class with democratic aspirations. I think blocking the sale had nothing to do with national security and everything to do with dividing the world almost arbitrarily into enemies and allies. China is not our friend, but that doesn't mean we should see every Chinese act as one of aggression, or that we should try and spite the aspirations of the Chinese people, who are NOT our enemies.

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