Reprinted by permission of The New Republic, April 7, 1997

The Coming Conflict with China
by Richard Bernstein and Ross H. Munro
(Knopf, 245 pp., $23)

In 1821, when American merchants hungry for the China trade were willingly submitting to the Qing dynasty's exacting and sometimes humiliating tribute system, a small incident revealed the China market's fatal attraction. A sailor onboard the American merchant ship Emily dropped a pot over the side. The pot landed on the head of a Chinese woman, who fell into the water and drowned. Chinese authorities seized a seaman named Terranova and sentenced him to death. Well, maybe "seized" is not the right word. Terranova was safely in the hands of his comrades who at first refused to turn him over, insisting that he be tried onboard the Emily. According to more than one historian, it was not even clear that Terranova was responsible for the woman's death. But, when the Chinese authorities threatened to suspend all American trading privileges in Canton, the American merchant community panicked. After lodging a formal protest, they handed the unfortunate Terranova over to the Chinese authorities. He was tried without any Americans present, found guilty and executed the next day by strangulation. The American trade in Canton continued.

For two centuries, the lure of the China market has had this kind of morally disorienting effect on American businessmen. In the latter half of the nineteenth century, the possibility of selling 100 million pairs of underwear stirred the owners of textile mills in New York, New England and in the struggling postbellum South into a frenzy for access to the Chinese trade. The Western Union Company mesmerized potential investors with a scheme to link up China's "great commercial cities" and their "over four hundred and twenty millions" of customers. Producers of cotton, steel, iron, kerosene and flour saw boundless riches lying before them in the world's most populous country. The realization of such riches, of course, proved always beyond their reach. Even at the height of America's quest for the "open door" a century ago, China absorbed less than 2 percent of American exports. But what historians now call the "myth of the China market" was never built upon immediate profits, which were always negligible. The myth was built upon the glittering possibility of future reward. And it was in pursuit of that distant prize that sacrifices had to be made in the short run by investors, and occasionally by unfortunate individuals such as Terranova, and, when necessary, by the nation.

In their effort to enlist the government's support for their dreams, businessmen and their political supporters liked to argue that their interests and the nation's were identical. Upon their success in China, the businessmen claimed, rested America's future as a great nation in its competition with the world's other great nations. "All Europe is seizing on China," cried Massachusetts Senator Henry Cabot Lodge at the turn of the century, "and if we do not establish ourselves in the East that vast trade, from which we must draw our future prosperity ... will be practically closed to us forever." Business interests even discovered ideological and geostrategic arguments to bolster their case. They argued that the open door in China had to be preserved so that Americans might reform and modernize that great country, so that a reformed China, in turn, could resist being swallowed by its giant Russian neighbor.

Still, American businessmen usually had little success in shaping American foreign policy around their special needs. Although an entire school of revisionist historians arose in the 1950s and '60s to explain that the diplomacy of the United States had been dominated by the search for export markets for American businesses, it is surprising how little this was true, either at the turn of the century or later. In the nineteenth century, American merchants found little backing from Washington when they ran into trouble in far-off places such as China. Even under the muscular presidencies of McKinley and Roosevelt, the American government's effort to pry open the door to the China trade was halfhearted and ultimately inconsequential, a victim of both popular and presidential apathy. "Public opinion is dull on the question of China," Theodore Roosevelt declared laconically when the Open Door looked to be shutting in the American businessman's face. Roosevelt didn't much trust American businessmen, in any case, recalling their almost uniform opposition to the war against Spain in 1898. And he was generally unimpressed with claims about the great riches to be had in China. His fellow expansionist Alfred Thayer Mahan predicted that profits in China would likely "fall very short of the rosy hopes of trade suggested by the mere words four hundred millions of people.'"

Then, and for most of the rest of the century, American foreign policy balanced business interests against strategic and ideological interests. And notwithstanding the contrary claims of neo-Marxist and "corporatist" theories of American foreign policy, those were not usually considered to be all one and the same thing. Presidents liked to help American business abroad if they could, but they generally recognized that a businessman's interest was not identical to the national interest. Even pro-business conservatives knew that businessmen were not entirely trustworthy in matters of foreign policy, that (as George Will nicely observed about a similar problem in the Reagan administration's attitude toward the Soviet Union), they loved capitalism more than they loathed communism.

During the cold war everyone remembered Lenin's prediction that the capitalists would sell the rope by which they would be hanged. When Occidental Petroleum's Armand Hammer and Pepsico's Donald Kendall insisted that their business interests in the Soviet Union coincided with the nation's interest in detente, they were regarded as disingenuous. Not many believed that selling Pepsi in the Soviet Union would hasten the fall of communism. It was not that businessmen were bad; their legitimate goal of maximizing profits merely conflicted sometimes with the nation's moral, strategic and even economic aspirations. The problem was that businessmen sometimes threw their Terranovas overboard if that was the price of doing business.

The alarming degree to which American leaders and strategists have recently forgotten this basic truth is one of the themes of Richard Bernstein's and Ross H. Munro's important and challenging new book, The Coming Conflict with China. After laying out their well-documented case that the current generation of Chinese leaders means to challenge the United States for predominance in East Asia, they make clear that America's Achilles' heel in this coming struggle is likely to be the powerful lure of the China market on some of America's biggest and most influential corporations. Although China is "an adversary, a dictatorship, an emerging superpower whose interests are at odds with those of the United States," Bernstein and Munro write, the Chinese leadership has nevertheless been able to "enlist behind it one of the broadest business efforts to influence national policy in all of American history." If the United States and China do come to blows in the next decade or two, and the American people find their government unprepared, some future Joseph McCarthy is going to have a field day.

China's success in shaping American foreign policy through the American business community has been extraordinary. Until recently, moreover, it has been well shielded from public scrutiny, not by any campaign of secrecy but by a powerful consensus of the foreign policy establishment on what the proper policy toward China ought to be. Thus journalists and experts and commentators have consistently described the Clinton administration's famous reversal of its policy toward China in 1994 as an intellectual maturation, a journey from woolly Wilsonian idealism to hard-headed Kissingerian realism. In the common telling of the story, President Clinton finally came to comprehend the childishness of using the threat of economic sanctions to modify Chinese behavior, and to realize that trading with China would actually hasten the already well-advanced transition to democracy there. The callow campaigner of 1992 discovered in 1994 that the world was more complicated than he thought.

This foreign policy bildungsroman is attractive to many people because it involves deep theory and grand strategy. But it is a lot of nonsense. Bernstein and Munro show exactly how President Clinton had things explained to him in the first months of 1994. Early in 1994, when the Clinton administration, led by Secretary of State Warren Christopher and Assistant Secretary of State for East Asia Winston Lord, was girding itself for a confrontation with the Chinese over their domestic repression and their international miscreance, American businesses suddenly found themselves "inking agreements with China at a faster pace than had been seen before, or has been seen since." In January, China floated $1 billion in bonds in American financial markets using Merrill Lynch as its lead underwriter. In February, Ford Motor Company was deep in negotiations for a joint venture with China to manufacture auto parts. In March, the chairman of IBM was in China concluding joint venture agreements. In April, Chinese officials in Shanghai invited Time Warner executives to discuss opening an amusement park; Vice Premier Zou Jiahua traveled to AT&T's New Jersey offices to sign $500 million worth of contracts; and Bill Gates met with Jiang Zemin and boasted of Microsoft's plan to increase sales in China by 50 percent a year. In May, Boeing officials revealed that they were close to completing a mammoth $5 billion sale of commercial jetliners to China.

This explosion of economic activity reverberated through the political world. China has been open to Western trade and investment for more than a decade, but any businessman trying to get into the Chinese market knows how long, frustrating and often futile the process usually is. With billions of dollars on the line, corporations lobbied hard against the Clinton administration's plan to use Most Favored Nation status as a lever to force an easing of Chinese repression. In early May 1994, Tom Foley, then Speaker of the House, who represented the district where Boeing is headquartered and who was in a tight race for re-election, publicly broke with the administration on China policy. Linking trade with human rights, he complained, was "very public and challenging and confrontational." In April of that same year, Mario Cuomo, then governor of New York, also in a struggle for his political life, signed an agreement with a Chinese trade delegation to facilitate exports from New York's high-technology firms. In announcing the deal, this Democrat who prides himself on his moral exquisiteness made clear his opposition to the administration's policy.

These were just the more prominent instances of a pervasive campaign by American corporations to remind elected leaders that jobs and profits were at stake in the U.S.-China relationship. As Bernstein and Munro recount, the Chinese government also worked to divide the Clinton administration itself "after accurately discerning a split ... between the human rights promoters at the State Department and the business-first elements elsewhere in the government." In mid-April, Chinese Foreign Trade Minister Wu Yi signed an agreement with Commerce Secretary Ron Brown to establish permanent working groups on trade and investment. Meanwhile, Wu's host and promoter "in all but name" was the U.S.-China Business Council, whose members were simultaneously feting Wu and lobbying Washington to protect China's MFN status. The quadrangular relationship between the Chinese government, American businesses, the Commerce Department and Democratic Party fund-raising -- all of which eventually came together in the person of John Huang -- was an unsurprising next step in the entrenchment of Beijing's influence over American policy-making.

The State Department was no match for this combined economic and political onslaught. When Secretary Christopher traveled to China in March 1994, he had little idea that the tough policy he was bringing to Beijing had crumbled behind him in Washington. He was in for a world-class humiliation. Playing right into the hands of the Chinese leadership, Christopher took an unusually stern tone in demanding that they improve their behavior or face trade sanctions. The Chinese, in turn, read Christopher the riot act, rejecting him to such a degree that he never again returned to China. After Christopher's angry departure, the Chinese completed their rout of the Clinton administration's policy. They re-arrested Wei Jingsheng, a leading dissident who had had the audacity to meet with an American human rights official before Christopher's trip. Weeks later, they amended China's public order law to expand police powers to detain and restrict democratic and labor union activists. Nor was the Chinese response limited to the area of human rights. As Bernstein and Munro point out, the Beijing government also flouted the Clinton administration's warnings about arms proliferation by shipping chemical weapons to Iran and missile parts to Pakistan.

The Chinese government had decisively established that human rights were not a fit subject for bilateral discussion. But that was not all that it established. Beijing's strategy aimed not only at delinking trade and human rights in American policy but, far more ambitiously, at demonstrating that American pressure could not possibly succeed in curbing Chinese behavior on any issue.

Bernstein and Munro convincingly demonstrate that the Chinese government had by 1993 adopted a far more aggressive foreign and defense policy aimed specifically at what senior military leaders for the first time officially designated as China's main enemy: the United States. The collapse of China's most dangerous adversary, the Soviet Union, and the amazing performance of the U.S. military in the Gulf war combined with Chinese leaders' fears about internal instability after the Tiananmen Square demonstrations and massacre to stir up a new belligerence in powerful circles. In April 1993, Bernstein and Munro report, 116 high-ranking officers of the People's Liberation Army wrote Deng and Jiang Zemin demanding an end to Deng's policy of "tolerance, forbearance, and compromise toward the United States." And, in November, a meeting of top foreign and military specialists produced a report describing the United States as China's "international archenemy."

The report's analysis of American policy was striking for its mixture of perceptiveness and paranoia. "From the present stage to the beginning of the next century," the specialists declared, "the major target of American hegemonism and power politics is China.... Its strategy toward China is, through economic activities and trade, to control and sanction China and force China to change the course of its ideology and make it incline toward the West." Wilhelmine Germany developed a similarly "rational paranoia" about Great Britain in the years leading up to World War I -- a paranoia of the "if you knew what we were planning to do, you'd be trying to stop us" variety.

By the end of 1993, Bernstein and Munro argue, the more virulent anti-American forces in the Chinese government had succeeded in overturning Deng's more moderate approach. The new, tougher line was not only a response to American actions. It was also, and perhaps primarily, an effort to deal with the domestic crisis caused by Deng's economic reforms. A Communist Party leadership that could no longer command the ideological allegiance of its followers instead fanned nationalist passions as a means of bolstering its legitimacy. The weaker post-Deng dictatorship needed a foreign devil more than Deng or Mao ever did, and the hegemonic Americans were perfect for the part.

The new Chinese strategy came together in those confrontational first six months of 1994. As Bernstein and Munro write, "The hard-line nationalists, ignoring Deng Xiaoping's advice, believed that China could have it two ways -- both preparing to confront the United States militarily and politically and at the same time benefiting from trade and investment ties with the Americans." Remarkably, the new strategy worked. Clinton announced in May 1994 that he was de-linking trade and human rights, thus marking, as Bernstein and Munro note, "one of the most complete turnabouts in recent American diplomatic history." And the administration thereupon embarked on the very opposite course, embracing a policy of "engagement" (sometimes called "commercial engagement," sometimes called "constructive engagement") whose central premise is that the best way to shape Chinese behavior is through cooperation, not confrontation.

History will record that, in the increasingly difficult relationship between the reigning superpower and its rising competitor, this was a strategic shift of enormous significance. The business leaders who helped engineer the shift did not claim any larger motives beyond increasing the long-term profitability of their companies. In April 1994, Gates did not argue that allowing Microsoft to sell its wares in China would bring democracy to the Chinese people through the Internet or restrain China's regional and global ambitions. Quite the contrary. Standing shoulder to shoulder with Jiang Zemin, Gates publicly criticized any American " interference in China's internal affairs." The day after Clinton announced his new policy, the president of Kentucky Fried Chicken, John Cranor, announced a new plan to invest $200 million in China; but Cranor, like Gates, made no broad pronouncements about the benefits to either the Chinese people or to American security of selling fried chicken. "By permanently delinking human rights and economic investment," Cranor simply stated, "President Clinton has removed uncertainty from our China business."

It has been left to others to explain to the American people why selling chicken in Shanghai is good for America. In the age of "geoeconomics," as Martin Walker has observed, "the new virility symbols are exports and productivity and growth rates, and the great international encounters are the trade pacts of the economic superpowers." So it follows, just as Henry Cabot Lodge and Brooks Adams insisted a century ago, that the development of export markets abroad must be a primary goal of American foreign policy. Yet the arguments for making American foreign policy serve the interests of American business don't stop there. Trade with China, we are told, will also reduce the possibilities of conflict between the two nations, and it will gradually undermine the Chinese dictatorship as well.

Officials of the Clinton administration, especially those with international economic portfolios rather than international strategic ones, have been trumpeting this wonderful news for the past three years. In a recent article in The New York Times, for example, Laura D'Andrea Tyson, the former chairperson of the Council of Economic Advisers, insisted that "the best way to encourage reform and democratization is to strengthen China's trade and investment with the rest of the world." The bulk of American imports from China comes from the "private or quasi-private sectors," she argued. And it is upon the success of these sectors that "a developing Chinese middle class and China's continued evolution toward a more democratic system depends." The questions of politics have economic answers.

We are all economic determinists now, it seems. "How, then, does one promote freedom and democracy in China?" asks William H. Overholt, a political risk analyst for Bankers Trust in Hong Kong and one of the most effective spokesmen for commercial engagement with China. The answer, happily, is more American trade and American investment. "Spur economic development," Overholt advises. "Educated people will demand more freedom than uneducated people.... People in a complex, highly differentiated modern economy will have more freedom than in a peasant economy because the government will have more difficulty controlling them." To translate this very popular argument back into the original Marx, the political superstructure of dictatorship in China will change when the economic base changes. If you want to create a democracy, all you have to do is build a bourgeoisie. Entrepreneurs of China, unite!

Such claims for the magical powers of American business abroad are so extravagant that they would have made Calvin Coolidge blush. Even in the nineteenth century, the spiritual enlightenment of the heathen Chinese was supposed to come from the Christian missionaries, not from the exporters of cotton goods. Now we can be grateful to learn that American business abroad enriches and reforms. Why are these arguments so persuasive to so many? In part, it is because the vast majority of educated Americans are persuaded that history, for all intents and purposes, really has ended. They can no longer imagine war between great powers or the possibility of a successful tyranny. (On March 7, the president himself, in a gaffe of Gerald Ford-like proportions, spoke about "Russia and China, the two great former Communist powers.") This, in turn, has transformed their view of the way the world works and the way history unfolds. The constant anxiety of the cold war, when the individual decisions of individual presidents and secretaries-general were always thought to be freighted with the risk of instant global catastrophe, when, in other words, the "contingency of history" loomed large, has given way to a dreamy sense of the sheer inevitability of it all. Large and impersonal social forces, transnational flows of money and ideas, computers and satellites, are what make the world go round, not political leaders and generals and the orders that they give.

The recent past has been reinterpreted to fit this pervasive sense of historical inevitability. The many complex and unpredictable factors that came together to produce the collapse of the Soviet Union -- the assassination of a Soviet puppet ruler in Afghanistan; the pressure of the Reagan arms buildup; the sudden death of Yuri Andropov; the unpredictable errors of Mikhail Gorbachev -- have all melted into one long causal chain of economic determinism. The common account of the Soviet Union's demise is now pleasingly simple: it was the beauty of capitalism that killed the beast. Politics was only an expression of economics.

As with the recent past, so with the near future. China will be a democracy by 2015, writes Henry Rowen, usually an astute and hardheaded analyst, and in the present mood this prediction becomes for serious people a guide to their thinking about what to do about China. Thoughtful pundits even repeat the specified date, 2015, as if it had real meaning. It certainly has obvious implications for American foreign policy. For, if China will be a democracy by 2015, then the best thing for Americans to do is sit back and enjoy the show. And by all means make as much money as possible in the meantime, especially since making some Americans rich is part of the chain reaction that will make many millions of Chinese free.

Not since the nineteenth century has international trade been so exalted as the single cure for all of humanity's most persistent maladies, from tyranny and oppression to international disputes and war. We forget, because the theory was so discredited by the two world wars of the twentieth century, that the free-trade doctrine of the nineteenth century was for most of its adherents not about making money, but about achieving world peace. Nations that traded with each other would settle their disputes by arbitration not war, the theory ran, because war was bad for business. Trade brought people of different nations together, and more contact among peoples inevitably meant less friction between nations. For the disciples of so-called Manchester liberalism, "paradise was an international bazaar," as the historian Geoffrey Blainey has put it. "The fortresses of peace were those institutions and inventions which promoted the exchange of ideas and commodities: parliaments, international conferences, the popular press ... the penny postage stamp, railways, submarine telegraphs, three-funneled ocean liners, and the Manchester cotton exchange."

It was a harsh lesson for economic liberals when it turned out that the same wealth that the industrial revolution and freer international trade created, the same inventions that brought nations into closer communication, also made possible a more brutal, more destructive, and more total form of war. The adherents of Manchester liberalism had made a striking misjudgment about the changing nature of their world. As Blainey has explained, "most of the changes which were hailed as causes of peace in the nineteenth century were probably more the effects of peace." The ease with which ideas, people and commodities crossed borders, the perception that economics mattered more than geopolitics, that traders were more important than warriors: these were all by-products of a stable international security order which the Manchester liberals took for granted, but which was already coming apart. As World War I showed, the allegedly unbreakable bonds of economic interest snapped in an instant when the armies of powerful nations moved.

The credence given to claims about the transformative power of economics today derives from a similar misjudgment about what undergirds the present international order. The greatest power on earth, in international and domestic affairs, remains the power of naked force and, when that force is unleashed, by tyrants against their people or by one nation against another, the web of economics is an ineffectual restraint. We must be careful not to confuse cause and effect again. The peace and the stability created and protected by American power over the past five decades have made possible the present explosion of international commerce and communication, not vice versa. The technological innovations of recent years are no more a guarantor of peace than the telegraph cable or the steamship were a century ago. And the communications revolution is still more the product than the producer of democracy.

Now, as ever, the wealth and the power produced by trade and economic development can be used for bad ends as well as for good. China provides the perfect example of this. Given the clear ambitions of the current generation of leaders, today's economic boom can be expected to fuel tomorrow's military buildup. The technology of civilian airplane manufacture, eagerly provided by McDonnell Douglas, can be used to build military aircraft, too. The technology of satellite communication, eagerly provided by Motorola and other American firms, can be used for government surveillance.

And if the wealth created in the Chinese economic miracle sows seeds of future political pressures from a new entrepreneurial class, that same wealth also provides the Beijing government and its army with the muscle to rebuff internal and external pressures for political reform. As Bernstein and Munro astutely argue, "trade with the West, including with Microsoft Corporation, has a double edge. It brings in practices and ideas that ought to lead to political reform. But it also enhances the power of the regime to resist and suppress political reform and to force other countries to drop their demands for it."

In 1996, China managed to block any consideration of its human rights practices by the United Nations Commission on Human Rights in Geneva. The American corporate community played an important part in that international campaign. As Bernstein and Munro bluntly point out, "a figure like Gates, standing side by side with China's president and the head of the Communist Party so that the two of them together can accuse the West of interfering in China's internal affairs, reflects, not an inclination toward long-term change in China, but a power to resist that change."

For all the talk of the inevitability of China's democratic transformation, and thus the inevitable convergence of American and Chinese interests, even a cursory survey of Sinologists reveals that little consensus exists, and what does exist does not support this rosy prediction. The most common prediction for China's future is not, to put it mildly, Jeffersonian. China is headed, rather, toward a kind of bureaucratic authoritarian capitalism, a mostly arbitrary rule by "princelings" or "cadre capitalists." Some scholars expect the current trend toward the decentralization of power to continue, though without bringing anything like political pluralism. Others expect a "neo- conservative" attempt to bring power back to the center. And there are optimists, too: Kenneth Lieberthal has imagined a more open, more decentralized, but yet more militarily powerful China.

As Arthur Waldron has pointed out, however, all these prognostications are little more than variations of straight-line projections from the present to the future. Waldron reminds us of Sovietologist Jerry Hough's "eminently reasonable" and in retrospect embarrassingly inane prognosis for the Soviet Union, made in 1979: "Any future evolution is highly likely to retain the framework of the present system in one sense or another." The t