Market Liberalism

American Foreign Policy Toward China

Gordon Cheung

• Publisher: Routledge
• Year: 2019
• eBook ISBN: 9781351290265
• Topic: Politics & International Relations
• Subtopic: Conservatism & Liberalism
• Index: Politics & International Relations

This study analyzes the overseas effect of the market force of US foreign policy toward China. Gordon Cheung puts forward the idea of "augmented market liberalism", arguing that the US was instrumental in making China a market economy.

1

Introduction

Americans have associated commerce with open markets, open markets with political freedom, political freedom with democracy, and democracy with peace.¹

—Jeffrey E. Garten

Reinterpretation of Sino-American Relations

This book attempts to reinterpret U.S. foreign policy toward China after World War II by looking at the extemalization of market forces.² Throughout the book, I shall put forward the concept of Augmented Market Liberalism (AML) as a theoretical guide to analyze their relations.

AML is defined as a process of assimilation and transformation of a country generated by the extemalization effects of the market force. In terms of Sino-American relations, the extemalization effects refer to the U.S. construction of a favorable environment to accomplish such change. First, from the foreign policy perspective, the transformation of Japan after 1945 strongly situated the market ingredients and the model of capitalism in the Far East.

The opening up of U.S. domestic markets to Japan and the nurturing of the Japanese market economy gave rise to multiple effects in terms of economic development and marketization toward Asian countries. Second, the success story of the Four Little Dragons further enhanced ideas of using market forces as a linchpin of development. In cold war terminology, these two examples served as the classic cases of the manifestation of containment policy. In the post-cold war era, the denoting effects of U.S. foreign policy are still profound. U.S. interests include: (1) military stability and peace in the Far East; (2) guaranteed economic opportunities in the Far East that cannot be toppled by an abrupt change in the balance—either by the rise of a dominant China or by the internationalization of Japan—of the political environment; and (3) upholding the idea of democracy through economic development in many Asian countries that are adopting a market economy as their development model.

As the major ingredient of U.S. foreign policy toward China, the pattern of market behavior gave rise to opportunity, enlargement of goals, growth through production and consumption, and the manifest orientation that envisioned change. The market is a dynamic organ which does not belong to any single country. Yet, it exists within and around countries that contained the ingredients of market forces.

Historically, the transformation effects of the market on a society has long been an academic focal point. Karl Polanyi’s groundbreaking book The Great Transformation initiated a classic literature studying the anatomy, the pattern of change and the facilitation of change of the market economy in the nineteenth century.³ The “self-regulating” nature of market behavior actually energized the world toward an astonishing new phase.⁴ In addition, as argued by Edward J. Nell, it is “not that market outcomes are optimal, [italics in original] but rather that they have a certain objectivity and reflect robust good sense. If you pay attention to the market signals, you ought to do all right; if you don’t you will run a serious risk of going under.”⁵ The momentum of the market and the dynamic forces of liberalism energize the world toward growth in an unprecedented manner. Empirical studies and researches have recently attributed the transformation of the global economy to the market impetus and the force that lies behind it.⁶ The post-cold war international economy has witnessed rapid changes in the economic structures of many formerly socialist countries. The demise of the former Soviet Union encouraged the transformation of many centrally planned economies into market-oriented economies. The introduction of private property rights and the vigorousness of market competition are given great attention by many international organizations.⁷

The perpetuation of market forces, in fact, may reconcile Sino-American conflict and disagreement by reorienting their focus on gain through trade instead of through military confrontation. China’s government, especially after 1978, gradually internalized the facilitating of market liberalism as an agent of reform.

Fortunately, the market, as an agency of change, performs well in regulating the various transactions involved in Chinese society without excessively violating the political ecology of China. As Susan L. Shirk put it, “the lesson of the Chinese case is that in some varieties of communism, it is possible to move from a command economy to market competition without changing the political rules of the game. Communist rule in and of itself is not an insuperable obstacle to economic transformation.”⁸ The adaptation to the disciplinary guiding post of market force engendered a model for the change of policy orientation toward internal development as well as foreign investment. In particular, the need for capital and technology caused by China’s economic reform and development inevitably leads to further deregulation policy and relaxation. This change is clearly depicted in Margaret M. Peason’s study of foreign direct investment (FDI) in China. She strongly emphasized that:

The growing belief that their [Chinese] economic modernization program required them to absorb foreign capital at even greater levels put them on a course whereby they had to pay attention to foreign concerns, and more generally to ways they might be able to improve the investment environment. Under these conditions, the reformers had little choice but to liberalize.⁹

With respect to U.S.-China relations, U.S. foreign policy assisted in fulfilling these forces. In addition, as China opened to the outside world in the early 1980s, the U.S. needed to implement a policy to incorporate the components of market force. Moreover, the market force, during the post-cold war era, allows the U.S. to maintain world leadership not in such a way as to “command troops and confront enemies” but “to bargain across many different issues and groups, build coalitions, and seize opportunities for agreement.”¹⁰ The study of market forces, therefore, enables us to observe the logical sequence and major elements of Sino-American foreign relations since World War II. Before we go to the detail, we must first look back to reveal the historical background.

U.S.-China Foreign Relations in Retrospect

The pendulum of U.S. foreign policy toward China moved from a containment policy at the height of the cold war to an engagement policy in the post-cold war era. In essence, the ideology of American foreign policy has long been embodied in the two concepts of “white man’s burden” and “manifest destiny.”

“White man’s burden” refers to Americans’ innate passion for world liberation and the improvement of human conditions. However, such a responsibility, when translated into realistic foreign policy, may sometimes result in a euphemism for expansionism instead of wholehearted altruism.¹¹ Similarly, “manifest destiny” was a term used to describe the absorption of Texas and the West by Americans in the 1850s. Postwar U.S. policy toward Asia and China is similar, if not identical, to that policy.¹²

Historically, however, U.S. policy toward China, has demonstrated that a lack of mutual respect toward international market forces underlying U.S.-China relations inevitably resulted in setbacks and resentment. The United States had tried to open up China in the late nineteenth century by fostering a foreign policy that was originally aimed at enlarging business opportunities, in contrast to the “sphere-of-influence” policy practiced by other nations.

The first phase of American foreign policy toward China began in the late nineteenth century when the Open Door Notes were promulgated in 1899 and 1900.¹³ United States policy was based on its historical orientation toward economic interests and market openness.¹⁴ In the late nineteenth century the American China Development Company¹⁵ was established to energize American capitalism abroad. China was regarded as “one of the most promising fields for American enterprise, industry, and capital.”¹⁶ The change and transformation had long been concepts of sentimental value in American culture. According to Mark Sullivan, the open-door policy “was set up in contrast to the ‘spheres-of-influence’ policy practiced by other nations….”¹⁷ and thus Tang Tsou argues, “America was deeply inspired by the vision of a huge country with an ancient civilization transforming herself into a modem, democratic, Christian nation and following the lead of the United States.”¹⁸ This Open Door policy, however, failed because it was basically imperialistic and coercive.¹⁹ The economic and market incentives behind the policy shrank, especially after the Qing empire collapsed from internal decay.²⁰

The succeeding Nationalist government was embroiled in an atmosphere of confusion and disintegration. According to The China White Paper, U.S. foreign policy objectives were to maintain an “equality of commercial opportunity” and “the territorial and administrative integrity and political independence of China.”²¹ The momentum of the American market attitude toward China between World War I and World War II was ratified by a tariff treaty—signed by J. V. A. MacMurray, envoy extraordinary and minister plenipotentiary of the United States of America and T. V. Soong, minister of finance for the Nationalist government of the Republic of China.²² The Treaty between the United States and China Regulating Tariff Relations was described as “an earnest desire to maintain the good relations which happily subsist between the two countries, and wishing to extend and consolidate the commercial intercourse between them.”²³ Nevertheless, America’s interests were quickly washed away by increasing Japanese military expansion and political malingering. Eventually, the end of the Nationalist government and the rise of the People’s Republic of China (PRC) separated China’s growth into a socialist state from the evolution of a global market economy.

America’s second attempt at a foreign policy toward China failed during the Mao era (1949–1976).²⁴ Sino-American relations sank to their lowest level, especially in the late 1950s due to the loss of common ground on economic issues. After 1949, the PRC under Mao’s ideology, repudiated any ideas related to a Western market economy. Market potential during the Mao period was close to zero because Mao’s ideology prevented him from looking at Sino-American relations in terms of economic potential.

In addition, debate about the American economy was overwhelmingly clouded by calls for containment and the fear of the spread of communism (from the former Soviet Union to China and from North Korea to Indochina).²⁵ But the “containment policy”²⁶ was ineffective because American militarism was not a proper tool in which to modify China. According to one of the chief architects of the Containment Policy, Robert S. McNamara,²⁷ the escalation of military confrontation, armament struggle, and political maneuvering at the time of the cold war were nothing but the “misperceptions and mistrust that exist to this day.”²⁸ In addition, military spending during the Cold war came to be regarded as unnecessary, if not a total waste.²⁹ The Vietnam War made no direct contribution to the economic well-being of the people in Southeast Asia. Moreover, according to Hans Morgenthau, the United States would also have to bear the moral obligation for the catastrophes and huge human losses incurred in Vietnam.³⁰

After the death of Mao in 1976, Deng Xiaoping’s leadership marked the first time that a market economy was implanted in mainland China’s state policy. Sino-American relations were first secured on the basis of a mutual development toward fortifying the market economy. Nowadays, many scholars still argue over contemporary U.S.-China relations. Observing the approaching third phase of America’s Chinese foreign policy—trade and economic cooperation—they arrive at two contrasting views. One side looks at Sino-American relations with caution and skepticism; the term “fragile relations” is used by...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Table of Contents
• List of Figures and Tables
• Preface
• 1. Introduction
• Part One: Theory
• Part Two: U.S. Construction of the Asian-Pacific Market Economy
• Part Three: U.S. Market Augmentation Policy toward China
• Part Four: U.S. Engagement with China
• Part Five: Conclusions
• Appendix
• Bibliography
• Index