Trading With The Enemy

As America grapples with a two-front challenge — the global war on terror and the need to reinvigorate the U.S. economy — its leaders are hoping that expanded international trade can help solve both problems. Unfortunately, if the machinations of the Chinese conglomerate Hutchison Whampoa are any indicator, an indiscriminate approach to trading with potential enemies could cost the United States dearly on both fronts.

Recent debates over granting President Bush Trade Promotion Authority (TPA), according Communist China permanent "Normal Trade Relations" status and permitting taxpayer subsidized trade with Cuba have all implicitly, if not explicitly, shared a dubious conviction: Since overseas commerce is an inherently good thing, the more of it the better.

Trade Uber Alles

This sentiment takes an extreme form among those who favor what might be called a "trade uber alles" philosophy. These advocates tend to be less than sensitive, to put it charitably, to the potential national security risks associated with putting their philosophy into practice. Even the relatively tangible repercussions — such as the loss of indigenous industrial capability and the attendant, increased reliance on foreign suppliers for components of key weapon systems — are typically dismissed, or at least subordinated to the perceived greater good of developing globalized relationships with trading partners.

To be sure, the most doctrinaire of Free Traders typically try to conceal their insouciance about the defense implications of their policies. They often assert that trading with authoritarian regimes that are either our enemies today or that might become foes in the future can be safely undertaken since commerce will inexorably transform them by creating a middle class imbued with capitalist impulses and, in due course, with irresistible democratic aspirations.

This thesis may even be true in the long run. The problem is that in the short- to medium-term, ill-advised trading with potential adversaries can serve not only to prop up their regimes, but afford them opportunities to do us great harm.

Case Study: Hutchison Whampoa

A case in point would appear to be Hutchison Whampoa, a Hong Kong-based commercial empire founded and largely owned by a Chinese multi-billionaire named Li Ka- shing. Li, who U.S. intelligence believes is closely tied to the Communist leadership in Beijing, has turned Hutchison into a global colossus described in a recent company press release as having "over 120,000 employees worldwide, operat[ing] and invest[ing] in five core businesses in 37 countries: telecommunications; ports and related services; property and hotels; retail and manufacturing; and energy and infrastructure."

As noted by the Center for Security Policy last month(1) , one of Hutchison’s subsidiaries secured long-term leases at either end of the Panama Canal two years ago and is currently hard at work acquiring a presence for China at other strategic "choke points" around the world, including notably the Caribbean’s Bahamas, the Mediterranean’s Malta and the Persian Gulf’s Straits of Hormuz. At a moment inconvenient to the United States, such access could translate into physical or other obstacles to our use of such waterways.

An even more troubling prospect arises from a bid Hutchison Whampoa and two partners (one an American company called Savi Technology) are making to win U.S. government contracts to enhance security at American ports. The lack of such security is widely understood to be one of the most serious vulnerabilities facing those charged with homeland defense. Turning over the design of a cargo-monitoring system to a company closely tied to the regime in Beijing could mean affording the latter insights into how that system can be defeated.

It would be decidedly in the interest of the Chinese People’s Liberation Army and its clients — which include all the world’s terrorist-sponsoring states — to know how to circumvent the techniques used by the United States to protect American harbors from deadly attacks using containers and/or the vessels that transport them. But it is certainly not in our interest.

The same probably can be said of Hutchison Whampoa’s just-announced purchase of a 61.5 percent majority interest in the bankrupt Bermuda-based telecommunications firm, Global Crossing Ltd. Global Crossing was the original winner of a 10-year, $450 million contract to operate a high- speed classified research network for Pentagon scientists. After the company went belly up, WorldCom got the deal last April.

Even before the latter’s corporate financial meltdown, however, Global Crossing and other telecommunications companies were demanding that the award be reconsidered. With Li Ka-Shing’s infusion of $250 million into Global Crossing, it may be seen as a viable competitor, assuming security considerations are not allowed to get in the way. And why should they? If Li and his friends are considered a safe enough bet to be put in charge of monitoring what is coming into our ports, how could anybody object to fiber optic cables he controls being used as the conduit for classified Defense Department secrets?

The Bottom Line

There is surely a place for genuinely free and fair trade in America’s war on terror. Those who are truly, as President Bush put it, "with us" in that war should be among the beneficiaries of our efforts to maximize reciprocal access to markets. However, some thirty years of ever-expanding Chinese opportunities to sell in the United States have yet to translate into comparable opportunities for American companies in the PRC — let alone transformed the government in Beijing into one that is reliably on our side in the present global conflict, to say nothing of democratic.

Trade uber alles means, by definition, subordinating national security considerations to the ambitions of those who seek profits through commerce. In a time of war like the present, we simply cannot afford to pursue such a policy to its illogical, and potentially highly destructive, conclusion.

1. See the Center’s Decision Brief entitled Back on the China Front (No. 02-D 36, 15 July 2002).