A NATO for the World Economy An Argument for a Trans-Atlantic Free-Trade Zone

Asian businessmen are probably the friendliest conquerors the world has ever seen. But despite the politeness and the smiles, Western governments must act quickly to combat the rise of China and Asia. The West should discuss an ambitious project: a European-American free-trade zone.

By Gabor Steingart

Germany's Chancellor Angela Merkel finds the idea of an EU-US free-trade pact "fascinating."

Germany's Chancellor Angela Merkel finds the idea of an EU-US free-trade pact "fascinating."

For 50 years it was a highly controversial institution. Today, though, every schoolchild knows that without the North Atlantic Treaty Organization, free Europe wouldn't exist. If the Western alliance hadn’t ostentatiously demonstrated its power -- with its fighter jets, tank divisions and continually updated weaponry -- Soviet communism would have expanded westward instead of imploding as it did. By the end of the Cold War, even NATO’s fiercest critics had learned their lesson: The dove of peace could only survive because the hawk was ready on his perch.

The world war for wealth calls for a different, but every bit as contradictory, solution. Alas, once again many lack the imagination to see that the aims of our economic opponents are far from peaceful. Yet what sets this situation apart from what we usually call a conflict -- what paralyzes the West -- is how quietly the enemy is advancing.

The two camps are divided between Europe and America on the one side and Asia on the other. But so far there has been no shouting, no bluster and no shooting. Nor have there been any threats, demands or accusations. On the contrary, there is an atmosphere of complete amiability wherever our politicians and business executives might travel in Asia. At airports in Beijing, Jakarta, Singapore and New Delhi red carpets lie ready, Western national anthems can be played flawlessly on cue -- and they even parry Western complaints about intellectual property theft, environmental damage and human rights abuses with a polite patience that can only be admired. The Asians are the friendliest conquerors the world has ever seen.

A stoic and dark superpower

Their secret is stoic perseverance, the weapon they use to pursue their own interests while at the same time disregarding ours. What looks like a market economy in Asia, actually follows the rules of a type of society which former German chancellor Ludwig Erhard liked to call a "termite state." In a termite state, it is the collective rather than the individual which sets the agenda. Tasks that serve the aims of society’s leaders are assigned to the individual in a clandestine manner that is barely perceptible to outsiders. It is a state that encourages as much collective behavior as possible but only as much freedom as necessary. We don't know what they feel, we don't know what they think and we have no way of guessing what they are planning. Indeed, this is what makes China a dark superpower.

Even if no one is prepared to say it outright, there are signs of a similar indifference to Western values all across Asia. But it is precisely that unspoken that separates the two worlds. Free labor unions are neither vilified nor permitted. Lip service is paid to the environment as something that should be protected, but at the same time it is torn apart like a car in a wrecking yard. Child labor is condemned even as it is actively tolerated. And a whole range of laws exist to protect Western intellectual property, but those rules are seldom applied.

The Asian elite politely brush off everything that matters to us -- the social framework surrounding daily working life, the idea of individual achievement and state-guaranteed fair competition. What we see as essential characteristics of a civilized society, they see as nothing more than bourgeois niceties.

The state (India) or party (China) is responsible for setting prices, promoting technology, ensuring provisions of raw materials, protecting industries and providing the impulse for just about any kind of economic or political activity. Like the West, Asian societies also operate with a certain give and take. The difference here, however, is that the state or the party, and not the individual, determines what is to be given or taken. The overwhelming success of their export industries is seen as proof that their way is the right one.

With every machine, the West sells part of its soul

Americans and Europeans could, of course, respond tolerantly to this differing view of how a country should be run -- if, that is, free trade didn't result in severe side effects for the West. But the reality is that, where there is no referee to ensure that everyone plays by the same rules, the West is encouraged, sometimes even forced, to make its own society a harsher place. In order to avoid losing business to low-wage countries, worker's councils are tamed, rules for environmental protection are watered down and responsibility for social welfare is gradually handed back down to families and individuals.

The West believes it is selling machines, cars and planes. But as part of the deal, it is also selling its soul. It’s as if politicians and companies are committing suicide to escape the fear of death.

But the West should have more confidence in itself. Foregone conclusions are an unknown concept in history and it is entirely possible to find a solution. Or, at the very least, to ease our problems.

The role NATO played in an age of military threat could be played by a trans-Atlantic free-trade zone in today's age of economic confrontation. The two economic zones -- the European Union and the United States (perhaps with the addition of Canada) -- could stem the dwindling of Western market power by joining forces. Together the Europeans and the Americans are still a force to be reckoned with. Representing about 13 percent of the total world population and 60 percent of today's global economic power, they stand ready to act as producers and consumers not only of goods, but also of values.

There are few reasons to oppose the Americans

There are three reasons the idea is particularly attractive, and the first is political. Such cooperation would lead Americans and Europeans closer together again. The temptation to childishly score points off each other -- dangerous in light of the Asian challenge -- would be removed. And while there may be plenty of reasons to oppose US President George W. Bush, there are few reasons to be against America. From an economic point of view, there are many tangible reasons that it makes sense to work together with the West's leading power.

The military alliance which was forged in the Cold War could be carried over into the global economic war. The aim of maintaining freedom and increasing prosperity would remain -- only the methods of pursuing those aims would change. A free-trade zone would inevitably lead to a convergence of the two economic systems. Europe would become more Americanized and the US would become more European, albeit slowly in a process which would last decades.

Countries that remove all trade barriers and unify accounting standards, technical norms, copyright laws and stock market practices would also ensure that their financial, social, taxation and environmental policies didn't drift apart. Governments would have more room to maneuver, as well as greater opportunities and responsibilities.

The second major advantage is economic. A domestic market as reliable and as big as an EU-US free-trade zone would be advantageous for both investors and workers. Economic growth would be fuelled, though perhaps not drastically. But investment creates jobs. The West could at least win back part of what it has lost. For one thing, it would regain the power to set technical standards -- even if that does mean, in the global economy that is more a question of promoting standards than actually "setting" them.

The most imposing effect of such a mega-merger of markets would doubtlessly be felt in the Far East. The boom region of the last decade and a half would rightly sit up and take notice. The new message would be this: The price of a product is still important, but the way in which it has been produced is equally relevant. Countries that refuse to tolerate trade unions -- or which exploit women, children and the environment, to name just a few issues -- would no longer be spoiled by preferential treatment at customs.

Freedom on the inside, a fortress on the outside

Asia's current economic behavior could for the first time prove to be a disadvantage. Inside, the free-trade zone would give its residents courage, but on the outside, it would serve as a fortress -- at least for those who consciously reject, or even denigrate, Western values. This would rectify one European Union mistake: Until now it has been servile towards enemies of freedom. By allowing almost every third state the right to the same conditions, the EU has to a large extent destroyed the advantage of being a member. The EU Commissioners are the last true believers in the religion of free trade.

A trans-Atlantic free-trade zone would have greater aims than simply defending the interests of importers and exporters. "Peace in Freedom" has always been NATO’s motto. "Prosperity with Values" could be the aim of the trans-Atlantic free-trade zone. One of those values would be the goal that this prosperity reach as many people as possible.

The notion of a confident and strong West is also one that is important to German Chancellor Angela Merkel. In the rare moments when Merkel is able to look past the day-to-day grind of political life and see the bigger picture, it is the trans-Atlantic free-trade zone which catches her eye. She envisions it as the fusion of the like-minded. At the very least, it would counteract the Asian strategy of pitting the Europeans and the Americans against each other. Indeed, the upcoming German EU presidency in the first six months of 2007 presents itself as a handy platform from which to push what could be the project of the century. Merkel speaks of a "fascinating idea."

When Merkel talks about a free-trade zone though, she isn't thinking exclusively about economics. It's true that the most transparent benefits for companies of lifting customs barriers and abolishing bureaucracy are most easily measured in dollars and cents. But there is another invisible advantage -- one that influences the landscape of power even if it doesn't appear anywhere on the ledgers. Merkel speaks of “non-material values” that could be preserved and indeed strengthened by the free-trade zone. For years and years, fear of globalization has preoccupied governments at the cabinet level in virtually all Western capitals -- and an alliance of the democracies and market economies surrounding the North Atlantic could do everyone there tremendous good. It would also re-energize the West.

The sins of growth

The history of the well-fortified West has taught us that those who defend their values also spread them. The principle of fair trade could also be spread in the Far East in the same way that the 1975 Helsinki Conference set off a process which ultimately benefited human rights in the entire Eastern bloc. Asia has a right to succeed. But the West also has the right to fight to preserve its own accomplishments.

Can a Western free-trade zone really prevent Asia’s ascendancy? Clearly not. Nor is that the goal. However, what it can do is to help reduce the slope of Asia's ascent and prevent our flight paths from crossing too frequently.

But doesn’t that sound too defensive? Is the energy needed to set up a trans-Atlantic free-trade zone worth it? Absolutely. A plane can take off in different ways: There is a violent updraft that creates turbulence on the ground and there is milder form of thermal wind which can also take others up with it. This take-off may not be as steep and as fast, but it is less destructive. Yes, global growth would slow down. But that wouldn't be nearly as tragic as many people think. The growth of the last few years has been impossible to enjoy anyway because of the many sins committed along the way, both in Asia and the West. Plus, it has been bought with other people's money -- namely through hefty borrowing and the money of future generations.

The creation of a trans-Atlantic free-trade zone would also send a strong political message: Look here, it would say, like-minded nations are coming together. The nations that gave birth to the Enlightenment are devoted to the individual's right to freedom, but not at the expense of the collective. World leadership may ultimately end up in others' hands, but we won't stand complacently by while it happens. The Asians still need us more than we need them: They thirst for Western capital and technological expertise. And without Western markets, the Asian export industry would soon fall apart.

No one less than Henry Kissinger, the godfather of modern American foreign policy, is encouraging Western government leaders to take steps in the direction of such a free-trade zone. The enormity of the task should not be a deterrent. The duty of governments, after all, Kissinger says, is to lead societies from where they currently are to places they have never yet been.

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