The Blog

Free-Trade Free-Fall?

Globalization may be falling out of political fashion.

11:00 PM, Mar 20, 2006 • By IRWIN M. STELZER
Widget tooltip
Single Page Print Larger Text Smaller Text Alerts

So we are not seeing a resurgent protectionism as much as a new concern about national security. The process for reviewing foreign acquisitions in America is opaque and ineffective. During the Clinton administration, control of some ports was turned over to a Chinese company, and another deal left the Chinese in control of a company that produces 80 percent of the magnets used in the military's "smart bombs," according to Senator Evan Bayh, a Democrat with eyes on a presidential run in 2008. Indeed, it is because so many politicians on both sides of the aisle have their sights set on the White House that the issue of foreign investment lends itself to political posturing. Hillary Clinton led the charge against the Dubai ports deal, followed closely by a number of Republican senators contemplating the juicy prospect of a wide-open fight for the nomination.

But just because there are demagogues abroad in the land does not mean there is not a worrying issue. The board set up to review the national security implications of foreign takeovers has turned down only 1 of more than 1,500 deals that came before it--the planned acquisition of Mamco Manufacturing, a maker of aircraft parts, by China National Aero-Technology in 1990. It is so insensitive to the post-9/11 security concerns of Americans that it did not think it necessary to advise the president that it was approving the management of ports by a state-owned Arab company.

Clearly, a new balance will have to be struck between the economic advantages and the security problems created by free trade in goods and in companies. That has nothing to do with protectionism. Rather, it has to do with legitimate security concerns in a world in which we are engaged in a life-and-death struggle against Muslim terrorists, and in which the Defense Department said only last week that China is gearing up its military to challenge American supremacy. Committed free trading nations such as Australia will have their work out for them in seeing to it that security does not become a cover for protectionism.

Irwin M. Stelzer is director of economic policy studies at the Hudson Institute, a columnist for the Sunday Times (London), a contributing editor to The Weekly Standard, and a contributing writer to The Daily Standard.