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The COVID-19 pandemic has raised alarms on many fronts around the world. First and foremost was the fear of a new virus ravaging the world. But as the world went into lockdown to curb the spread of the virus, other concerns emerged, including securing supplies of face masks, ventilators, computer chips, auto parts, and even toilet paper. What the pandemic has revealed is the fragility of global supply chains. The New York Times Global economics correspondent Peter S. Goodman explores these fault lines and how they emerged in his new book, How everything disappeared from the world (Mariner, June issue). In this excerpt, Goodman analyzes how, decades ago, companies around the world began turning to China to boost their profits by providing cheap labor for manufacturers and a vast consumer market, leading to widespread offshoring and just-in-time shipping with no safety net.
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Despite his penchant for impromptu showmanship, Bill Clinton pushed himself too far in a massive ballroom in central Beijing.
On a balmy evening in June 1998, while the president was in the midst of persuading or pressuring the Chinese government to agree to American terms for membership in the World Trade Organization, he and then-first lady Hillary Rodham Clinton were attending a dinner in the Great Hall of the People, a columned fortress at the western end of Tiananmen Square.
Just nine years earlier, the square had been the site of an extraordinary protest movement led by students calling for greater freedom. The People’s Liberation Army put down the uprising with a massacre that claimed hundreds of lives, an atrocity that would come to symbolize China in the international community for years to come. But China’s pariah status was already fading as Western business executives dazzled at the lucrative opportunities that could be exploited in China. The Clintons were in Beijing to serve that cause.
Clinton early positioned herself as one of China’s fiercest critics. During the 1992 campaign, she attacked President George H.W. Bush over normalizing trade ties, accusing him of pandering to “butchers in Beijing.” Shortly after taking office, she signed an executive order threatening tariffs of up to 70 percent if China did not show “significant progress across the board” on human rights.
That’s all up to here.
In that bastion of Chinese power, Clinton set out new values to guide his administration’s China policy. Protesters had been shot just a few hundred yards from the banquet hall, but the incident seemed like a distant memory. The Clintons posed for photographs and saluted their hosts, President Jiang Zemin and his wife Wang Yeping. “The American people applaud the great progress China has made,” Clinton declared in a toast before the dinner. “We the American people highly value the mutual respect between our two countries.”
After feasting on shark fin and grilled beefsteak, the two couples made their way to the back of the ballroom, where they were greeted by the musicians who had entertained them: members of the People’s Liberation Army Band. To the delight of the crowd, President Clinton took the baton and briefly led the band as they played John Philip Sousa’s march, “Hands Across the Sea.”
Clinton’s arrival at the helm in front of the very institution that had massacred peaceful protesters marked the completion of a remarkable image makeover. He now led a campaign orchestrated by American business to use China as a profit center, discarding the human rights concerns that hindered commerce. China’s accession to the WTO was the centerpiece of that effort.
The WTO was an arbitrator in international trade disputes. China wanted to join for the simple reason that it would open up new export opportunities and attract foreign investment. But to join, China had to promise to open up its markets to foreign competitors. This prospect terrified the heads of China’s largest industries but was well received by China’s economic policy chief, Premier Zhu Rongji, who believed that the very process of applying for WTO membership would help modernize the Chinese economy.
Zhu’s mission was backed by a key base of support: the American business lobby. They saw a gold mine in China. A country of more than 1.2 billion people would be the largest potential market for virtually anything. Telecommunications companies and financial giants would have permission to buy larger stakes in Chinese ventures. Agricultural companies would be free to sell vast quantities of soybeans, wheat, and other crops. Multinational brands were especially enthralled by the savings to be made by relocating manufacturing from wealthy countries with labor unions and workplace safety regulations and moving production to Chinese factories, where party cadres were the law and their loyalty could be bought with a bit of a cash prize. Labor unions were banned, and hundreds of millions of rural people were streaming into cities in desperate search of work. It was an ideal recipe for low-cost production.
There was an ironic confluence of interests here: The People’s Republic of China, still ruled by a Communist party that had seized power through a peasant-led revolution, was attractive to Walmart, Apple and other icons of American capitalism as the ultimate joint venture partner.
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Yet multinational corporations feared that their plans for China would be interpreted as crude profiteering. Stories of widespread repression, human rights abuses, and labor exploitation in China risked reputational damage. So U.S. companies and their political allies reframed the terms of engagement, settling on the common view that expanding trade with China would promote freedom. To be sure, U.S. companies would make huge profits in China, but that was irrelevant to the transformation mission at hand. Senior officials in the Clinton administration repeatedly proclaimed this. If China joined the WTO, its prosperity would depend on operating within the WTO’s norms. Chinese companies would need to develop an understanding of the outside world to capitalize on the benefits of their participation in the global trading system. Chinese consumers would have access to international fashion trends, music, entertainment, and sports. All of this would permeate Chinese society and create a demand for the ultimate Western export: democracy. First, the Chinese would taste KFC. Then, they would demand the ballot box.
“By joining the WTO, China hasn’t just agreed to import more of our products; it has agreed to import one of our democracy’s most cherished values: economic freedom,” Clinton declared in a speech on the eve of a crucial congressional vote to approve the agreement. “The genie of freedom will never be put back in the bottle.”
There was a logic to this structure: markets demand information, and repressive governance is incompatible with its free flow. But the most powerful driver of such trust was the pursuit of profit: the greatest beneficiaries of China’s entry into the global trading system were shareholders of the multinational brands that exploited China as a source of cheap labor.
In Washington, lobbyists representing major American companies said China’s entry into the global trading system was an opportunity to advance Beijing’s reformist agenda. Robert Rubin, the Clinton administration’s Treasury secretary who would later lead financial services giant Citigroup as it expanded into China, assured Congress that China’s entry into the global trading system would “sow the seeds of freedom.”
But behind the scenes, major lobbying groups like the National Federation of Manufacturers and the Business Roundtable complained that tying trade policy to human rights issues would create uncertainty about doing business in China and discourage investment, hindering their grand plans to sell to Chinese consumers while relying on Chinese factories as the core of their supply chains.
Clinton’s Secretary of State, Warren Christopher, later noted, “Business convinced the president that trade was worth more to America, or, more generously, that denying trade would accomplish nothing in the area of human rights, and that became policy.”
Provided by the publisher
▸ Excerpt from the book Why the World Ran Out of Everything: Inside the Global Supply Chain By Peter S. Goodman. Copyright © 2024 Peter S. Goodman. An imprint of Mariner Books, an imprint of HarperCollins Publishers. Reprinted with permission.
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