Wednesday, April 19, 2006

The Pot vs. The Kettle, Mercantilism in 2006

I know, I know - two entries in one day!  Will wonders never cease?  It’s just that the material out there today is so good I simply can’t help myself.  But don’t take my word for it, read on…
The Bush Administration released a revised National Security Strategy last month that made a rather strong claim about China.  That country's leaders, the document declared, are "expanding trade, but acting as if they can somehow 'lock up' energy supplies around the world or seek to direct markets rather than opening them up, as if they can follow a mercantilism borrowed from a discredited era."
Now, for those of you unfamiliar with economic policies that were developed as lords, vassals and fiefs became extinct, I offer you the following definition of Mercantilism:  A post-feudal doctrine of national economic health through protectionism, foreign trade and exports.  Basically, it means putting the interests of your country first by protecting national industries, while trading with any nation that has what you want, regardless of that nation’s political leanings or even alleged inhumane policies.
Bush Administration officials have repeatedly used the term mercantilism to describe China.  And, there are some indications that Dubya’s cronies are not far off the mark.
"They are buying long-term supplies wherever they find them, including in unsavory places like Sudan, Iran and Burma, where we won't buy," said Michael J. Green, a Georgetown University professor who directed policy on China at the National Security Council until late last year. "They say it is benign, because they don't interfere with the internal affairs of other nations. And we say it is anything but benign, because it finances these regimes' bad behavior."
Now, what does Mr. Green mean by all this economic jargon?  Well, consider a country like Sudan.  China has made deals with Sudan to firm up access to oil for years to come.  Sudan is a nation known around the world for incorporating insalubrious practices like genocide.  For that reason, the US cries, “Foul!” on the grounds of Mercantilism.  But China says 'Look, you know, we don't care about internal issues like genocide, we only care about the oil because we need the resources.'  And we’re not influencing how the Sudanese run their country, so why should it matter?
How about Iran?  In November 2004 China's state-owned oil company signed a $70 billion deal with the Iranians to develop an Iranian oilfield that could eventually produce 300,000 barrels a day.  Meanwhile, the Bush Administration wants the global community to put sanctions in place against Iran because they’re busy playing with Uranium.  But, China won’t cooperate.  China doesn’t want to threaten its oil interests.  Mercantilism rears its ugly head once again!
So there you have it.  China is doing business with unscrupulous governments and is protecting energy interests in other countries in spite of the apparent wishes of the world community.  Man, those Chinese sure are mercantilists.  Just look at them, parading around the world and muddling in the affairs of foreign nations, all in the name of ‘locking up’ energy.  How arrogant!  How just plain wrong!  Of course, no one else has been behaving like that on the world stage over the last, oh I dunno, 100 years or so, have they?
So, why are the Chinese so desperate for oil?  Could it be because they are an emerging super power with a population of around a billion people?  Sure, they can use their abundant coal reserves to create power, but hey, maybe they’d like to drive a car now and again?  For that, they’re certainly going to need some oil.
Right now China consumes about 6.5 million barrels of oil per day.  That’s a lot.  The Bush Administration predicts that that number could double in the next few years.  Greedy Chinese!  Why, they’re already second in oil consumption in the world!  Isn’t that enough?  How dare they even consider moving in on the world’s number one?  That’s right, we’re number one!  The US is currently the number one consumer of oil in the world, at over 20 million barrels per day.
Let’s see now:  300 million people at 20 million barrels per day vs. 1 billion people at 6.5 million barrels per day.  I’m not much of a mathematician, but something seems a little uneven here.  It’s a disparity that, given the world’s total oil reserves, may just need a little protectionism to maintain.  Perhaps the nation that has done such a good job “locking up” the world’s oil reserves for the last 50 years is feeling a little threatened by the new kid on the block.  And, there’s nothing more threatening when you’re on top than seeing the favored contender hot on your heels, playing the same game you’ve been playing all along, only better.
BTW – This entry unabashedly borrows from an article in today’s NY Times


brock said...

I find that one of the more interesting aspects of China's quest for an oil supply is the quiet fashion in which they do it. They adopt the practices of the country where the oil is. In the US they used the stock market, where they were unsuccessful in their bid for Exxon. However, they are many other US and Canadian players now backed by Chinese money. (Think Husky.)In Russia and Central Asia they play the Great Game with an affinity and adeptness that the Russians and English never matched. Perhaps, most remarkably in the absence of force in any country. While supporting the Myanma dictatorship is not a laudable effort, it is, I suggest, more humanitarian than subjecting the country to a decade of war, poverty, rape, and famine.

The US chases the same goal, oil, using democracy as their oil derrick. Given the current status of Latin America, and the Middle East I would say that US methods have less to show, and unstable oil supply. Where the goal is control of resources I think the best method is to secure the resource by any means possible, rather than looking to justify the method. And, it would seem that the final outcome favours those that strive to obtain what they need rather than meddling in internal affairs.