A Grand Plan for a Much Poorer World

But you know what they say about where good intentions lead.

The Trade Trap: How to Stop Doing Business With Dictators, Mathias Döpfner, Simon & Schuster, 208 pp., $27.99, September 2023

Döpfner has plenty of unorthodox ideas to offer—but most of them would be disastrous. To protect democracy, Döpfner would destroy the world trading system that has helped to make the world richer and replace it with one where democracies—generally the richest of the world’s countries—trade among themselves without restrictions and shut out imports from autocracies—including most of the world’s poor.

He calls this a “Freedom Trade Alliance,” although it wouldn’t be too much of a stretch to call it a White Person’s Trade Alliance. The heart of his trade group would be the United States and Europe, he makes clear, although it would also include Japan and some others in Asia.

If actually implemented, his plan would likely impoverish tens of millions of people in poorer countries, pummel export industries in rich ones, and give a lift to dictators who could legitimately argue that the United States and Europe were trying to destroy their political systems. And good luck recruiting an ostracized China to work with democracies on climate change, nuclear proliferation, economic crises, and other global problems.

Döpfner wants to make the world a better, freer place—but the result would be a more hostile and frightening world.

Mathias Döpfner speaks at an Axel Springer award ceremony in Berlin on Oct. 17.Ben Kriemann/Getty Images

But unlike Murdoch, he has also been a longtime political commentator. He backed the U.S. invasion of Iraq, hardly a popular stand in Europe, campaigned against antisemitism, and privately urged Elon Musk to buy Twitter. Although Döpfner is often described in the press as a billionaire, he lacks Murdoch’s mega-wealth and global reach.

In The Trade Trap, Döpfner stalwartly defends press freedom, though he has plenty of critics in the press. The Guardian recently had a field day recounting leaked memos showing his political machinations, as well as his fascination with artificial intelligence, and his reluctance to fire a Bild editor accused of sexual misconduct. In one leaked text, he said he was so impressed by the 2020 killing of Iranian Gen. Qassem Suleimani by a U.S. drone strike, that he thought then-U.S. President Donald Trump deserved a Nobel peace prize for the hit.

His trade plan comes at a time when free trade is out of fashion in the United States. Populist Republicans, in particular, are doubling down on protectionism. Trump’s former trade chief, Robert Lighthizer, has recently made some proposals similar to Döpfner’s. The Biden administration, meanwhile, views trade pacts as politically radioactive. The president hasn’t proposed new free trade deals or eliminated Trump’s tariffs on China, though he  criticized them during his 2020 campaign.

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Döpfner has long worried about the growing power and influence of China, and he fears that totalitarian systems are superior to democracies when it comes to the economy. “The problem is: Centrally controlled, turbo-charged state capitalism can actually be more successful than a free-market economy,” he writes. “Totalitarian capitalism is faster and more ruthless.”

This is an argument that’s been made at least since the emergence of the Soviet Union, which was once seen as an unstoppable economic force until it petered out and eventually imploded. Skeptics of democracy downplay the difficulties that dictatorships have in getting reliable information and adapting to new challenges—such as China’s years of Maoist disaster, and perhaps the sense of economic and political malaise it faces post-COVID. The skeptics also underestimate the role that individual freedom plays in creating prosperity as well as democracy.

In retrospect, political leaders such as former U.S. President Bill Clinton vastly oversold the power of trade not only to reshape China’s economy, but also its politics. Clinton counted on new technology, especially the internet, to spread infectious ideas of freedom and change to a wealthier China.

After all, rising middle classes in South Korea, Taiwan, and Latin America at the time had used their newfound wealth and infatuation with Western ideals to shuck off dictatorships peaceably. Why not China? In Germany, Döpfner writes, that thinking was called “Wandel durch Handel”—“change through trade.”

Clinton didn’t expect China’s leaders to be able to wall off the internet and use it instead to keep tabs on the population. The Communist Party successfully bet that it would get credit from the rising middle class for making China wealthier through trade. A big dollop of repression and nationalism also kept the middle class in check politically.

Döpfner rightly observes that the international trading system made Beijing richer and more powerful. But he leaps from that observation to conclude that a relatively open trading system has become the enemy of democracy.

While expanded trade didn’t deliver democracy, Döpfner argues, cutting off trade could do the trick. Denying trade with the West to dictators in Beijing and elsewhere would cripple them and finally pressure them to drop their evil ways and join the good guys. He writes: “Nondemocratic states would thus be confronted with a fundamental choice: whether to allow misguided pride and outdated convictions to take precedence over economic prosperity and national well-being,” which Döpfner argues comes from being admitted into the trade alliance of democracies.

Wandel durch Handel didn’t work in fighting dictatorship, he says. But “Wandel durch kein Handel”—or “change through no trade” would.

But there’s no evidence offered for this. More likely it would impoverish populations in dictatorship, making them resentful of those who cut them off. Economic sanctions on Russia and Iran, for instance, have helped leaders there rally nationalist resentment. Beijing cites American’s broad use of sanctions in its attacks on Washington’s leadership.

Cutting off trade would also turbocharge Beijing and Moscow’s efforts to create an alternative system that uses a currency other than the dollar, and it would spur them to ramp up military spending further to try to keep aggressive democracies at bay.

Workers walk by the perimeter fence of what is officially known as a vocational skills education center in Dabancheng, located in China’s Xinjiang Uyghur Autonomous Region, on Sept. 4, 2018. Thomas Peter/Reuters

Even with its surveillance systems, jailing of dissidents, and repression of minorities, China today is a less despotic place in everyday life than it was in the early 1980s, when the country started relying on trade for growth, making it more open to foreign ideas and practices. The Chinese now can travel abroad, own property, and choose their own professions.

Certainly, a more powerful China has cowed many Western businesses that fear losing the Chinese market if they offend Beijing. But the corporate world is hardly rich in profiles in courage anyway. Döpfner includes several stomach-turning examples, none more craven than the CEO of Volkswagen, Herbert Diess, claiming ignorance of reported internment camps in Xinjiang, where Volkswagen has a factory. Corporations within democracies are hardly value-driven actors, whether they’re lobbying against regulation or capitulating to pressure campaigns.

Governments are a different story. Recent state targets of Chinese economic coercion, such as Lithuania and Australia, have weathered the pressure without caving in. If anything, Beijing’s campaigns have backfired by deepening the resolve of democracies to work together to counter Chinese influence. Australia signed a deal with the United States and Britain to build nuclear submarines and work on other advanced technology. Some European countries have started to distance themselves from Beijing. Italy, for instance, seems to be looking for a graceful way to exit from Beijing’s massive infrastructure-building program, the Belt and Road Initiative.

To create his Freedom Trade Alliance, Döpfner would abolish the World Trade Organization (WTO) rather than try to reform it so it is better able to deal with challenges posed by China, such as its massive industrial subsidies and forced technology transfer. WTO rules require, with few exceptions, all 164 members to grant each other their lowest tariff rates and not to discriminate against one another. Although members sue each other when they claim the rules are flouted, the organization is based on an all-for-one, one-for-all philosophy.

Instead, Döpfner envisions a two-tier trading system. The top tier would consist of democracies that pass three tests: adherence to the rule of law, human rights, and carbon dioxide targets. Those countries would not only eliminate tariffs among themselves, they would also largely eliminate borders. “Travel, tourism, working in other member countries—the term ‘foreign countries’ doesn’t fit any more—would be made easier,” He writes. Imagine a kind of expanded European Union.

Nonmembers (autocracies and many near-democracies) would face heavy tariffs in trading with rich democracies. Döpfner calls this a “values-based trade policy.” He hopes the lure of rich-nation trade would convince India, in particular, to seek membership and presumably shape up when it came to environmental and human rights policies.

Essentially, Döpfner would fracture the world trading system into haves and have-nots. This isn’t merely a half-baked proposal; it’s raw dough.

Nowhere does he say who would make decisions about who qualifies and who doesn’t. Would the United States under a second Trump presidency qualify, given Trump’s disdain for carbon dioxide limits? What about an illiberal European Union member, such as Hungary or Poland?

Although Döpfner proposes a much tighter trans-Atlantic coupling, the United States and EU weren’t even able to agree on a far weaker proposed trade arrangement, called the Transatlantic Trade and Investment Partnership, during the Obama administration. The differences over agriculture, privacy, digital regulation, environmental standards, subsidies, and other issues that tanked that proposal wouldn’t suddenly disappear.

Cutting off trade with poorer countries is also bound to wreck rich-country industries. The United Nations Conference on Trade and Development estimates that developing countries—often autocracies or fragile democracies—accounted for about 42 percent of global exports in 2022. Döpfner understands that his proposals could kill the German car industry, which is hugely dependent on China for sales.

“Hundreds of thousands of [auto] jobs would be at risk,” he writes. “The backbone of the German economy would be broken.” But he doesn’t offer any solution other than government subsidies and tariffs.

A liquified natural gas processing vessel is moored at a terminal in Lubmin, Germany, on Jan 14. Stefan Sauer/Picture Alliance via Getty Images

But it was the existence of an open trading system—not a two-tier caste system—that helped encourage South Korea and Taiwan, for instance, to make the turn to democracy. The middle class there got richer through trade. Under Döpfner’s plan, the middle class in autocracies would get poorer.

China would surely suffer under his plan, too, which is one of Döpfner’s goals. But he doesn’t acknowledge that Beijing would have a much easier time lessening the pain than less-developed nations by shifting exports to partly free countries, such as Mexico, which then could truck them over the border tariff-free due to Mexico’s free trade deal with the United States. Trump’s 25 percent tariff on some Chinese goods already has prompted Chinese businesses to divert a fair amount of trade with the United States through Vietnam and Mexico.

Poorer countries in Africa and Latin America that haven’t reached China’s level of development or trade would suffer far more. They would lose potential markets in rich democracies. But that isn’t a big concern of The Trade Trap. Africa doesn’t rate a listing in the book’s index, and the entire continent only gets a few mentions in the book.

Döpfner says he knows that his proposal isn’t fully formed, and he wants particulars fleshed out through “true crowdsourcing” by “experts, students, and engaged citizens working together to generate concrete ideas for implementation.” This is not exactly reassuring. Here’s one point that the crowd, or Döpfner himself, should consider: Although Döpfner paints China with the blackest possible ink, he briefly—in just one sentence—makes a powerful case for continued engagement with China rather than a radical decoupling.

China “invested enormous sums during the financial crisis [of 2009] and saved the global economy from collapse,” he writes. That’s a typical Döpfner overstatement and simplification, but it’s true that China’s vast stimulus program helped lift global demand. Along with ramped-up spending and monetary easing by the United States and other wealthy democracies, that helped keep a global recession from spiraling into a depression.

At the time, the United States and China worked hand-in-glove through international organizations such as the Group of 20 and the International Monetary Fund, which are open to democracies and autocracies alike. They figured out a way to work together despite their vast political differences. That’s a better model than what Döpfner proposes.