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The COVID-19 pandemic raised alarms across the world on many fronts. Fears of a new virus running rampant, first and foremost. But as the world locked down in a bid to control the virus' spread, other concerns arose, like securing face masks and ventilators, computer chips and car parts—and even toilet paper. Exposed by the pandemic was the tenuous nature of the worldwide supply chain. New York Times global economics correspondent Peter S. Goodman explores these fault lines and how they came to exist in his new book, How the World Ran Out of Everything (Mariner, June). In this excerpt, Goodman analyzes how, decades earlier, businesses worldwide began to rely on China to improve their bottom line by providing cheap labor for manufacturing and an expansive market of consumers, culminating in widespread offshoring and just-in-time shipping—with no safety net.
Even for a figure inclined toward impromptu displays of showmanship, Bill Clinton outdid himself inside the massive banquet hall in the heart of Beijing.
It was a balmy night in June 1998, and the president was in the midst of alternately wooing and pressuring China's government to assent to American terms on a deal bringing the nation into the World Trade Organization. He and then–First Lady Hillary Rodham Clinton were attending a state dinner at the Great Hall of the People, the colonnaded fortress occupying the western edge of Tiananmen Square.
Only nine years earlier, the square had been the locus of an extraordinary protest movement led by students who demanded greater freedom. The People's Liberation Army put down the uprising with a massacre that killed several hundred people. That act of brutality had defined China in international discourse for years after. But China's pariah status was already fading as Western executives salivated over the lucrative opportunities waiting to be exploited there. The Clintons were in Beijing in the service of that cause.
Clinton had initially presented himself as one of China's most strident critics. During his 1992 campaign, he attacked the incumbent president, George H. W. Bush, for normalizing trade relations. He accused Bush of pandering to the "butchers of Beijing." Soon after taking office, Clinton signed an executive order threatening China with tariffs as high as 70 percent unless it showed "overall significant progress" on human rights.
So much for all that.
Inside the citadel of Chinese power, Clinton demonstrated the updated values guiding his administration's approach to China. The demonstrators had been gunned down only a few hundred yards from the banquet hall, but that event had seemingly been dispatched to ancient history. The Clintons posed for pictures. They saluted their hosts, Chinese president Jiang Zemin and his wife, Wang Yeping. "The American people admire the great strides China has taken," President Clinton declared during a predinner toast. "We Americans appreciate the mutual respect of our relationship."
After a meal featuring shark's fin and grilled beefsteak, the two couples worked their way to the far end of the banquet hall. There, they greeted the musicians who had been entertaining them—members of the People's Liberation Army Band. To the delight of the assembled, President Clinton wielded a baton and briefly conducted the band as it played a John Philip Sousa march, "Hands Across the Sea."
Clinton's turn as maestro before the very institution that had slaughtered peaceful protesters marked the completion of a striking makeover. He was now leading a campaign orchestrated by American business interests to ditch commerce-impeding considerations of human rights in favor of exploiting China as the Holy Grail of profit centers. Getting China into the WTO was the centerpiece of that effort.
The WTO was the referee for international trading disputes. China wanted in for the simple reason that this would unlock fresh export opportunities and lure foreign investment. But gaining entry required that China promise to open its markets to foreign competition. That prospect horrified the heads of China's industrial giants, yet was favored by Premier Zhu Rongji, then spearheading economic policy. He saw the mere process of applying to join the WTO as an accelerant in modernizing the Chinese economy.
Zhu was aided in his mission by a crucial constituency—the American business lobby, which recognized a gold mine in China. Here was a country of over 1.2 billion people, making it the largest potential market for practically everything. Telecommunication companies and financial giants stood to gain clearance to buy larger stakes of Chinese ventures. Agribusiness would be free to sell mountains of soybeans, wheat and other crops. Multinational brands were especially enthralled by the savings to be gained as they moved manufacturing away from wealthy nations with unions and workplace safety regulations, transferring production to plants in China. There, Party officials were the law, and their loyalties could be purchased with a cut of the bounty. Unions were banned, and hundreds of millions of rural people were streaming toward cities in desperate pursuit of work—an ideal recipe for low-cost production.
Here was an ironic confluence of interests. The People's Republic of China—still dominated by a Communist Party whose power flowed from a peasant-led revolution—beckoned as the ultimate joint venture partner for Walmart, Apple and other icons of American capitalism.
Still, multinational companies were fearful of seeing their designs on China construed as a crude reach for profit. Stories of pervasive Chinese repression, human rights abuses and labor exploitation posed reputational risks. So, American business and its political allies reframed the terms of engagement, while settling on a consensus narrative: expanded trade with China would advance freedom. Yes, American companies stood to make enormous amounts of money in China, but that was incidental to the transformational mission at hand. A chorus of Clinton administration officials declared this repeatedly. Once China was inside the WTO, its prosperity would depend on operating within its norms. Chinese companies would require greater understanding of the outside world to capitalize on the benefits of joining the global trading system. Chinese consumers would gain exposure to international fashion trends, music, entertainment and sports. All of this would infuse Chinese society while generating demand for the ultimate Western export: democracy. First, Chinese people would get a taste of Kentucky Fried Chicken. Then, they would demand the ballot box.
"By joining the WTO, China is not simply agreeing to import more of our products; it is agreeing to import one of democracy's most cherished values: economic freedom," Clinton declared in a speech on the eve of a key congressional vote that cleared the deal. "The genie of freedom will not go back into the bottle."
There was logic to this construction. Markets demanded intelligence, and repressive governance was at odds with the free flow of information. But the most powerful driver of such faith was the imperative of the bottom line. The greatest beneficiaries of China's entry into the international trading system were the shareholders of the multinational brands that would exploit China as a source of cheap workers.
In Washington, lobbyists representing the largest American companies described China's entry to the global trading system as an opportunity to advance the agenda of reformists in Beijing. Clinton's Treasury secretary, Robert Rubin—who would go on to head the financial services giant Citigroup as it penetrated China—assured Congress that the country's entry to the global trading system would "sow the seeds of freedom."
Yet behind the scenes, major lobbying organizations like the National Association of Manufacturers and the Business Roundtable complained that tying trade policy to human rights rendered their dealings in China uncertain, limiting their appetite to invest. And that was impeding their grandest plans—selling products to Chinese consumers while relying on Chinese factories as central components in their supply chains.
As Clinton's secretary of state, Warren Christopher, later put it: "The business community had convinced the president that trade for America was a higher value, or perhaps, to put it more charitably, that nothing would be accomplished in the field of human rights by denial of trade, and so that became the basic policy."
▸ Excerpted from the book How the World Ran Out of Everything: Inside the Global Supply Chain by Peter S. Goodman. Copyright © 2024 by Peter S. Goodman. From Mariner Books, an imprint of HarperCollins Publishers. Reprinted by permission.
