Editor's Note: The following essay has been excerpted from the German best-seller "World War for Wealth: The Global Grab for Power and Prosperity" by SPIEGEL editor Gabor Steingart. SPIEGEL ONLINE is publishing a series of daily excerpts  from the book.

After the end of World War II in 1945, the North Atlantic Treaty Organization (NATO) emerged as a Western military alliance. But its combat units don’t prepare wars of aggression -- NATO is a defensive coalition. Nevertheless, the group's military planners do have the task of thinking about -- and planning for -- the unthinkable. Sometimes NATO even goes so far as to threaten military action.

The alliance also strives to keep its arsenal state-of-the-art -- whichever member notices a shortcoming has a duty to raise the alarm, even if that warning is unpopular. Former German Chancellor Helmut Schmidt, for example, noticed the Soviet Union build-up of SS20 rockets and immediately realized the implications. The West had nothing to counter these mid-range missiles, aimed as they were directly at Western Europe. The region was at risk, even if the majority of Germans didn’t notice or feel the danger.

Even members of Schmidt’s own party, the Social Democrats, thought the Chancellor's concerns exaggerated, with some even accusing him of being overly hawkish. His campaign to deploy Pershing and Cruise missiles was met with angry protests. Armament finally came, but Schmidt was no longer in office.

Why the history lesson? Because in today’s economic world a similar security risk has developed with China’s emergence as an economic power. Free-market economies in the United States and Europe find themselves confronted with China's controlled market economy -- a model for which they are unprepared. In the global war for prosperity, a rival has emerged -- and it is willing to use complete state protection to win.

China is supported by a banking system which pursues other ends than mere profit. Import tariffs protect entire industries as effectively as a brick wall. Thus does China, a shoe exporter, prevent shoes from coming into the country. The domestic market is protected from foreign competition by a 27 percent surcharge.

Furthermore, Chinese currency policy acts as a massive subsidy for exports by keeping prices of goods sold abroad artificially low while the intellectual property of foreign firms is taken without payment and without compunction.

More than any other country in the world, China talks the free-market talk while never deviating from the state-controlled walk. The country’s leaders clearly don’t navigate by the principles of free trade, despite having committed themselves to do so in international treaties.

China promises remedies but does nothing

As the West looks spellbound at developments in the Far East, the old dream of unconditional free trade is slowly fading, with nothing waiting to replace it. Apart from a collective feeling of outrage, which the Chinese leadership has learned to live with, there is no consensus about what to do. Diplomats and leaders who visit the country demand fair trade conditions, call for better protection of intellectual property and criticize the role of the currency policy. China’s leadership listens passively to the West’s complaints, before apologizing, and promising to address the situation. But they have done nothing about it for the past decade and a half.

So far, Europe and the US have avoided changing tack from focusing on trade to focusing on trade policy. The idea of protectionism has become taboo. When uttered, economists shake their heads and politicians roll their eyes.

The current situation, though, cannot continue. Not that we should blithely erect protectionist walls. What we can do, however, is display the bricks which could be turned into a wall if necessary -- while making clear our unwillingness to ever use them. As it currently stands, the Western countries are economic pacifists, uneasy about even arming themselves.

The Old Continent and the New World swore they would never use the weapons of modern economic warfare because they believed free trade would necessarily lead to wealth and growth. The result, paradoxically, is that the economists and economic policy makers -- who see themselves as a highly rational bunch -- have become the biggest dreamers of all. The accusations once levelled at peaceniks and pacifists now apply to Western economists: They think the best of people and are therefore dangerous. They know a lot and are still incredibly naïve.

Aiming for parity

The question today, of course, is not whether free trade should be ended. Even Helmut Schmidt didn’t end the policy of détente and march on the Soviets. Instead, the question is this: When will Europe and the West realize that a pure market economy exists only in the minds of our economists, but is not how individual states function in reality? For China, trade conditions are a question of utility, not of faith. Europe and America would do well to aim for parity.

Given the present-day realities, America has started to back down from the economic ideals it once touted. The state protects and supports its own economy wherever it can. Steel and agriculture in particular are two industries which get special protection. Additionally, foreigners are not allowed to hold controlling stakes in media companies, and ports were, prior to a recent intervention by the US Congress, in the same boat. Asian companies are taken to court for violating copyright and trademark laws and for stealing software. Import quotas have likewise been slapped on the Chinese textile industry -- and customs authorities are vigilant about reporting any infringements.

In the eyes of both Republicans and the Democrats, imports and exports are not acts of nature which flow uncontrolled into or out of the country. Trade is a political instrument to be leveraged according to national interests.

Further illustrating America's attitude toward dealing with the global market, the US commissioner for trade is a member of the cabinet. And yet, when it comes to trade, the president himself has a very limited mandate -- one which Congress, even in the middle of a president's term in office, can refuse to renew. When it comes to global trade, Congress demands its say.

A tougher authority

The new US Treasury Secretary, Henry Paulson, former head of the investment bank Goldman Sachs, announced his readiness to take on Asia the very day he was appointed: He would, he promised, promote free trade -- which for him means ensuring that “our trading partners play by the rules.”

The most common critique of aggressive trade policy is the price argument. In the end, the argument goes, any control on the economy only hurts the consumers because manufacturers who offer the lowest price may not get the chance to enter the game at all. Such reasoning, though, ignores the fact that consumers not only demand cheap T-shirts and bargain electronic goods, but also want jobs.

Plus, even low consumer prices can’t go on forever. If one country succeeds in dominating the global market and destroying the competition, rock-bottom prices are history. Monopolies and cartels are not in the consumer's interest, which is why smart trade policy is also anti-monopolist. It must ensure that anti-cartel legislation, essential to the health of the marketplace, also be applied internationally. When it comes to monopolies and cartels, global markets function every bit as badly as domestic ones do.

Low prices is always one -- but not the only -- criteria for trade. If the aim is to increase the wealth of one's own nation, and not that of the country goods are being shipped to, it is important to pay closer attention. The liberal economic structure is only liberal within its sphere of influence. In order to win out in the end, the liberal model requires an authority which allows for punishment and monitoring. It must have the ability to maintain a surveillance of the market. Who is the supplier? What are the conditions? How was the price set? And, what benefits accrue to the manufacturer's home country that are not reflected in the price?

The paradox of Western controls

In exercising such surveillance, the threat of quotas, tariffs and import bans is more important than actually implementing them. International trade policy is a bit like a game of poker, in which one player tries to trump the other. Pacifism in such an atmosphere is a sign of stupidity. Those whose ideology prevents them from playing the trump card are destined to lose the game.

In Western Europe there is a strange imbalance when it comes to foreign and trade policy. Europeans are very interested in what happens abroad when it comes to air and water pollution, and to capital invested in foreign countries. Europe now has environmental agreements and treaties concerning the protection of foreign investments with over 100 countries.

Similarly, the state also tries to prevent dirty money from crossing its borders. Millions earned in drug smuggling, human trafficking and the illegal arms trade are tracked down with all technological means available. Goods are checked and confiscated, making life difficult for criminals. The state doesn’t necessarily win every time, but it aggressively plays the game. The message to criminals is loud and clear: Be on your toes, because we certainly are. There is no refuge.

Even food imports are closely examined. The laws governing food in Vietnam and Morocco are all well and good, but they are of little interest to us. But what finds its way from there to Germany, France and Italy, is determined by European import legislation.

All of which serves to protect citizens here. There is a consensus that food has value over and above its price. Indeed, access to nearly all sensitive markets is regulated in a similar way. Medication made by a pharmaceutical company in India, for example, would never be sold in Europe without the company first being checked by EU authorities. A nuclear power plant constructed by those who built the Chernobyl reactor wouldn't have a chance in Western Europe. And cars without modern catalytic converters are routinely knocked back by customs officers.

It makes sense that goods have to comply with the safety standards of the country where they will be sold. The decisive factor here is the national criteria of where the consumer is, rather than the manufacturer. And it is a factor which necessarily causes the manufacturer to adapt his goods to meet the criteria his customers demand.

But nowadays workers enjoy less protection than bees and prawns. The consumer need not balk when prawns from China appear in the supermarket freezer next to prawns from the North Sea. Both must adhere to the same law governing banned additives. Even the amount of antibiotics used in breeding is controlled. A memo issues by German customs authorities on Sept. 25, 2005 was categorical:

“In the past, some foodstuffs from China have repeatedly contained the antibiotic Chloramphenicol. The member states of the European Union have therefore banned the industrial import of animal products. This ban was decided on as a result of inspectors in China finding substantial deficits. All animal products which are destined for human or animal consumption are covered by this ban. This includes in particular food such as prawns, chicken, rabbit meat and honey.”