The Need for a Global Trade Makeover
It is not just the United States and other advanced economies that need more policy space. China and other countries should not be encumbered by global trade rules in deploying their own growth-promoting structural diversification policies.
CAMBRIDGE – US President Donald Trump’s on-and-off trade war against China added ominous clouds of uncertainty to the world economy in 2019, raising the prospect of a significant global economic downturn. His erratic and bombastic style made a bad situation worse, but the US-China trade war is a symptom of a problem that runs much deeper than Trump’s atavistic trade policies.
Today’s impasse between these two economic giants is rooted in the faulty paradigm that I call “hyper-globalism,” under which the priorities of the global economy receive precedence over the priorities of the home economy. According to this model for the international system, countries must maximally open their economies to foreign trade and investment, regardless of the consequences for their growth strategies or social models.
This requires that national economic models – the domestic rules governing markets – converge considerably. Without such convergence, national regulations and standards will appear to impede market access. They are treated as “non-tariff trade barriers” in the language of trade economists and lawyers. China’s admission to the World Trade Organization was predicated on the assumption that China would become a market economy similar to Western models.