If you doubt that we have moved on from the era of laissez-faire free trade, read a white paper released late last year by the Chinese government. The title, China’s Export Controls, is not brilliant. But the conclusions are, at least for those who care about trade.
“The world is experiencing profound changes on a scale not seen for a century, with a multiplication of destabilizing factors and uncertainties,” reads one passage. “The status and role of fair, reasonable and non-discriminatory export control measures are gaining prominence as an effective means of addressing international and regional security risks and challenges and safeguarding world peace and development.
On the one hand, that doesn’t tell us anything we don’t already know about the past few years of trade battles between the United States and China, particularly around high-growth technologies. But the Chinese argument deserves special attention, because very often when American politicians, regulators and policymakers make the same point, they are labeled as protectionist, nationalist or worse. This is true even within the US administration itself, where there seem to be two opposing camps.
The first, Team Status Quo, is heavy on state departments and trade types. They want to believe that we can somehow go back to the 1990s, a period of willful blindness about a “one world, two systems” model in which China and liberal democracies would cooperate for their mutual benefit despite maintaining fundamentally different policies and economies. systems.
The second, Team New Rules, includes Katherine Tai, the U.S. Trade Representative, as well as other administration officials interested in labor, climate and long-term security issues. They have a more realistic approach, understanding that even if the United States wanted to revert to a neoliberal trade approach that prioritized market access for big business over better wages, the ability to manufacture critical products, or the protection of the planet, China enters another direction.
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Beijing’s so-called dual circulation plan is a decisive step away from World Trade Organization rules and multilateral agreements orchestrated by technocrats from the United States and Europe. It prioritizes self-reliance, indigenous innovation, and the use of all strategic resources to shape a world where the United States no longer makes most decisions. This means doing more business deals in renminbi, to better reduce the financial leverage the dollar gives the United States. It also means militarizing supply chains – various legislative loopholes in the United States still allow states and companies to source from China, such as personal protective equipment.
This is the state of affairs. The only question is how the United States should react. The status quo team should abandon the rather arrogant idea that the United States can return to the Clinton era, or the electorate wants it to. And the United States should craft a trade policy fit for today. The starting point should be the objectives. Rather than simply making new trade deals without a concrete understanding of how they connect to today’s geopolitical reality, the United States should ask itself, “what kind of economy do we want to build?” “.
The new settlement should be economically fair and geopolitically secure, with a level playing field for businesses of all sizes, better wages and environmental standards, resilient supply chains, and a thriving industrial commons. This is particularly important for innovation in industries such as semiconductors, where companies learn by making.
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Once the overriding objectives are in place, the administration can articulate coherent policies and develop strategic trade agreements. This is exactly what China is doing. In fact, it goes further, incorporating trade as part of a much larger economic picture that is measured in decades, not quarters – or in the case of the former US president, in tweets.
This type of top-down planning is complicated, risky, and inappropriate for the United States. But more strategic thinking for a new world is not. “Trade is a tool,” says Lori Wallach, a trade lawyer who leads the Rethink Trade program at the American Economic Liberties Project, a think tank focused on breaking concentrations of economic power. “This administration has set goals such as creating good jobs for workers with and without college degrees and building economic resilience,” she adds, “and our trade policy and agreements must provide, not damage. that”.
A timely example is the fight over competition law in the House and the innovation and competition law in the Senate. Both bills support greater domestic chip production and the rebuilding of critical supply chains. But the House bill has a deeper analysis and approach to the relocation of goods and capital, better environmental protections, and stronger trade adjustment assistance. This is crucial for Democrats to avoid the mistakes of the Clinton era, when they encouraged unfettered trade without adequate support for those who lost their jobs, some of whom later backed Donald Trump. For Democrats, it was the most politically devastating policy choice of the past two decades.
I could go on. There are many inconsistencies between White House goals and initiatives like Buy America, which really means Buy America plus 60 other countries with widely varying economies and political systems, or how we think about trade and security. Pan-Asian. The fact is, the United States has no new unifying theory for trade policy in our post-neoliberal era. We need one now.