China's successful economic development model has changed that calculus, at least for the United States.
“China” here is important because of its size. 18 percent of the world's population represents a strong productive and consumer market. China is now a wealthy country by most standards, and “success” is important because wealth breeds influence.
The United States has adopted many of the policies that China has adopted and uses them against China.
The “economic development model” is important because China's state-led, heavily subsidized, export-oriented model competes with the private sector-led, competitive and consumer-based model that is the main objective of WTO rules. It is. Add to that China's increasingly authoritarian and internationally assertive approach under President Xi Jinping.
According to this calculation, WTO rules underpin the system that has enabled China's economic growth and will continue to enable its authoritarian system and international aggression.
WTO rules, and the benefits China derives from the open international market they support, have proven unable to induce China to abandon trade and investment policies inconsistent with the WTO's objectives. .
These include high government subsidies that contribute to global overcapacity, forced transfer of intellectual property as a condition of investment, and the use of commercial relationships as a tool to achieve political and strategic objectives. and so on.
protectionist strategy
U.S. advocacy for China to move away from these policies has failed. Instead of defending it, the United States is taking many of the policies adopted by China and using them against China. Subsidies and state-sponsored incentives under the Inflation Control Act, restrictions on investment in and from China, and a ban on exports of advanced chips to China.
Other people are also following. In January, the European Union strengthened screening of foreign investments in the EU, pushing for greater coordination of export controls and identification of risks posed by foreign investment in some technologies. The Netherlands and Japan have joined the US ban on exports of advanced chips and chip manufacturing technology to China.
Australia's strategic investments in critical mineral processing are aimed at countering China's stranglehold on this sector and trade diversification strategies that weaken China's ability to exert political influence through domestic industry. The National Recovery Fund and Modern Manufacturing Initiative are attempts to restore added value through diversification and support supply chain resilience and overall economic resilience.
Industrial policy is back in vogue, with market openness, competition, and economic efficiency playing a secondary role in national security and economic resilience.
What does it mean for economic growth to fall to the second-largest global economy? It means more government intervention in markets, higher government debt, lower economic efficiency and value erosion, and higher unemployment. means.
That means we will walk a difficult path.
And at the end of that road is the WTO, a very sensible idea for us all to sit down and sort out our differences through rules that support open markets that benefit us all. Probably.
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