To Counter China, Out-Invent It

Trump’s Trade War Ignores the Real Threat From Beijing

A lab in Beijing, May 2017 Reuters

China’s economic strategy is no secret. In the short term, Beijing will grow the country’s economy by manufacturing and exporting cheap, globally competitive goods. Over the longer term, it will build the capital, infrastructure, and expertise necessary to make the country an innovation powerhouse.

China is not the first to adopt this strategy. The same measures powered the rise of countries such as Germany, France, and Japan over the last 70 years. And even then they caused considerable trade friction with the United States. Washington accused all three of those countries of unfair trade and monetary policies—Germany and France in the 1970s and Japan in the 1980s. Recent U.S. administrations have accused China of the same. But this time around, the tension is more concerning. China is much more populous than Germany, France, or Japan, and its economy could easily become the world’s largest. Beijing also projects influence beyond its borders, sharing technology with smaller countries and endeavoring to create a set of close trade and investment relationships—ones that may one day be based on Chinese renminbi instead of the U.S. dollar.

In his second term, President Barack Obama tried to pressure China to change its behavior through alliances and international cooperation, most notably in the form of a trans-Pacific trading bloc. More recently, President Donald Trump has taken a confrontational approach and imposed tariffs on Chinese goods. Trump has labeled China a “currency manipulator” and seeks to end intellectual property theft and narrow the U.S.-Chinese trade deficit by waging a trade war.

But Trump’s sights are set on outdated threats. China’s economic strategy has already mostly succeeded. As a result, Beijing hasn’t artificially depressed the value of its currency in over a decade, and it has begun to improve intellectual property protection as a way to encourage local innovation. The bilateral trade deficit, while asymmetrical, is a bad reason to launch a trade war. There is no need to

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