Chinese Reform During a Trade War
China has only limited influence over the evolution of the rules-based world order. But, by upgrading its property-rights infrastructure, it can support shared prosperity and mutually beneficial engagement, potentially defusing some of the tensions that have lately been fueling instability worldwide.
HONG KONG – Last June, The Economist lamented that “Donald Trump is undermining the rules-based international order,” as he seeks “short-term wins for America” at the cost of “long-term damage to the world.” With Trump now escalating his trade war with China – and with both sides seeming to be girding for protracted competition over technological leadership – the threat is only growing.
For a long time, trade appeared to benefit everyone. This assumption underpinned a broad global consensus on trade rules, including the relatively consistent protection of property rights. China, for example, has managed to integrate itself into the global economy because its firms learned how to operate and compete within the framework established by the World Trade Organization.
But, as the Nobel laureate economist Joseph Stiglitz has repeatedly pointed out, the neoliberal obsession with unfettered markets failed to account for the distributive costs of efficiency gains. Inequality has risen sharply, spurring many populations to become increasingly disillusioned not just with the specific factors fueling it, but with openness and globalization in virtually all its forms, including immigration and free trade.
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