The right way to beat China on trade

There’s already a trade war, and it’s being waged by Beijing.

China’s ascension to the World Trade Organization nearly 20 years ago has failed in its large-scale strategic objectives. It hasn’t created a liberalizing regime or a free-market economy in China; in fact, it hasn’t even created a China ready and willing to abide by the norms of free trade.

The regime of Xi Jinping, who increasingly looks like president for life, hasn’t been pushed toward democratic reforms by a rising middle class. He has centralized power and written “Xi Jinping thought,” challenging Western liberalism, into the constitution.

China still champions state-led, rather than market-led, capitalism. It has no rule of law, and the government suffuses the economy such that the distinction between state-owned enterprises and purportedly private-sector firms is fuzzy. A country that has a “13th Five-Year Plan for Science and Technology” is probably not robustly free market.

As for trade, China has taken advantage of the WTO to push mercantilist policies. It uses non-tariff barriers and industrial policy the WTO wasn’t built to address to maximize exports and minimize imports.

President Trump’s prospective tariffs on steel and aluminum have put renewed focus on China trade, although the tariffs, at least as announced by Trump, are a comically inept misfire if their true target is China. The rubric for the levies could be: “How to lose a trade war with China in one easy step.”

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