“This won’t revolutionize the U.S.-China relationship or the terms of trade between us, but it shows that the two countries can work together on an important issue,” said Clete Willems of Akin Gump to Bloomberg, referring to President Trump’s “phase one deal” announced October 11. “Learning to do so is critical to avoid a broad deterioration of all aspects of our relationship, which is not in anyone’s long-term interest.”
Despite what Willems said, it now is in the long-term interest of the United States to walk away from trade deals with the People’s Republic of China.
Why? Four reasons: First, communist China has never accepted the notion of comparative advantage, which underpins the global trading system. Yes, the mercantilist Chinese believe we should buy their products, but they, the masters of non-tariff barriers and other forms of predation, have worked hard to keep foreign goods out of their market. How can America trade with a state that does not believe in the benefits of trade?
Second, Communist China has in fact never honored a trade deal with the US. Beijing, over the course of decades, has systemically violated both its World Trade Organization obligations and its obligations to America in various bilateral agreements.
Third, China’s economic system is incompatible with America’s. Xi Jinping, the Chinese ruler, has in recent years been forcibly marching the country backwards, the “great regression” as it is now called.
He has, with ruthless determination, been closing off the Chinese market to foreigners with, among other things, highly discriminatory rule enforcement and the enactment of prejudicial laws and regulations. He has at the same time been recombining already large state enterprises back into formal monopolies, reversing the partial privatization of earlier years by increasing state ownership of state enterprises, having the state take control of private companies, shoveling more state subsidies to favored state market participants, and pursuing development through dubious industrial policies such as his infamous Made in China 2025 initiative to dominate 11 crucial technology sectors.
As they now say in China, the state sector is rapidly “advancing” and both the private and foreign sectors are “retreating.” That is because Xi is seeking to return China to a modern form of Maoism.
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