How the United States Should Confront China Without Threatening the Global Trading System

Robert Lawrence

No PB18-17, Policy Briefs from Peterson Institute for International Economics

Abstract: The Trump administration’s willingness to violate trade rules to maximize its negotiating leverage is undermining its most important and most legitimate objective in international trade and investment: persuading China to reform its problematic economic system, in which foreign firms are discriminated against in high-tech projects. The administration could have dealt with the problems posed by China through measures that would have been consistent with preserving the rules-based trading system rather than threatening it with destruction. Instead of confronting China with unilateral actions, the administration should be working with its allies to put pressure on China to conform to World Trade Organization rules where these are applicable. But the administration’s actions, coupled with China’s retaliations, have so far been counterproductive. And overall they have weakened adherence to rules and norms that have contributed to the success of the global trading and investment system.

Date: 2018-08
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