NBA fans occasionally come up with fanciful trade proposals—say Trae Young for Zion Williamson—and then ask, “Who says no?” The basic idea is that if your trade proposal is clever enough then neither side will say no.
Commenters occasionally tell me that the US must get tough with China, because that country is trying to make the world a more illiberal place. I actually don’t think China cares very much how liberal other places are, but I do agree that the Chinese government is increasingly nationalistic and bullying. I’m much less confident that the proper response is a trade war with China.
Today, there are only two countries in the world that have very much ability to bully other countries, the US and China. So I developed a proposal to make world trade more liberal, with much less bullying. After reading my proposal I’d like you to consider who says no.
Provision A: No trade policies of WTO members can interfere with the free expression of speech in other countries, either by private citizens or public officials. Thus China cannot retaliate against Australia for calling for an investigation into the origin of Covid-19. If you want to have trade sanctions in response to speech that you object to, then you must leave the WTO and give up most favored nation status.
Provision B: No third party sanctions. WTO members are free to restrict their own imports and exports if there is a plausible national security rationale. But country A cannot punish country B for trading with country C. Thus the US cannot punish foreign countries trading with Iran, or foreign companies supplying components to Huawei.
And that’s it. Two very simple proposals to make trade more liberal. Both aimed at stopping big countries from bullying small countries, by which I mean the 99% of the world’s 200 nations not called China or the US. The vast majority of those smaller nations would support my proposal.
The proposal is written in a way where both the US and China would be giving something up. And yet while I cannot be sure, I suspect that it would be the US that says no. That’s because while both countries are bullies, the US is the bigger bully.
China has the larger GDP in PPP terms, but the US has more power because our GDP is concentrated in areas that other countries cannot do without, such as our control of the dollar-dominated global banking system as well as dominance in high tech, while China mass produces many ordinary products than can just as well be produced in other countries.
In recent years, the US president has increasingly become a sort of dictator of the world. The president can go a long way toward destroying a foreign company by denying it access to the international banking system. Entire countries can be badly damaged by sanctions programs that don’t just punish US firms that trade with our adversary, but even firms located in friendly countries that don’t happen to share our foreign policy obsessions. China also has a lot of power due to its vast market, but not that much power.
Both countries might have signed onto the deal back in the 1990s, but not today. At that time, neither were doing much of the bullying that I describe above. Because the US is the biggest bully of all, and because it is rapidly increasing the extent to which it bullies other countries all over the world, I suspect that it is the US government that would turn down my proposal.
I’m generally not in favor of fighting trade wars, but I’d have some sympathy for a war fought to advance my proposal, a trade war fought to make the world a more liberal place. But while hardline American intellectuals often complain about Chinese illiberalism, actual US policymakers spend their time trying to extract billions more from Chinese consumers in order to further enrich people like Bill Gates and Marc Zuckerberg. That’s not a trade war that I’d choose to fight. The US, with 4% of the world’s population and roughly 20% of its GDP, has 54.5% of global stock market capitalization, partly because our overly generous international property rights regime extracts wealth from all over the world. How much more do we want? So no, IP theft is not my number one concern right now.
PS. Both Atlanta and New Orleans say no to my NBA trade. New Orleans because Williamson is viewed as the bigger talent. Atlanta because the NBA is increasingly a three point shooting league and because there are doubts as to whether the human body is designed to absorb the punishment that Williamson will put on his knees and feet. And both GMs because you get blamed more for making bad trades than refusing to make good ones.
READER COMMENTS
Anonymous
May 20 2020 at 1:50pm
Prof Sumner,
One problem I see with these proposals is that it requires one to prove the reason that China/US is enacting a tariff/sanction. For example, in response to Australia calling for a Covid-19 investigation, can China not just put a 90% tariff on Australian goods and claim that it was in order to benefit/protect their own manufacturers? And can’t the US do likewise in regards to Huawei or Iran?
Scott Sumner
May 21 2020 at 12:24pm
That would also violate WTO rules.
Alan Goldhammer
May 20 2020 at 3:17pm
Who says no? Peter Navarro, that’s who!
Phil H
May 21 2020 at 3:35am
Strategically, this would be a very good move for the USA. I can’t see any future where China does not get more powerful over the next 20-50 years, so it will become the de facto biggest superpower. The more anti-bullying regimes the USA locks into place now, while it still has more international clout, the better it will be positioned going forward.
Scott Sumner
May 21 2020 at 12:25pm
Very good point.
Matthias Görgens
May 22 2020 at 11:25pm
It’s a good point, but do American politicians play that long a game unless voters (and public opinion) reward them for it in the short run?
Floccina
May 21 2020 at 12:28pm
50 years from now the USA might have a higher population that China. The population of China is expected to start falling some time in the next 10 years.
Scott Sumner
May 22 2020 at 12:07am
In 50 years the US will probably have roughly 400 million people. China will have roughly 1.0 to 1.2 billion.
P Burgos
May 22 2020 at 3:29pm
The US has a sub-replacement birthrate, and it is still falling. Immigration was at a very low level before the pandemic, and likely will be even lower after it. Trump’s changes to immigration policy will be hard for future Republicans and Democrats to undo politically, and they won’t want to waste political capital on it. And the US will be a much less attractive place for people to migrate to, both because the US response to the pandemic tarnishes its reputation, and also because the new rules and operating procedures make it more difficult for immigrants, and as nations like India, China, and other places become wealthier and so there is less of an incentive for people to move.
So I don’t think that the US will reach 400 million residents by 2050. Maybe it will get to 350 million, but not much more than that.
MikeDC
May 21 2020 at 3:21pm
Who says no would be dependent on who says yes. If China said yes, the US would say no. But if the US did say yes, China would end up saying no.
Why? Because as you point out, this is really a big country vs. small country policy, not a US vs. China policy. US and China would, in this case, be on the same side, though they would publicly agree or disagree with each other to gain a tactical advantage.
Beyond that, the talk about making trade policy more “liberal” and less bullying seems misplaced. Most bullying and iliberalism in intranational, and we might do better to hold national governments to minimal standards of individual rights rather than to keep anthropomorphize national governments and treat them as discrete leviathans.
Like, I can’t get too worked up about efforts to “bully” evil, repressive regimes.
On the other hand, I could fully get behind policies that held all members to a common, basic standard.
Scott Sumner
May 22 2020 at 12:09am
The US is bullying many democratic nations in places like Europe and North America.
Matthias Görgens
May 22 2020 at 11:27pm
And the bullying is often in the form of trade restrictions.
Restrictions that fall on private individuals and companies.
Governments can even benefit from trade restrictions, if they make for good stories. Just like the Castro regime was supported by American embargoes.
Jon Murphy
May 22 2020 at 8:11am
I like what you’re saying and I agree wholeheartedly, but I think the problem is it is only agreeable to people with a liberal mindset. Unfortunately, we currently have a president who thinks liberalism is weakness and that trade harms us. Thus, I agree that the US government would be the one to object.
ricky
May 26 2020 at 12:25am
These proposals are unrealistic.
The world will always have a hegemon. The question to ask yourself is whether you want that hegemon to be – for the most part – a force for good, or a force for evil. There is no doubt that the United States has abused it’s power (at times), but the abuse from the U.S.. has not been anything like what we’ve seen from the CCP. Let’s review shall we?
The CCP arbitrarily arrests foreigners to use as bargaining chips (Canada Conflict).
The CCP uses their military to violate sovereignty with the purpose of taking national land and resources. They even have the audacity to begin building roads on it (India, Chinese conflict)
The CCP uses their military to seize islands that belong to Vietnam and Philippines, and responds to their inquiries by telling them to “shut up, or we might get very angry”.
The CCP seeks to gain political power in foreign countries by buying up land, and businesses, then using business ownership and influence to exert control over policy makers. Therefore, enacting Chinese friendly laws. In countries that have a decentralized government, like Australia, they seek to drive a wedge between independent states (Victoria) and the central government with the purpose of weakening the central state.
The CCP uses the one belt one road, to setup Chinese owned businesses in foreign countries, employing only the minimum amount of local labor needed to appease the govt, and use the rest of that money to hire Chinese nationals and funnel the profits back to Chinese accounts. Chinese tourists are told to only go to Chinese owned businesses, and ignore local owned businesses, to help destroy the local economy and consolidate Chinese power.
I am not suggesting the U.S. is perfect. But the U.S. has been the only hegemon in world history to show respect for law and sovereignty (again, for the most part). There have been some occasions where sovereignty law has been violated, say when we entered Pakistan with helicopters to kill bin laden, but that is very different then what we are seeing from the CCP.
The commenter says that he cannot imagine a China that is not a superpower. It’s very easy to see a China that is NOT a superpower. A china that continues to isolate itself from the international community, that continues to engage in conflict that exceeds what most nation states consider to be acceptable behavior, and a china that continues to engage in acts of war, will not be a China that exists for very long.
In the U.S., there are essentially two schools of economic thought. There is Keynesian (the minority), and what they call ne0-classical. The group think that exists within the substructure of American economics is dangerous. It’s dangerous to the American economy, and the health of the global eco-system. The fact that economists rarely argue over important topics is a dangerous, dangerous, thing for the academic community. It shows complacency, and fear.
You can continue to believe in fair and free trade. At it’s core, there is no question that trade increases efficiency and wealth. But you have to ask yourself whether increases in wealth and efficiency lead to a better life or a worse life.
A life where millions of Americans are unemployed because they cannot compete with Chinese and Vietnamese labor. A life where the CCP purchases companies around the world to gain majority share, pushout board members, and gain access to critical infrastructure. A life where your ISP providers are consistently monitoring your geo-location data, and your conversations for “key words”. In that Orwellian world, arms bearing, resource hungry people, are not going to be better off (at least not the majority).
If you would like to know what life is currently like under the CCP. You may ask the majority of Chinese. Of course when you ask please make sure the battery is removed from your phone (shutting it down is not enough), you are indoors away from the CCP camera’s, and that minders are not within ear distance!
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