Experts: Next US president should shift China policy
The next United States administration should recognize the “unstoppable expanding role” of the Chinese economy, avoid a policy of “decoupling”, and unilaterally remove commitment targets for purchases by China in the US-China phase one trade deal, according to researchers at a Washington-based think tank.
As US voters cast their ballots to choose between incumbent Republican President Donald Trump and Democratic challenger Joe Biden, US researchers are compiling “actionable” to-do lists to tell policymakers what needs to be repaired while the country is heading into a new presidential term.
“No matter who wins the US presidential election tomorrow, work needs to be done to repair the global economy, which was fracturing even before the pandemic,” Adam Posen, president of the Peterson Institute for International Economics, said on social media on Monday in introducing his institution’s policy proposals for the new presidency.
Nicholas Lardy, a leading US expert on the Chinese economy, said the incoming administration should assume that China’s economy and its influence on the overall world economy will continue to expand.
In a memo to the chair of the US delegation for bilateral economic talks with China, Lardy suggested the next administration “recognize China’s unstoppable expanding role” and “adopt and work toward obtainable goals”.
“These would not include slowing China’s economic rise or promoting regime change,” said Lardy, as “there is little the United States can do to significantly slow China’s economic rise and its increasing role in the global economy”.
For one thing, China is leading the global recovery from the COVID-19 pandemic, primarily because it was successful in controlling the pandemic within three months of the initial outbreak, according to Lardy.
“In contrast, the United States and several other advanced economies continue to struggle more than six months after their initial outbreaks,” he wrote.
The new US presidential term will coincide with the start of China’s 14th Five-Year Plan (2021-25). In explaining the proposals for the draft plan last week, President Xi Jinping said, “China has the world’s largest consumer market, which also possesses the greatest potential. The room for growth is huge.”
The International Monetary Fund said last month that China continues to be the only major economy to show positive growth in 2020, while the United States is forecast to see a 4.3 percent contraction in its gross domestic product during 2020.
“China accounted for 30 percent of global economic expansion in 2019, and its share in 2020 will almost certainly be larger. Thus, a US decoupling strategy would be a policy of economic self-isolation from a major source of global growth and trade,” Lardy said in the memo.
Little interest shown
Other countries have shown little interest in participating in a US-led decoupling strategy, given China’s growing global economic and financial role. They have even less of an appetite for joining a US-led effort to promote regime change in China, according to Lardy.
Even a narrower US decoupling in technology is likely to be a highcost strategy for the United States. For example, shutting US semiconductor companies out of the China market will lead to the loss of 124,000 US jobs, he said.
Lardy proposed that the new president recognize that the “trade war” has failed and it should avoid weaponizing trade policy, such as through tariffs on Chinese imports, because the costs to the US will likely exceed anticipated benefits.
Chad P. Bown, another senior fellow with the Peterson institute, proposed that Washington “unilaterally drop the artificial targets of purchase commitments” in the US-China phase one agreement, “as these do not encourage trade liberalization or market reform”.
Bown, who runs a US-China phase one tracker, said he thinks that the incentives for China to fulfill its commitments relate to increased purchases by Stateowned enterprises, not China’s private sector. He said the targets also encourage China to divert trade from US allies, undermining multilateral cooperation.
Other researchers, like Jason Furman, a nonresident senior fellow at the Peterson institute and a former White House top economic adviser, highlighted international cooperation on climate change as a priority for the next administration.
Last week, the Brookings Institution also said that whoever wins the election will be challenged by an ongoing pandemic and the ensuing economic and social devastation, but will face opportunities, too, including the chance to make “highly consequential and hopefully constructive” choices on China, international trade and post-COVID-19 recovery.