Bloomberg
A group of prominent economists from the US and China called for the world’s two largest economies to abandon their trade war and agree to a new path forward that would give both countries more latitude to both pursue their own domestic economic policies and hit back at those that hurt them.
In a joint statement issued in China, 37 economists, including Joseph Stiglitz, Michael Spence and three other Nobel winners, bemoaned what they said has been a descent of the trade conflict into a binary debate where the only emerging solutions are either wholesale economic reforms by China leading to a converging of economic models or an economically-damaging “decoupling.â€
The group argued a more sensible framework for future trade relations would give China room to pursue industrial policies that are often a target of criticism from the US, while also allowing the US latitude to respond with targeted tariffs if China’s policies were damaging its interests.
“We believe this approach preserves the bulk of the gains from trade between the two economies, without presuming convergence in economic models,†the statement says. It also would be in line with the current multilateral system, they argued, although it would enlarge both the US and China’s rights under current World Trade Organization rules.
The push is emblematic of the ways in which economists and other thinkers are wrestling with how to respond to US President Donald Trump’s challenge to the existing governance of the global economy. While many countries have circled the wagons to try and protect the WTO and other institutions from Trump’s attacks, there is also a growing acknowledgment from many sides of politics that the current system has not worked in addressing China’s economic rise and its effect on other economies.
It comes as Trump is working to close what he has described as “phase one†of a trade truce with China that is designed to avoid a further escalation of their trade wars. It would see China resuming US agricultural purchases.