The War on Trade and its Theoretical Implications
Instituto de Investigaciones Económicas UNAM
Please cite the paper as:
Oscar Ugarteche, (2020), The War on Trade and its Theoretical Implications, World Economics Association (WEA) Conferences, No. 1 2020, Trade Wars after Coronavirus, Economic, political and theoretical implications
China in 1980 had an income per head of about 300 dollars, the US had 29,863.02 dollars. Forty years later, China is a world leader on par with the US, has a dynamic high tech industry, and the largest middle class market in the world. The US Government’s reaction is to blame China for currency manipulation and intellectual property theft. It is argued that she is a vital threat to the United States both economically and strategically, that U.S. policy toward China has failed, and that Washington needs a much tougher strategy to contain it. China however has developed its own agenda in direct proportion to its new economic power and its own principle of exceptionalism. An economic war has begun. It is, first of all, a war, and the ballistics metaphorically speaking, are economic. The object of war is to defeat the enemy. The object of economic war is to bankrupt the enterprises that are gaining the markets, metaphor for territory. After two years of skirmishes, the US is losing the Chinese market while China remains as the number two trading partner for the US.
Beijing has launched a “go out” strategy designed to remake global norms and institutions. China is transforming the world as it transforms itself. This meant entering the WTO and using it for its benefit, becoming a voice for free trade at the Davos Conference, pressing the IMF to include the Yuan in the SDR basket and pressing to have the proper votes at the IMF board, amongst the most visible changes. The United States shut the WTO arbitration court and is losing the technological lead in at least five branches of production. The end result is that the trade war finally has shaken up the theoretical frameworks established after WWII and consolidated more modern views while indicating US weakness in the face of another more dynamic economy. Tariffs do not resolve these issues. New international institutions appear to be required to solve the problems posed and the ensuing crises. Theoretically it means the end of WWII institutions and the surge of new ones. These will, more likely, not be US-led in a slow and conflict-filled process.