By: COLIN GRABOW–
As the rankings in the recently-released Economic Freedom of the World: 2017 Annual Report make clear, the United States and China find themselves in very different places on the matter of trade policy. Occupying the somewhat middling overall position of number 63 (of the 159 jurisdictions ranked) in the “Freedom to Trade Internationally” category, the U.S. is nonetheless significantly ahead of China at number 108.
Worth noting, however, are incipient signs that the two countries may be trending in different directions. Traditionally a relatively closed and protectionist economy, China through its words and even some of its actions has shown encouraging signs of moving towards greater openness (a topic I explore in a new policy analysis). In depressing contrast, trade policy under the Trump administration may be headed for a different track. A number of developments this year serve to illustrate this nascent divergence:
Rhetoric: Chinese President Xi Jinping offered a surprising but sorely-needed defense of free trade at the World Economic Forum in January. Likening the pursuit of protectionism to “locking oneself in a dark room” in his keynote address, Xi added that “While wind and rain may be kept outside, that dark room will also block light and air.” Similar sentiment has also been voiced in subsequent speeches by other senior leaders including Premier Li Keqiang and Vice Premier Zhang Gaoli.
President Donald Trump, meanwhile, said in his February speech to Congress that “I believe strongly in free trade but it also has to be fair trade”—language suggesting a less than full-throated embrace of the concept (Notably, in Premier’s Li’s own speech he reversed this formulation, stating that “In fact, free trade…is the prerequisite for fair trade.”). Privately, the President is reported to have told his chief of staff, “I want tariffs…bring me some tariffs.”
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