Part 1 of 2 on The Scourge of Protectionism
America’s can-do spirit, shrewd diplomacy, and relentless innovation resulted in a hundred
years of cultural, military, and economic dominance—an American Century. A maxim of the
capitalism that the U.S. preaches to the world is this: when a competitor consistently gains on you, it’s time to raise your game.
So it was amusing to read an apparently irony-free essay published in The Atlantic by a former member of President Trump’s national security team, Nadia Schadlow (“Consider the Possibility That Trump Is Right About China”, April 5), who seems shocked to discover that an ascendant China is:
Seeking advantage in the global competitive arena;
Using the advantages of WTO membership to advance Chinese interests;
Extracting economic advantage from “hyper-globalization”;
Leveraging international organizations to pursue China’s own interests;
Promoting Chinese technological and security protocols internationally; and
Using foreign aid to expand its global influence.
Never mind that “hyper-globalization” is an American corporatist invention, and a key
ingredient of U.S. global dominance; that the WTO was established in the U.S.’s own image; or that the U.S. enjoyed a near-monopoly on global technology for decades. China’s crime, it seems, is having the chutzpah to beat the U.S. at its own game. Schadlow characterizes China’s rise as “aggressive” - it seems that the success of a capitalistic “China First” policy has gotten under the skin of American hegemonists.
I am not an apologist for China. Of course, western democracies should continue to press China to improve its human rights record, to further open domestic markets, to acknowledge internationally agreed borders, and to respect intellectual property rights.
But it is natural for the Chinese to seek economic advantage in pursuing prosperity, just as
Americans want their own nation to thrive. Tellingly, the U.S. pressured China to open its
economy to the world’s markets during those decades when international trade régimes
skewed heavily in America’s favor. China took the advice, and the result was perhaps the single greatest human achievement in economic history: according to the World Bank, in the past thirty years China has lifted 750 million citizens - comparable to the total populations of the U.S. and the European Union combined - out of extreme poverty.
To dismiss China’s astonishing progress as illegitimate, or America’s economic and social funk as the result of some unfair exterior force, is to delay confronting the real problem. The only acceptable response - the only truly American response - is to raise our game and compete.
Political populism, and its economic counterpart, protectionism, drive us to the facile belief that our shortcomings must be someone else’s fault. It has become a tradition for U.S. presidential administrations to identify the scapegoat du jour early on. This time it’s not Russia, or Japan, or The Axis of Evil; it’s China’s turn. The culprit keeps shifting, but somehow America’s competitive decline continues. Three of this year’s most prominent presidential contenders, Donald Trump, Bernie Sanders, and Elizabeth Warren, preach the populist-protectionist gospel. A simplistic solution to complex, entrenched economic problems is an easy sell to voters. Over the long term, protectionism damages the economy.
By definition, protectionism is anti-capitalistic and anti-American. No economy achieves lasting growth through protectionism, the refuge of those who fear competition. If there are
imbalances in international trading rules, the U.S. should leverage what remains of its dominant global position to negotiate a level playing field--not pick up the ball, stagger home, and lock the doors and windows. The U.S.’s withdrawal of its participation in the Trans-Pacific Partnership (TPP) in January 2017 was a monumental unforced error that delivered economic leadership over the world’s most dynamic free-trading bloc straight into China’s hands. That’s what protectionism looks like, and the American economy will suffer for it.
The effects of protectionism on America’s diminishing international competitiveness will be the subject of an upcoming blog post. But for the U.S. to attribute its own failings to a foreign scapegoat - to consider that my rival’s success must be the source of my own problems - is so 19th century.
It is possible in the 21st century for the U.S. to thrive at the same time that China (or Chile or Chad) thrives. It is even possible for the U.S. to thrive because China is thriving. No enemies are required, only respected competitors and trusted trading partners.
Gregory Testerman is CEO at Testerman Advisory, LLC, a firm providing Sustainability and ESG (Environmental, Social, and Governance) consulting services to emerging markets banks.
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