Economics‐based Principles for a Post‐conflict China–US Commercial Regime

• Author: Adam S. Posen
• Published date: 01 September 2018
• DOI: http://doi.org/10.1111/cwe.12253
• Date: 01 September 2018

©Peterson Institute for International Economics, reproduced by permission from PIIE

China & World Economy / 2–11, Vol. 26, No. 5, 2018

2

*Adam S. Posen, President, Peterson Institute for International Economics, USA. Email:aposen@piie.com.

This essay has benefited from discussion at the 7th Annual CF40-PIIE Economics Conference, including

comments from Chad Bown, Madona Devasahayam, Jiming Ha, Jacob Kirkegaard, Nicolas Veron, Steven

Weisman, Huang Yiping, Yongding Yu and Min Zhu. The views expressed herein, however, are solely those of

the author.

Economics-based Principles for a Post-conict

China–US Commercial Regime

Adam S. Posen*

Abstract

Neither the Chinese nor US economic systems will fundamentally change as a result of

overt trade conict. The challenge for policy-relevant economics is to design a regime

for China–US commerce that accepts the co-existence but also addresses underlying

disputes. Many important China–US disputes, notably those over intellectual property

protection and state subsidies, cannot be resolved by the World Trade Organization,

thus new institutions must be built. Economics-based regime principles should entail

recognition that: the China–US bilateral trade imbalance is unique mainly because of

macroeconomic and nancial factors, not trade; agreements should restrict commercial

and government behaviors, not target economic outcomes; Chinese companies must

compete and be allowed to succeed in any sector, including high-technology; China is

not entitled to US-owned technology, thus intellectual property rights must be enforced;

and the US Government should support an increased role for China in global economic

governance.

Key words: China–US relations, commercial policy, high-technology competition, trade

conict

JEL codes: F02, F13, F23, F53

I. Introduction

The outright trade conflict seemingly imminent between the world’s two largest

economies will be harmful to the working people of both countries, as well as

destructive to the future of the world economy. These costs would be both direct, in

terms of short-term losses of growth and displacement of jobs, and indirect, in terms of

long-term damage to the world trading system, diminishing investment and efciency