细节决定成败 – The devil is in the details. After Amelie Richter went through the annexes of the EU-China investment agreement CAI which is still almost hot off the press for issue 39 of the China.Table briefing, we want to delve deeper into the details in the coming days. For more on the implications of the agreement for German and European market participants, read our China.Table analyses on the CAI. We start with Michael Radunski. He examines the planned regulations for the media. His conclusion: In important areas of media and information, the EU is letting itself get ripped off by China.
The development of state-of-the-art drugs based on mRNA promises enormous market potential. The principle has only become known to the public since the pandemic and the development of vaccines. Finn Mayer-Kuckuk looks into the mRNA research of Chinese companies and also sheds light on the background of the international battle for the best COVID vaccines.
Germany’s technology sector is the focus of Chinese investors. This is shown by a study conducted by the Kiel Institute for the World Economy in cooperation with Peking University. For China, access to German companies also means that doors are opening to key technologies.
China’s ambition to one day be on a par with the EU and the US in terms of technology also affects biomedicine. Rather unnoticed by the public, two groups are working on vaccinations based on mRNA technology, which is considered the front line of modern disease control. The vaccine produced by Biontech, the majority of which is used in Germany, also uses mRNA. In the long term, China wants to enter the development and production of corresponding drugs on a large scale and become independent of the West in this area as well.
The first company with an mRNA vaccine in development is called Stemirna Therapeutics. This initially unwieldy-sounding name becomes a little easier to understand when looking at the logo: the “RNA” at the end is highlighted in color. The company is working on a stem cell database in the second branch of research – this explains the first part of the name, which is derived from the English “stem cell”. In Chinese, the company is called “Si Weishengwu” (斯微生物), or Siwei for short. It is based in Shanghai and develops the mRNA agents together with Tongji University.
The financial and distribution partner is the pharmaceutical company Tibet Rhodiola from Lhasa. The company has already appeared as a vaccine manufacturer and is currently also producing Sputnik V on behalf of Russia. Stemirna and Tibet Rhodiola are currently starting a clinical trial of the mRNA vaccine. The companies are still keeping quiet about the details.
Stemirna has been researching mRNA since 2016. This is not unusual: biomedical scientists around the world have founded corresponding start-ups in recent years. In fact, Biontech and Curevac were not the only start-ups with an mRNA focus in Germany either. The question is rather how far advanced the concrete product development was in each case when the epidemic came. Biontech and Moderna had the advantage of already being present in hospitals with real therapy studies. Biontech had also been working with Pfizer on flu vaccines – so the partners already knew each other in early 2020 when COVID-19 broke out.
Stemirna is now apparently somewhat behind Curevac in the development schedule, but depending on the duration of the study, it has a good chance of still finding a market for its product. After all, China will not manage to fully vaccinate its population until mid-2022. COVID would then have given the company a huge boost – just like its Western competitors.
The second Chinese mRNA project is running as a collaboration between the People’s Liberation Army Science Academy and two private companies:
Clinical trials began in the middle of last year. At present, it is not entirely clear what has come out of them so far. A marketable vaccine, in any case not, that would have become known.
However, China is not only interested in mRNA in the fight against COVID-19. Even if it is not the panacea that some are already making it out to be: The new technique will likely soon be one of the most important working tools in the field of pharmacology. After all, it can probably be used to cure several types of cancer, compensate for hereditary diseases, or control autoimmune diseases. It will also enable vaccinations against the common cold, HIV, herpes, or malaria. There is already talk of an “era of mRNA” in medicine. Clearly, China wants to get in on the action. It is also said that the rapid establishment of large production capacities for mRNA active substances due to the pandemic has given the EU and the USA an advantage. This is because the active ingredients can easily be repurposed for other applications after the pandemic.
Presumably for this reason, there was huge interest last year in concluding an agreement with Biontech to set up a production line for the COVID vaccination in China. So far, the plants are not running. Yet, the industrial policy pattern is familiar: invite world leaders to manufacture domestically. This involves training Chinese personnel in the most advanced techniques. The mRNA revolution is an opportunity for China here. As in the case of the electric car, all economies together are only at the starting line. No country can boast decades of experience here.
China, in the form of the state-owned company Fosun, recognized the potential of mRNA vaccines even earlier than the EU and Germany. Last spring, the company offered Biontech an equity investment at a very early stage – while the Federal Republic of Germany held back in this respect. Only competitor Curevac has received state capital.
When Biontech offered the EU Commission a supply of several hundred million cans in the autumn, which was supposed to go beyond the original contracts, the Commission explicitly refused. Fosun, on the other hand, gratefully accepted in December. Xi Jinping had just issued the “important instruction” to “resolutely implement the fight against epidemics”.
Reciprocity is the great goal that EU politicians wanted to achieve through the investment agreement with China (CAI). Negotiations with Beijing have been going on for seven years, with the longed-for equal treatment being recited over and over again like a mantra. Now, at last, the agreement with the People’s Republic is in place. EU Commission President Ursula von der Leyen praises the “EU-China Comprehensive Agreement on Investment” as an “important milestone in relations with China and for Europe’s value-based trade agenda”. But a closer look at the documents shows: Von der Leyen’s milestone turns out to be a millstone on the neck of Europeans in some areas. Especially in the important area of press and information, there is nothing of the intended equal treatment to be found.
Annex I of the CAI, for example, contains four pages of extensive information stating that the Chinese media market will remain de facto closed to European investors in the future. Whether in news agencies, newspapers, magazines, radio and television stations, or online news services and digital platforms, nothing is possible without the consent of the Chinese government. Only Internet search services are allowed to buy in, but the foreign share must remain below 50 percent. Even in the case of Sino-foreign publishing cooperations, the right of final approval will remain on the Chinese side, according to CAI.
While these investment conditions are kept in a general prohibition tone, Beijing has been able to enforce meticulous specifications for the broadcasting of foreign radio and television programs. For example, page 31 of Annex I states that no foreign films or TV series may be shown in China between 7 p.m. and 10 p.m. without the approval of the State Administration of Radio and Television.
Foreign documentaries require explicit approval from the state authorities at any time of day. And for children’s programming, only Chinese cartoons may be broadcast between 5 p.m. and 10 p.m. Overall, foreign films and TV series may not exceed 25 percent of the daily volume in China – other content must even remain below 15 percent.
In terms of equal treatment, the European requirements for Chinese investments in the media sector would now have to be just as rigid, and the programs for radio and television would also have to be planned down to the minute. However, the EU guarantees “national treatment”, i.e., the European states are to grant Chinese investors the same rights as local interested parties. Eleven EU members – including Bulgaria, the Czech Republic, Hungary, Poland, and Slovakia – have reserved the right to treat Chinese investors separately.
Only France took the Chinese approach as a model and imposed restrictions similar to those imposed by Beijing: According to these, Chinese investments in existing media companies may not exceed 20 percent of the capital or voting rights. The other large EU states such as Germany, Italy, and Spain, on the other hand, continue to leave their media sectors open to China without restriction.
At the same time, the battle for information and its sovereignty of interpretation is in full swing. Increasingly, it is a testimony against testimony: the events in Xinjiang are sometimes described in the West as genocide, while the Chinese side speaks of successful training camps. With regard to the COVID pandemic, too, the contrasting views in East and West on its origins, control strategy, and supposed aid are clearly visible.
President Xi Jinping makes no secret of his view. As early as February 2016, Xi said, “Wherever the readers may be, wherever the viewers, that’s where propaganda reports must spread their tentacles.” At the 19th National People’s Congress in October 2017, he put China’s goals to the global public in more flowery terms. “We will improve our capacity in international communication so that China’s stories are well told, enabling a true, multi-dimensional and comprehensive view of China. This will enhance our country’s cultural soft power.”
China is also backing up these words with action: Between 2008 and 2018, the People’s Republic invested a total of 2.3 billion US dollars in the European media industry. The Map!nfluence project examines how China’s investments influence reporting: negative reports about the People’s Republic have almost completely disappeared from the relevant media. The image of China in the reports became more and more positive.
And so, with the CAI, Europe has not come any closer to the desired goal of equal treatment, at least in the area of press and media. On the contrary, the CAI codifies the imbalance and thus resembles a capitulation: while CGTN, the foreign channel of the Chinese state television CCTV, can be received freely throughout Europe, more and more European channels and news sites are being blocked in China – from the French Le Monde to Deutsche Welle and the British BBC.
Over the course of his presidency, Donald Trump raised US tariffs on imports from China several times, from an average of about 3 percent when he took office in January 2017 to over 20 percent by the end of 2019. As a result, the current average US tariff on Chinese goods is essentially at the same level that the United States imposed on the rest of the world in the early 1930s under the Smoot-Hawley Act, a protectionist measure that many economists blame for the severity of the Great Depression. Now that President Joe Biden is reversing many of Trump’s policies, including import tariffs on European goods, he has to decide whether to rescind his predecessor’s China tariffs, too.
Biden will not do so for the benefit of Chinese workers or firms, not least because he needs to protect himself from accusations of being too soft toward America’s main global rival. But he has three stronger reasons to ditch the tariffs: they have hurt American workers and firms, failed to reduce the overall US trade deficit, and arguably further weakened respect for global economic rules.
Of all evidence-based studies by US-based economists, none has found that Trump’s trade war benefited American households or businesses. Mary Amiti of the Federal Reserve Bank of New York, Stephen Redding of Princeton University, and David Weinstein of Columbia University have studied Trump’s six tariff hikes on Chinese goods during 2018, which increased the share of US imports facing a duty of 10 percent or more from 3.5 percent to 10.6 percent. Contrary to what Trump and his senior trade officials claimed, the higher tariffs fed through almost entirely into higher prices paid by American consumers.
Meanwhile, US imports of similar goods from other countries also became more expensive in response to the tariff hikes. So, although the federal government collected extra tariff revenue, this was merely a transfer from American households to the US Treasury. Other studies have reached similar conclusions.
Because Chinese consumer products in the US are disproportionately purchased by middle- and low-income households, Trump’s tariffs were a de facto regressive tax. They thus skewed further America’s already highly unequal income distribution.
China’s retaliatory tariffs on American products have led to additional economic losses in the US – evident in reduced sales of durable goods such as automobiles. Michael Waugh of New York University has found that automobile sales fell significantly (by about 15 percent) in US regions more exposed to Chinese trade retaliation, suggesting a decrease in household income. Such regions also suffered a decline in employment.
Some US sectors that compete with Chinese imports received some protection. But this benefit was more than offset by job destruction in sectors that use Chinese inputs – including services as well as manufacturing – and by job losses resulting from lower US exports to China.
Moreover, the US trade balance saw no improvement from Trump’s tariffs. The bilateral deficit with China in 2019 was essentially the same in dollar terms (about $345 billion) as it was in 2016, the last full year of President Barack Obama’s administration. This reflected equal reductions of about $10 billion each in US exports to and imports from China.
The pattern continued in 2020. Although the bilateral deficit decreased to $311 billion, this was partly because the pandemic-induced recession reduced overall US imports. And while US exports to China rose from $107 billion in 2019 to $125 billion in 2020 under the two countries’ “phase one” trade agreement, this figure is similar to the level in 2018, but lower than the 2017 total of $130 billion.
Higher US tariffs on Chinese goods merely shifted imports of some products to other countries. Whereas the bilateral trade balance with China is not very important for Americans’ well-being, the overall US trade deficit, which rose to a 12-year high in 2020, reflects a shortage of US national savings relative to national investment.
While China could do more to reduce its own trade barriers, these are not the reason for its trade surplus. In fact, my research with Jiandong Ju and Kang Shi suggests that China’s import liberalization in the early 2000s has contributed to a rise in its overall trade surplus.
One could argue that the US should reduce its trade dependence on China for national-security reasons. But with more national-security tools than almost any other country, the US does not need to rely on tariffs in pursuing such strategic objectives. In fact, it will be in the US national interest to champion reforms at the World Trade Organization that delegitimize the use of tariffs for non-economic purposes.
Repealing Trump’s tariffs on Chinese goods is essential to reviving confidence in the global trading system. In September 2020, a WTO dispute panel ruled the US tariffs illegal under the organization’s rules. The US has the right to appeal the decision, but the Trump administration disabled the WTO’s Appellate Body by refusing to confirm new judges when the previous incumbents’ terms expired, rendering the body inquorate.
Ignoring the WTO ruling could weaken the credibility of the Biden administration’s professed interest in strengthening the rules-based global system. But, given that the Trump tariffs are already in place, should the US try to extract something from China in exchange for abandoning them?
If Biden can obtain something useful, such as a conversion of China’s unilateral pledge to achieve carbon neutrality by 2060 into a more binding international commitment, he should do so. But the longer the Trump tariffs remain, the longer America’s middle-and low-income households will have to bear the burden. Like the Smoot-Hawley tariffs in the 1930s, a continuation of the Trump tariffs will work against Biden’s objective of an inclusive economic recovery.
Shang-Jin Wei is a former chief economist at the Asian Development Bank and a professor of finance and economics at Columbia Business School and Columbia University’s School of International and Public Affairs.
Copyright: Project Syndicate, 2021.
www.project-syndicate.org
细节决定成败 – The devil is in the details. After Amelie Richter went through the annexes of the EU-China investment agreement CAI which is still almost hot off the press for issue 39 of the China.Table briefing, we want to delve deeper into the details in the coming days. For more on the implications of the agreement for German and European market participants, read our China.Table analyses on the CAI. We start with Michael Radunski. He examines the planned regulations for the media. His conclusion: In important areas of media and information, the EU is letting itself get ripped off by China.
The development of state-of-the-art drugs based on mRNA promises enormous market potential. The principle has only become known to the public since the pandemic and the development of vaccines. Finn Mayer-Kuckuk looks into the mRNA research of Chinese companies and also sheds light on the background of the international battle for the best COVID vaccines.
Germany’s technology sector is the focus of Chinese investors. This is shown by a study conducted by the Kiel Institute for the World Economy in cooperation with Peking University. For China, access to German companies also means that doors are opening to key technologies.
China’s ambition to one day be on a par with the EU and the US in terms of technology also affects biomedicine. Rather unnoticed by the public, two groups are working on vaccinations based on mRNA technology, which is considered the front line of modern disease control. The vaccine produced by Biontech, the majority of which is used in Germany, also uses mRNA. In the long term, China wants to enter the development and production of corresponding drugs on a large scale and become independent of the West in this area as well.
The first company with an mRNA vaccine in development is called Stemirna Therapeutics. This initially unwieldy-sounding name becomes a little easier to understand when looking at the logo: the “RNA” at the end is highlighted in color. The company is working on a stem cell database in the second branch of research – this explains the first part of the name, which is derived from the English “stem cell”. In Chinese, the company is called “Si Weishengwu” (斯微生物), or Siwei for short. It is based in Shanghai and develops the mRNA agents together with Tongji University.
The financial and distribution partner is the pharmaceutical company Tibet Rhodiola from Lhasa. The company has already appeared as a vaccine manufacturer and is currently also producing Sputnik V on behalf of Russia. Stemirna and Tibet Rhodiola are currently starting a clinical trial of the mRNA vaccine. The companies are still keeping quiet about the details.
Stemirna has been researching mRNA since 2016. This is not unusual: biomedical scientists around the world have founded corresponding start-ups in recent years. In fact, Biontech and Curevac were not the only start-ups with an mRNA focus in Germany either. The question is rather how far advanced the concrete product development was in each case when the epidemic came. Biontech and Moderna had the advantage of already being present in hospitals with real therapy studies. Biontech had also been working with Pfizer on flu vaccines – so the partners already knew each other in early 2020 when COVID-19 broke out.
Stemirna is now apparently somewhat behind Curevac in the development schedule, but depending on the duration of the study, it has a good chance of still finding a market for its product. After all, China will not manage to fully vaccinate its population until mid-2022. COVID would then have given the company a huge boost – just like its Western competitors.
The second Chinese mRNA project is running as a collaboration between the People’s Liberation Army Science Academy and two private companies:
Clinical trials began in the middle of last year. At present, it is not entirely clear what has come out of them so far. A marketable vaccine, in any case not, that would have become known.
However, China is not only interested in mRNA in the fight against COVID-19. Even if it is not the panacea that some are already making it out to be: The new technique will likely soon be one of the most important working tools in the field of pharmacology. After all, it can probably be used to cure several types of cancer, compensate for hereditary diseases, or control autoimmune diseases. It will also enable vaccinations against the common cold, HIV, herpes, or malaria. There is already talk of an “era of mRNA” in medicine. Clearly, China wants to get in on the action. It is also said that the rapid establishment of large production capacities for mRNA active substances due to the pandemic has given the EU and the USA an advantage. This is because the active ingredients can easily be repurposed for other applications after the pandemic.
Presumably for this reason, there was huge interest last year in concluding an agreement with Biontech to set up a production line for the COVID vaccination in China. So far, the plants are not running. Yet, the industrial policy pattern is familiar: invite world leaders to manufacture domestically. This involves training Chinese personnel in the most advanced techniques. The mRNA revolution is an opportunity for China here. As in the case of the electric car, all economies together are only at the starting line. No country can boast decades of experience here.
China, in the form of the state-owned company Fosun, recognized the potential of mRNA vaccines even earlier than the EU and Germany. Last spring, the company offered Biontech an equity investment at a very early stage – while the Federal Republic of Germany held back in this respect. Only competitor Curevac has received state capital.
When Biontech offered the EU Commission a supply of several hundred million cans in the autumn, which was supposed to go beyond the original contracts, the Commission explicitly refused. Fosun, on the other hand, gratefully accepted in December. Xi Jinping had just issued the “important instruction” to “resolutely implement the fight against epidemics”.
Reciprocity is the great goal that EU politicians wanted to achieve through the investment agreement with China (CAI). Negotiations with Beijing have been going on for seven years, with the longed-for equal treatment being recited over and over again like a mantra. Now, at last, the agreement with the People’s Republic is in place. EU Commission President Ursula von der Leyen praises the “EU-China Comprehensive Agreement on Investment” as an “important milestone in relations with China and for Europe’s value-based trade agenda”. But a closer look at the documents shows: Von der Leyen’s milestone turns out to be a millstone on the neck of Europeans in some areas. Especially in the important area of press and information, there is nothing of the intended equal treatment to be found.
Annex I of the CAI, for example, contains four pages of extensive information stating that the Chinese media market will remain de facto closed to European investors in the future. Whether in news agencies, newspapers, magazines, radio and television stations, or online news services and digital platforms, nothing is possible without the consent of the Chinese government. Only Internet search services are allowed to buy in, but the foreign share must remain below 50 percent. Even in the case of Sino-foreign publishing cooperations, the right of final approval will remain on the Chinese side, according to CAI.
While these investment conditions are kept in a general prohibition tone, Beijing has been able to enforce meticulous specifications for the broadcasting of foreign radio and television programs. For example, page 31 of Annex I states that no foreign films or TV series may be shown in China between 7 p.m. and 10 p.m. without the approval of the State Administration of Radio and Television.
Foreign documentaries require explicit approval from the state authorities at any time of day. And for children’s programming, only Chinese cartoons may be broadcast between 5 p.m. and 10 p.m. Overall, foreign films and TV series may not exceed 25 percent of the daily volume in China – other content must even remain below 15 percent.
In terms of equal treatment, the European requirements for Chinese investments in the media sector would now have to be just as rigid, and the programs for radio and television would also have to be planned down to the minute. However, the EU guarantees “national treatment”, i.e., the European states are to grant Chinese investors the same rights as local interested parties. Eleven EU members – including Bulgaria, the Czech Republic, Hungary, Poland, and Slovakia – have reserved the right to treat Chinese investors separately.
Only France took the Chinese approach as a model and imposed restrictions similar to those imposed by Beijing: According to these, Chinese investments in existing media companies may not exceed 20 percent of the capital or voting rights. The other large EU states such as Germany, Italy, and Spain, on the other hand, continue to leave their media sectors open to China without restriction.
At the same time, the battle for information and its sovereignty of interpretation is in full swing. Increasingly, it is a testimony against testimony: the events in Xinjiang are sometimes described in the West as genocide, while the Chinese side speaks of successful training camps. With regard to the COVID pandemic, too, the contrasting views in East and West on its origins, control strategy, and supposed aid are clearly visible.
President Xi Jinping makes no secret of his view. As early as February 2016, Xi said, “Wherever the readers may be, wherever the viewers, that’s where propaganda reports must spread their tentacles.” At the 19th National People’s Congress in October 2017, he put China’s goals to the global public in more flowery terms. “We will improve our capacity in international communication so that China’s stories are well told, enabling a true, multi-dimensional and comprehensive view of China. This will enhance our country’s cultural soft power.”
China is also backing up these words with action: Between 2008 and 2018, the People’s Republic invested a total of 2.3 billion US dollars in the European media industry. The Map!nfluence project examines how China’s investments influence reporting: negative reports about the People’s Republic have almost completely disappeared from the relevant media. The image of China in the reports became more and more positive.
And so, with the CAI, Europe has not come any closer to the desired goal of equal treatment, at least in the area of press and media. On the contrary, the CAI codifies the imbalance and thus resembles a capitulation: while CGTN, the foreign channel of the Chinese state television CCTV, can be received freely throughout Europe, more and more European channels and news sites are being blocked in China – from the French Le Monde to Deutsche Welle and the British BBC.
Over the course of his presidency, Donald Trump raised US tariffs on imports from China several times, from an average of about 3 percent when he took office in January 2017 to over 20 percent by the end of 2019. As a result, the current average US tariff on Chinese goods is essentially at the same level that the United States imposed on the rest of the world in the early 1930s under the Smoot-Hawley Act, a protectionist measure that many economists blame for the severity of the Great Depression. Now that President Joe Biden is reversing many of Trump’s policies, including import tariffs on European goods, he has to decide whether to rescind his predecessor’s China tariffs, too.
Biden will not do so for the benefit of Chinese workers or firms, not least because he needs to protect himself from accusations of being too soft toward America’s main global rival. But he has three stronger reasons to ditch the tariffs: they have hurt American workers and firms, failed to reduce the overall US trade deficit, and arguably further weakened respect for global economic rules.
Of all evidence-based studies by US-based economists, none has found that Trump’s trade war benefited American households or businesses. Mary Amiti of the Federal Reserve Bank of New York, Stephen Redding of Princeton University, and David Weinstein of Columbia University have studied Trump’s six tariff hikes on Chinese goods during 2018, which increased the share of US imports facing a duty of 10 percent or more from 3.5 percent to 10.6 percent. Contrary to what Trump and his senior trade officials claimed, the higher tariffs fed through almost entirely into higher prices paid by American consumers.
Meanwhile, US imports of similar goods from other countries also became more expensive in response to the tariff hikes. So, although the federal government collected extra tariff revenue, this was merely a transfer from American households to the US Treasury. Other studies have reached similar conclusions.
Because Chinese consumer products in the US are disproportionately purchased by middle- and low-income households, Trump’s tariffs were a de facto regressive tax. They thus skewed further America’s already highly unequal income distribution.
China’s retaliatory tariffs on American products have led to additional economic losses in the US – evident in reduced sales of durable goods such as automobiles. Michael Waugh of New York University has found that automobile sales fell significantly (by about 15 percent) in US regions more exposed to Chinese trade retaliation, suggesting a decrease in household income. Such regions also suffered a decline in employment.
Some US sectors that compete with Chinese imports received some protection. But this benefit was more than offset by job destruction in sectors that use Chinese inputs – including services as well as manufacturing – and by job losses resulting from lower US exports to China.
Moreover, the US trade balance saw no improvement from Trump’s tariffs. The bilateral deficit with China in 2019 was essentially the same in dollar terms (about $345 billion) as it was in 2016, the last full year of President Barack Obama’s administration. This reflected equal reductions of about $10 billion each in US exports to and imports from China.
The pattern continued in 2020. Although the bilateral deficit decreased to $311 billion, this was partly because the pandemic-induced recession reduced overall US imports. And while US exports to China rose from $107 billion in 2019 to $125 billion in 2020 under the two countries’ “phase one” trade agreement, this figure is similar to the level in 2018, but lower than the 2017 total of $130 billion.
Higher US tariffs on Chinese goods merely shifted imports of some products to other countries. Whereas the bilateral trade balance with China is not very important for Americans’ well-being, the overall US trade deficit, which rose to a 12-year high in 2020, reflects a shortage of US national savings relative to national investment.
While China could do more to reduce its own trade barriers, these are not the reason for its trade surplus. In fact, my research with Jiandong Ju and Kang Shi suggests that China’s import liberalization in the early 2000s has contributed to a rise in its overall trade surplus.
One could argue that the US should reduce its trade dependence on China for national-security reasons. But with more national-security tools than almost any other country, the US does not need to rely on tariffs in pursuing such strategic objectives. In fact, it will be in the US national interest to champion reforms at the World Trade Organization that delegitimize the use of tariffs for non-economic purposes.
Repealing Trump’s tariffs on Chinese goods is essential to reviving confidence in the global trading system. In September 2020, a WTO dispute panel ruled the US tariffs illegal under the organization’s rules. The US has the right to appeal the decision, but the Trump administration disabled the WTO’s Appellate Body by refusing to confirm new judges when the previous incumbents’ terms expired, rendering the body inquorate.
Ignoring the WTO ruling could weaken the credibility of the Biden administration’s professed interest in strengthening the rules-based global system. But, given that the Trump tariffs are already in place, should the US try to extract something from China in exchange for abandoning them?
If Biden can obtain something useful, such as a conversion of China’s unilateral pledge to achieve carbon neutrality by 2060 into a more binding international commitment, he should do so. But the longer the Trump tariffs remain, the longer America’s middle-and low-income households will have to bear the burden. Like the Smoot-Hawley tariffs in the 1930s, a continuation of the Trump tariffs will work against Biden’s objective of an inclusive economic recovery.
Shang-Jin Wei is a former chief economist at the Asian Development Bank and a professor of finance and economics at Columbia Business School and Columbia University’s School of International and Public Affairs.
Copyright: Project Syndicate, 2021.
www.project-syndicate.org
