Trade Intervention for Freer Trade
Introduction
The global trade system is fundamentally flawed, incentivizing the misallocation of capital from where it is most needed to wealthier regions. This misallocation deprives countries of necessary investments and exacerbates broader economic issues affecting consumers globally. The current system fails to recognize that industrial policy is a form of trade policy, leading to large and persistent trade imbalances. Surplus countries subsidize their manufacturing industries by leveraging the free flow of capital, passing the costs onto deficit countries. This has led to significant declines in U.S. manufacturing and shifts in global manufacturing patterns.
Key Data Points
- Manufacturing Share: China's manufacturing share of GDP is 28%, compared to the U.S.'s 11%.
- Consumption Share: U.S. consumption accounts for 82% of GDP, while China's is 53%.
- Global GDP Contribution: Despite comprising 26% of global GDP, the U.S. accounts for less than 16% of global manufacturing and nearly 26% of global consumption.
- Trade Imbalance: The U.S. has consistently been a net importer, while certain other countries like China and Germany have been net exporters.
Policy Implications
The current trade regime focuses on addressing specific trade violations rather than promoting balanced trade flows, stifling the potential benefits of global trade. To address these issues, the U.S. must either transform the global trading system or unilaterally opt out of its current role. This would benefit both the U.S. and other countries by reducing the persistent downward pressure on global demand caused by surplus countries.
Subsidies in the International Trade System
In the current international trading regime, some countries (e.g., the U.S. and U.K.) are net importers, while others (e.g., China and Germany) are net exporters. Figure 1 illustrates the trade balances for these countries.
Figure 1: Net Trade in Goods and Services
- U.S.: Persistent net importer.
- China and Germany: Persistent net exporters.
Current trade policies obscure true comparative advantages，通过需求侧的扭曲性补贴，过剩国家通过间接转移让家庭补贴制造业，从而使这些国家的制造业在世界范围内具有竞争优势。制造补贴通常通过家庭间接转移实现，这使得这些家庭购买这些部门产品的能力降低。
Conclusion
To unlock the full potential of trade as a tool for mutual benefit, new trade rules are needed to ensure the U.S. retains its freedom to set economic policy, protects itself from the costs of other nations' industrial policies, and allows resource and production allocation based on comparative advantage.
