INITIATIVE ON STOPPING CHINA-U.S. TRADE WAR

INITIATIVE ON STOPPING THE CHINA-U.S.
TRADE WAR

 

The trade war between the United States and China, which has now been ongoing for 18 months, represents the single greatest threat to global economic growth today. A failure to bring this trade war to a satisfactory conclusion significantly increases the risk of recession next year in the US, Europe, Japan, and other developed and emerging economies. It would also seriously undermine China’s near-term growth prospects.

 

That’s why, as representatives of a group of 10 former prime ministers and presidents from countries that have historically enjoyed close relations with both the US and China, we are writing to urge Presidents Donald Trump and Xi Jinping to reach a substantive trade agreement by year’s end. It’s time to bring this source of global economic uncertainty to an end.

 

The prosperity of both America and China has been built on global free trade. America has profited immensely from access to global markets since its birth, and China - particularly since embarking on its period of ‘reform and opening up’ 40 years ago - has been able to lift millions of its people out of poverty largely through global trade. Indeed, much of the prosperity enjoyed by people across the world today is anchored in the unprecedented ability to sell goods and services freely across national boundaries.

 

Now, however, we see global growth in trade lagging behind general economic growth for the first time in decades. In part, this is the product of the expanding trade war between the world’s two largest economies. This is also happening because of a more general outbreak of protectionism around the world. Both these factors now threaten continued global prosperity.

 

As the former leaders of countries with longstanding economic relationships with China, we recognize the real difficulties regarding a number of Beijing’s trade and economic practices. We understand, for example, the challenges which arise from Chinese policies on intellectual property and technology transfers, its restrictions on access to its markets, and its subsidizing of private and public firms that are active in the global marketplace. We believe these practices should change in all countries that use them, but this is particularly important in China because it is the world’s second-largest economy.

 

At the same time, as countries long committed to the principles of free trade, we do not see the ever-widening tariff war - which was initially launched by the US - as an effective way of resolving international trade and economic disputes. Tariffs, by definition, are the enemy of free trade. Their cumulative impact - particularly combined with the current resurgence of protectionism worldwide - only depresses economic growth, employment, and living standards. Tariffs raise the cost of living for working families as consumer prices are driven up.

 

This tariff war is also creating economic uncertainty, which is depressing international investor confidence, exacerbating downward pressure on growth, and increasing the risk of recession. The disruption of global supply chains is already profound. Therefore, we believe that the World Trade Organization (WTO), despite its limitations, is best positioned to address China’s trade practices. We also believe that the WTO is the most appropriate forum to resolve trade disputes. So we urge the US and China - which on Thursday restarted their stalled trade talks in Washington - to work with other member states to strengthen the WTO’s institutional capacity.

 

Our group of former prime ministers and presidents includes François Fillon of France, Joe Clark of Canada, Enrico Letta of Italy, Jan Peter Balkenende of the Netherlands, Felipe Calderón and Ernesto Zedillo of Mexico, and Han Seung-soo of South Korea. Given our collective experience, we are not naïve about the inherent complexities in negotiating international trade agreements. Many of us have actually negotiated free-trade pacts with both the US and China. We are therefore highly familiar with the concerns of each country - including the presence of powerful domestic political constituencies that may argue for continued protection.

 

Many of those domestic concerns focus on the long-term enforcement of any agreement. On this point, we argue that it is in China’s own long-term economic interest to ensure the effective implementation of any new trade deal - whether involving intellectual property, technology transfer, state subsidies, or market access. Such policies would also apply to all of China’s trading partners, just as they would apply to its relationship with the US.

 

On the question of enforcement - an issue that is reportedly of major concern to the American negotiators - China must be acutely aware that if it fails to comply with the terms of the agreement, an already damaging trade war is likely to continue and perhaps worsen. To give greater confidence to both parties, a new trade agreement should include strong enforcement provisions, along with strengthened WTO dispute-resolution mechanisms.

 

For these reasons - and given the gravity of the global economic outlook for 2020 - we urge both countries to exercise every effort to reach a substantive agreement this year. We also urge the US to withdraw the punitive tariffs it has imposed - and that China do the same with the reciprocal tariffs it has enacted.

 

Beyond trade, we are also anxious about the wider strategic impact of any further decoupling of the Chinese and the American economies, particularly in the areas of technology and finance. So much of the world’s current prosperity and stability has rested on the connections between these two great countries - and the integration of their markets with the rest of the world. Such a decoupling would present a long-term threat to global peace and security.

 

It would also effectively constitute the first step in the declaration of a new Cold War. As with the last Cold War, many nations would be forced to choose between the two powers - and that is a choice that no one wants to make.

Kevin Rudd, the 26th Prime Minister of Australia

Helen Clark, the 37th Prime Minister of New Zealand

Carl Bildt, the 28th Prime Minister of Sweden

François Fillon, the 168th Prime Minister of France

Joseph  Clark, the 16th Prime Minister of Canada

Enrico Letta, the 55th Prime Minister of Italy

Jan Peter Balkenende, the 49th Prime Minister of the Netherlands

Felipe Calderon, the 56th President of Mexico

Ernesto Zedillo, the 54th President of Mexico

Han Seung-soo, the 39th Prime Minister of the Republic of Korea