December 03, 2018

‘America First’ hastens the demise of US hegemony

In this Mint article, Resident Senior Fellow at IDFC Institute, Vivek Dehejia, and Emeritus Professor of Economics at Simon Fraser University, James Dean, write on US trade policy in relation to China. Excerpts:

 

"The charge that China has, since its opening up in the 1980s, extracted greater gains from trade with the US than vice versa is suspect. The US—indeed, the whole world—has benefited enormously from China’s exports of an ever more diverse variety of products that are less expensive than ever in human history.

 

This boon to the world’s consumers was initially due to cheap labour, but is increasingly due to mass production and cutting-edge technology, usually borrowed, but occasionally stolen. But the world’s producers have benefited as well, having greatly leveraged their technology, design and brand names by outsourcing labour-intensive assembly to China, thus handsomely enhancing their profit margins. Apple is a prime example: its products are assembled in China but designed in the US, which reaps most of the gain.

 

The Trump administration is threatening to raise its existing 10% tariffs on Chinese imports to 25% by January unless China makes major concessions. China has signalled clearly that it will not be browbeaten. It is not constrained by the niceties of Western-style democracy from dipping into its deep pockets to hold out in a trade war with Trump.

 

It is surely ironic that policies designed to “Make America Great Again” are very likely to backfire and accelerate American decline, by choking off the very gains from free trade and investment that helped create and sustain American hegemony in the first place..."

 

Read the whole article here.

Topic : State Capacity / In : OP-EDS
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