(Ed. Note: The “Innovation Fact of the Week” appears as a regular feature in each edition of ITIF’s weekly email newsletter. Sign up today.)
Protectionist trade policies hurt a country’s productivity growth. That’s why joining the World Trade Organization (WTO)—which requires implementing free trade practices such as reducing import tariffs—has helped raise productivity levels across emerging economies. China is an example. It joined the WTO in 2001, and in the six years after it acceded, the trade-creation impact accounted for four-fifths of its manufacturing productivity growth.
Unfortunately, while it has benefited from reducing tariffs, China also has violated the spirit of WTO trade rules by implementing a wide array of mercantilist trade practices that provide its companies an unfair edge in innovation-intensive industries in particular. For more on China’s innovation mercantilism and how the U.S. and its allies can push back, see ITIF’s May 2017 report, “Stopping China's Mercantilism: A Doctrine of Constructive, Alliance-Backed Confrontation.”