Editor’s note: This article is the second in a three-part series on power trade that Rob Atkinson authored in The International Economy:
- “A Remarkable Resemblance: Germany From 1900 to 1945 and China Today. Time for a NATO for Trade?” Fall 2020.
- “The Global Third Way on ‘Power Trade’,” Winter 2021.
- “U.S. Trade Policy at a Turning Point: How America Can Better Protect Itself Against China’s Predatory Policies,” Spring 2021.
Part Two Abstract
What is the right strategic response to China’s unrepentant “innovation mercantilism”? One reason it has been difficult for U.S. policymakers to craft an answer that inspires confidence is that, viewed only in the present context, it has been too easy to believe the United States has never before faced such an adversary. But as I argued in the previous issue of TIE, it has: Germany for the first forty-five years of the twentieth century.
Germany then was neither a free trader nor a protectionist—it was a “power trader” that used trade to gain commercial and military advantage over its adversaries. Likewise, China’s trade policy today is guided neither by free trade nor protectionism, per se, but by the power trade formula, with an overarching strategy and discrete tactics remarkably similar to Germany’s in its late-Empire, Weimar Republic, and Nazi eras. Understanding how Germany manipulated the global trading system in that period to degrade its adversaries’ capabilities, entrap nations as reluctant allies, and build up its own industries for commercial and military advantage—just as China is doing today—can point the way toward appropriate policy solutions to the China challenge.
One potential solution that will not be available as a practical matter is meeting China’s power trading strategy with an equal and opposite power trading strategy. The approach will need to be more nuanced than that. In this article, I describe how the United States also practiced power trade for much of the Cold War era, but not to boost its economy (which it did in some cases and didn’t in others), but to achieve over-arching foreign policy goals, the most important of which was to assure global security and constrain the Soviet Union. But today, America’s relative economic and technological strength is so diminished from where it was even twenty years ago that power trade premised on leveraging U.S. economic competitiveness to achieve broad foreign policy goals is no longer sustainable. President Donald Trump understood that, but shifted not to a new form of power trade, but to protectionism. The Biden administration needs to renew America’s role as a power trader, but with a new focus of maintaining its relative lead, economically and technologically, over China. Doing so will require changes in the strategy and organization of U.S. trade policy.
Read part two in full. (PDF)
