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Outside In | US-China trade war: Europe’s ‘de-risking’ approach is sensible amid American insanity
- The trade war against China that Donald Trump initiated in 2018 is self-defeating, and it defies reason that US President Joe Biden has continued it
- Given the realities of global trade, it is understandable that Europe’s leaders focus on ‘de-risking’ rather than decoupling
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Adam Posen, president of the Peterson Institute for International Economics, identifies “four profound analytic fallacies” underpinning US trade policies in his recent Foreign Policy article “America’s Zero-Sum Economics Doesn’t Add Up”.
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He notes the false idea that “self-dealing” is smart; the belief that self-sufficiency is attainable or even desirable; the idea that subsidies are helpful; and that “on-shoring” is good. Posen says these fallacies are “contradicted by more than two centuries of well-researched histories of foreign economic policies and their effects”.
In less polite terms, the trade war against China initiated in 2018 by Donald Trump was crazy, and it is equally crazy today that US President Joe Biden has continued it. Their deafness to the poverty-alleviating value of trade in recent decades and the harmfulness of protectionism is both tragic and deeply damaging.
Trading partners worldwide are praying they will not be forced to take sides and assessing how to cope if they end up with no choice.
This reality provides an important part of the backdrop to the recent visit to China of European Commission President Ursula von der Leyen and French President Emmanuel Macron. If the overriding commercial imperative is not clear, note that the delegation included representatives from Airbus and nuclear energy producer EDF, focused on potentially massive deals in the power and aviation sectors respectively.
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There was pressure on President Xi Jinping to give firm assurances that China will not provide arms to Russia, and that it will find a way to exert pressure on Russian President Vladimir Putin to lay down arms in Ukraine. But more than anything else, these European leaders are making it clear that “decoupling” from China is not part of Europe’s foreign policy lexicon.
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