U.S. protectionist moves undermine int'l trade system: Nobel winner

U.S. Nobel Prize-winning economist Joseph Stiglitz, currently a professor at Columbia University, attends a U.S.-China Business Summit at the Harvard Club in New York on April 12, 2018. [Photo: China Plus/Qian Shanming]

A Nobel Prize-winning U.S. economist says the U.S. protectionist measures against China would harm its own economy and undermine a rule-based international trading system. Joseph Stiglitz spelt out his opinion in New York on Thursday at a gathering of top U.S. and Chinese CEOs, government leaders, and experts.

Stiglitz said that the Trump administration has initiated a potential trade war against China partly to serve its own political purposes.

"His fixation with the bilateral trade deficit is really primitive. He seems to say when we have a trade deficit with a country, he says that country is playing unfair. I'm actually convinced that Trump wants a little war for his political purposes. There has been a wing at the Republican Party, not all, but a wing of it, that has been skeptical of international engagement for some time, and Trump has sort of exploited that," explained Stiglitz.

Stiglitz also warned that appeasing a minor few would be at the cost of the majority, saying that "helping Wall Street does not help the 'Rust Belt.'" He noted that trade disputes should be solved within a multilateral framework, like the World Trade Organization, and in accordance with international rule of law, instead of sticking to bilateral bargaining, where power matters.

"The WTO provides a framework for adjudicating disputes. If we the United States think they are violating WTO rules, you file a case. What is remarkable about the Trump administration is that they have not filed those cases. So you have to guess, is there or is there not a violation? China is actually beginning to file cases against the United States. What the United States is doing in steel and aluminum is probably a violation of WTO laws," said Stiglitz. 

Stiglitz said that even though China is the world's second largest economy, the country is still classified by the World Bank as a developing economy. The U.S. must understand that China has its own right to develop.

"The United States has to buy into the notion that China has to have the right to develop. You mentioned their 2025 policy, that's based on a recognition that they are a developing country. It's a big developing country, but their per capita income is one fifth of the United States. So they want to develop. Obviously, any developing country has an aspiration of closing their per capita income gap, and that's going to require investments across the board, infrastructure, and also education," explained Stiglitz. 

Stiglitz also urged the U.S. not to impose its own legal framework on China; but rather, the U.S. and China should try to expand areas for cooperation where there's room for consensus.

Stiglitz was among a long list of panelists present at the China Institute 2018 Executive Summit, themed "U.S.-China Business in the New World Order." The event brought together hundreds of U.S. and Chinese CEOs, government leaders, business insiders and experts to examine challenges and opportunities amid the changing business relations between the U.S. and China.