Trade System Dysfunction Reflects Collective Failure



Stephen Olson | Hinrich Foundation

China has exercised its sovereign right to chart its own economic development path, opting for a system of state-directed capitalism and a centrally managed economy.  The result has been one of the greatest trade and FDI-led economic development stories in modern history.   No one can dispute China’s right to take such policies, nor the results they have produced.

But it is now evident that China’s system is posing significant complications for the global trade architecture, which was premised on the assumption that countries would pursue Western models, with market-driven economies and free trade policies.

To be clear, the issue here is not simply China’s compliance with specific WTO provisions and the failure of the WTO and other trade partners to seek enforcement of those obligations (although there are certainly legitimate concerns on that front which have been well-catalogued elsewhere).  The real issue is the extent to which endemic features of China’s system have disrupted the smooth functioning of the global trade architecture.

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