Retaliatory increases in protection by China? The likely response of Chinese policy makers if the United States did levy punitive tariffs is very difficult to predict. is little precedent for any significant trade war involving China since it embarked on opening up its economy in 1978. China undertook unilateral liberalisation aimed at, and culminating in, World Trade Organization (WTO) accession in 2001. At accession, China committed to rules and practices above and beyond those that apply to other WTO members as the price for entry. China’s accession to the WTO transformed the global trading system, lifted trade as a share of China’s GDP (figure 2.1) and helped to make China the largest international trader. The Chinese economy continues its transition from a centrally planned economy to a market economy and economic openness has been critical to China’s economic development and modernisation. China has followed the commitments it made in its accession to the WTO (USTR 2015) and has abided by rulings against it in WTO dispute settlement cases. are three plausible Chinese responses to US increases in protection against its imports. One is for China to do nothing in retaliation and to keep its outward economic orientation. A second response could be to make business difficult for US firms operating in or exporting to China. A third response would be to respond inkind with likeforlike measures. Each of these is considered in turn. Comments made on possible reasons for adopting each scenario are not intended to characterise any scenario as more (or less) likely than any Commentators may choose their own assessment of likelihood. China continues liberalising China could work to avoid a trade war for at least two reasons. First, the Chinese government puts a premium on social, economic and political stability (Prasad 2017). An economically damaging US tariff on Chinese goods would be disruptive and bring uncertainty and instability to the Chinese economy. The Chinese leadership could recognise the even larger costs that retaliation would impose on the Chinese economy. Not retaliating would still be disruptive for the Chinese economy, but less so than a trade war. Figure 2.1 China’s accession to the WTO significantly expanded the contribution of trade to China’s economya
Retaliatory increases in protection by China? The likely response of Chinese policy makers if the United States did levy punitive tariffs is very difficult to predict. is little precedent for any significant trade war involving China since it embarked on opening up its economy in 1978. China undertook unilateral liberalisation aimed at, and culminating in, World Trade Organization (WTO) accession in 2001. At accession, China committed to rules and practices above and beyond those that apply to other WTO members as the price for entry. China’s accession to the WTO transformed the global trading system, lifted trade as a share of China’s GDP (figure 2.1) and helped to make China the largest international trader. The Chinese economy continues its transition from a centrally planned economy to a market economy and economic openness has been critical to China’s economic development and modernisation. China has followed the commitments it made in its accession to the WTO (USTR 2015) and has abided by rulings against it in WTO dispute settlement cases. are three plausible Chinese responses to US increases in protection against its imports. One is for China to do nothing in retaliation and to keep its outward economic orientation. A second response could be to make business difficult for US firms operating in or exporting to China. A third response would be to respond inkind with likeforlike measures. Each of these is considered in turn. Comments made on possible reasons for adopting each scenario are not intended to characterise any scenario as more (or less) likely than any Commentators may choose their own assessment of likelihood. China continues liberalising China could work to avoid a trade war for at least two reasons. First, the Chinese government puts a premium on social, economic and political stability (Prasad 2017). An economically damaging US tariff on Chinese goods would be disruptive and bring uncertainty and instability to the Chinese economy. The Chinese leadership could recognise the even larger costs that retaliation would impose on the Chinese economy. Not retaliating would still be disruptive for the Chinese economy, but less so than a trade war. Figure 2.1 China’s accession to the WTO significantly expanded the contribution of trade to China’s economya