China and the WTC – a real game changer

Cover of China, Trade and Power by Stewart PatersonChina, Trade and Power: Why the West’s Economic Engagement Has Failed
Stewart Paterson
London Publishing Partnership (£18.99)

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What was the most important event of the past two decades? Some might say 9/11; others the financial crisis of 2008-09. Stewart Paterson argues the real game-changer was China’s accession to the World Trade Organisation in 2001. That was sold as an attempt to bind China to the rule of law and allow US exporters to gain access to Chinese markets. If those were the goals, then the move has failed, says Paterson.

Indeed, by allowing China to develop using a mixture of mercantilism and state capitalism, China’s WTO accession probably slowed the pace of genuine political and economic change. Meanwhile, Chinese imports destroyed manufacturing in the developed world, increased income inequality and unbalanced the global financial system.

To solve these problems, the developed world needs to put pressure on China to raise consumption, open itself up and engage in genuine political reform. Its trade war with the US might not be a bad thing if it forces China to make these changes.

This is a short book and there are times when a bit more detail would have been useful. The author also at times overstates his case. Still, he’s surely right that China has been taking unfair advantage of the world trading system and that its authoritarianism and state direction of the economy are no models to follow.