China’s Not Breaking the Rules. It’s Playing a Different Game.
In their Oval Office meeting earlier this week, President Obama predictably warned China’s visiting president-in-waiting Xi Jinping that China must play by the rules in international trade. It sounded right and fair and slightly tough as it was carefully crafted to do by top White House political advisers, and the president may even believe it. But he shouldn’t have said it.
Put aside for the moment the indelicacy of implicitly calling the soon to be president of the a country that is the world’s second most powerful and that highly values “face” (pride,dignity) a cheater. I mean, can you imagine the reaction here if Xi had lectured Obama on playing by the rules? But I digress.
There are three problems. The phrase “all must play by the same rules” implies that all are playing the same game, but in actuality they are not. In many instances there are no rules or the rules are vague, untested, and unclear. Even where there are rules, many countries have been ignoring them for a long time and there is thus strong precedent for not playing by the rules or even for interpreting the rules such that they are actually said to bless the apparent violations.
I have said before this before and I must emphasize it again. The fundamental premise of all U.S trade/globalization talks and discussions is that the participants are all playing the same game of liberal, neo-classical, free market, resource endowment and comparative advantage based free trade. This is a totally false premise that immediately gets the discussions off in irrelevant directions. The global economy is, in fact, sharply divided between those who are playing the free trade game and those who are playing some form of mercantilism. Of course, there is a spectrum of attitudes and policies, but roughly speaking the Anglo/American countries, North America, and parts of Europe are playing free trade. Most of Asia, much of South America, the Middle East, Germany and parts of Europe are playing neo-mercantilism. It’s like watching tennis players trying to play a game with football players. It doesn’t work, and insisting on playing by the rules doesn’t help, because both sets of teams are playing by the rules — of their game.