Abstract
Using the model presented in Chap. 6, we simulate China’s growth and show that it generates a welfare gain for the whole world. The gain is larger for countries close to China and for commodity exporters that gain from improved terms of trade. There is a reduction in manufacturing production in other countries, and for the USA and Western Europe, these pains are large compared to the gains. Simulating trade policy options for the USA, the analysis suggests that trade integration, also with Asia, is good for welfare as well as US manufacturing. Trade liberalisation has to be reciprocal; otherwise it hurts manufacturing. Hence President Trump is right about reciprocity, but wrong about trade agreements: Free Trade Agreements (FTAs) are part of the solution and not the problem. Since China has grown in size and productivity, its share of the US trade deficit has increased. But the US trade deficit is a US problem and not a China problem; its trend over time looks about the same with or without China.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.