SIMON JOHNSON, YURIY GORODNICHENKO, and ILONA SOLOGOUB
On his recent visit to the United States, Chinese President Xi Jinping encouraged American companies to regard his country as a close trading partner. In fact, US companies should be seeking to move their supply chains and other business away from China – while they still have the time. Through its deliberate and repeated actions, China is heading for an economic showdown with the US.
For many decades, Western governments have pursued versions of what Germans call Wandel durch Handel (change through trade), hoping to achieve global stability, reduce international confrontation, and (perhaps) promote more democracy through economic interaction with authoritarian regimes. The idea is simple: countries that trade extensively with each other will not jeopardize the resulting profits and jobs by going to war; prosperity and interdependence mitigate aggression.
In the post-World War II era, this strategy has sometimes worked astonishingly well. The establishment of the European Coal and Steel Community in 1952 took the key inputs for weapons production out of the hands of national governments and led to the European Union today. Germany and France (and later other Western European countries) became tightly linked by mutual trade and investment, so that war between any of them would impose an unbearable cost on victim and aggressor alike. Western Europe, a region that for centuries had been the most prone to interstate violence (often with disastrous global spillovers), became a bastion of peace.
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