Trump’s exit from WTO would fulfil Xi’s ‘China dream’

Never believe something until it’s been officially denied. This age-old adage comes to mind as US treasury secretary Steven Mnuchin refutes reports his boss is withdrawing from the World Trade Organization (WTO).

Well, of course, President Donald Trump will. If Trump has been consistent about anything, it’s keeping his most ill-informed campaign promises.

He said he would pull out of the Trans-Pacific Partnership (TPP), and he did. He said he would kill deals on climate, Iran and South Korean trade, and he did. He pledged to ban Muslims from entering the US, and that’s afoot. Why wouldn’t Trump follow through on threats to leave the WTO?

A better question: why would a man who touts his business acumen so willingly hand the future to China?

One could argue Trump’s myriad own goals already did just that. Leaving TPP was a dream come true for China’s Xi Jinping and agonizing for Japan’s Shinzo Abe. Scrapping every multilateral deal in sight allows Xi to play the pragmatic, pro-globalization adult in the room.

Seriously, Trump has Xi looking like Al Gore as the US makes coal great again and lets manufacturers pollute like it’s 1899.

Leaving the WTO would finish the job, letting China effectively rule the institution it rode to today’s economic heights.

The day China entered the WTO in 2001 was the day everything changed for globalization. Then-premier Zhu Rongji saw it as a reformist Trojan horse. Once inside China’s walls, the rules of international trade would force Beijing to play by new rules, liberalize the capital account and increase transparency. By lowering its defences, Beijing would have to raise its game.

Things didn’t work as planned. Pundits said the internet would destabilize China’s Communist Party. Instead, it bent cyberspace to its will, cementing its power. Beijing did the same with the WTO system.

Rather than prying China open, Xi’s party bent trade dynamics to its will. Trump correctly put his finger on this problem. Sadly, he’s focused on the wrong answer.

There’s lots on which to criticize Xi’s government: state subsidies for politically connected enterprises; forcing foreign companies to share intellectual property; extreme opacity; a South China Sea land grab; a dismal human-rights record; coddling North Korea’s murderous regime.

But reading from the Chinese playbook on trade with tariffs and currency manipulation won’t make the US more innovative or productive.

And leaving the WTO frees Xi’s party to replace the “Washington consensus” with a Beijing one that drags the global economy in a perilous direction.

The Washington ideal of democracy, free markets, financial openness and transparency is anything but perfect. The global crash of 2008 that emanated from Wall Street was proof enough of that. It’s hard to argue, though, that a “Beijing consensus” preference for authoritarian rule, quasi-open markets and extreme censorship is preferable or consistent with a future driven more by ideas and information flows than factories.

There’s an obvious paradox here: if Trump had his way, he might prefer to impose Beijing’s vision on Americans. He is, after all, working to neuter institutions at the heart of the Washington consensus: the International Monetary Fund (IMF), World Bank and Steven Mnuchin’s treasury department.

Yet there is no unilateral answer to the multilateral threat posed by China’s rise. The only way to pressure China to become a global stakeholder, rather than just a shareholder, is cooperation. That’s what former US President Barack Obama envisioned when crafting the 12-nation TPP. It’s what Japanese Prime Minister Abe had in mind when pushing the “quadrilateral dialogue” between Tokyo, Washington, New Delhi and Canberra. The same goes for the “Indo-Pacific” framework.

There’s strength in numbers and only big numbers of trading partners will get Xi’s attention. And none is bigger than the 164-member WTO. Rather than leave it, Trump should cajole the Group of Seven and a critical mass of Group of 20 members to bring loads of WTO cases against Beijing.

What better way to shame Xi’s government to accept the responsibility that comes with being the No. 2 economy and biggest trading nation?

Walking away from the WTO would be a breathtaking gift to China—and a giant leap backward for American workers. Little did Trump voters know that Trump’s Art of the Deal would be such a huge plus for Beijing.

William Pesek, based in Tokyo, is a former columnist for Barron’s and Bloomberg and author of Japanization: What the World Can Learn from Japan’s Lost Decades.