https://archive.is/whAsg

The continent’s leaders should instead consider what problem they are trying to solve. Europe may have a bilateral trade deficit with China. But in Germany’s case, only about a third of its loss in market share in other global markets can be explained by Chinese exports, according to the Kiel Institute, a think-tank. The rest reflects a broader loss of competitiveness. Fixing that problem would mean bringing down energy costs, making labour markets more flexible, integrating markets for capital and services and culling unwise regulations. Some progress is being made at a European level, but national governments are more interested in protectionism, such as the blanket eu tariffs against China floated by advisers to the French government earlier this year. Talk of “global imbalances” helps that agenda, while doing little to raise the remote prospect of either America or China changing tack. Make no mistake: it would be a good thing if America were to borrow less and Chinese consumers spend more. There is some evidence that imbalances tend to increase the risk of a financial crisis—and they certainly breed protectionism. Market competition must be seen by voters and consumers to be fair, and it is wise to avoid giving China choke points in critical supply chains or total dominance of carmaking. New balance Yet Europe must recognise that erecting trade barriers with China only increases the need for reforms, because diversifying away from the cheapest supplier raises costs and harms growth. An economy of China’s size and stage of development will always have significant manufacturing exports. If Europeans wants their industries to thrive, they should focus not on shutting out competitors but fixing their own house.

💥