Editor’s note: This article is the first in a three-part series on power trade that Rob Atkinson authored in The International Economy:

1. “A Remarkable Resemblance: Germany From 1900 to 1945 and China Today. Time for a NATO for Trade?” Fall 2020.
2. “The Global Third Way on ‘Power Trade’,” Winter 2021.
3. “U.S. Trade Policy at a Turning Point: How America Can Better Protect Itself Against China’s Predatory Policies,” Spring 2021.

Part One Abstract

The issue of China trade has taken up most of the trade policy oxygen for the last four years as the United States and China deepened their trade war, and it is unlikely that a new Biden administration will go back to a pre-Trump era vis-à-vis China trade. Yet crafting the right response to China’s unrepentant “innovation mercantilism” is difficult because it appears the free world has never faced such an adversary before. But in fact, the free world has faced such an adversary: Germany for the first forty-five years of the twentieth century. As noted development economist Albert O. Hirschman wrote in 1941, Germany was neither a free trader nor a protectionist. It was a “power trader” that used trade as a key tool to gain commercial and military advantage over its adversaries. Likewise, China’s trade policy is guided neither by free trade nor protectionism, but by power trade, with remarkably similar strategy and tactics to those of 1940s Germany. Understanding how Germany manipulated the global trading system to degrade its adversaries’ capabilities, entrap nations as reluctant allies, and build up its own industries for commercial and military advantage, just as China is doing, can shed light and point the way for solutions to the China challenge.

Read part one in full. (PDF)