ABSTRACT
For decades, the United States has consistently run the largest trade deficits in the world. Its merchandise trade deficit with China now equals two-thirds of the entire U.S. deficit. China has been accused of generating its enormous trade surpluses through unfair trade practices including unlawful expropriation of intellectual property rights, policies favoring state-owned enterprises, corruption, currency manipulation, and other violations of its commitments as a member of the World Trade Organization. Efforts to hold China accountable for these practices via WTO trade dispute mechanisms appear to have had little effect, and have called into question the viability and effectiveness of multilateral institutions such as the WTO. In response, the Trump Administration has undertaken unilateral measures to impose stiff tariffs on a wide range of Chinese imports, using national security concerns and other rationale to justify such measures. Short-run successes from such unilateral actions may come at the expense of longer-term consequences and may undermine global institutions that the United States helped to found and that are intended to prevent a return to an earlier era of ubiquitous tariffs and trade wars. Club theory suggests that it may be useful for the United States to focus on building regional or other trade blocs on a more selective basis with like-minded trade partners. At the same time, there may be an opportunity for the United States and China to undertake joint leadership in reformulating some of the basic foundations of the World Trade Organization in a manner that recognizes the legitimate but differing trade imperatives of nations in the Global North and Global South.
