Competing with China: broad tariffs not the best option
The new Kiel Policy Brief: “Competing with China in Tthird Markets” finds that it is not only China that has gained market share. Countries such as Germany and France have also lost ground to other competitors in many third markets. This indicates that some of the challenges are homegrown and cannot be explained solely by China’s rise.
“Against this backdrop, it is problematic to focus trade policy measures exclusively on fending off Chinese competition. Broad-based tariffs on products from China should not be the tool of choice. Such measures do not address the underlying competitiveness problems faced by European companies in markets outside the EU and do not automatically contribute to higher productivity or innovation capacity”, argues Julian Hinz, director of the Trade Policy Research Group. “Furthermore, there is a risk of costly retaliatory measures and further fragmentation of international trade. The durable fix for the loss in competitiveness is investment in innovation and new technology”, says Katharina Erhardt, head of the Industrial Policy Lab at the Kiel Institute.
“Where sectoral safeguard measures are being considered, they should be based on clearly understandable strategic or security policy considerations or be justified by clear evidence of unfair trade practices — such as proven dumping. If tariffs are used to facilitate adjustment processes or to provide temporary protection, they should be accompanied by clearly defined sunset clauses”, the two co-authors argue.
