The U.S. and China have reached a "phase-one" trade agreement. From the perspective of overall U.S.-China relations, this is well worth celebrating. A deal—any deal—takes the world's two largest economies back from the cliff's edge. In purely trade terms, though, this is anything but the huge trade deal President Donald Trump touted on social media. Reducing existing U.S. tariffs may boost growth prospects in both countries next year, but it doesn't remove the uncertainty that's undermined business confidence. As for the scrapping of tariffs on iPhones, toys and laptops that were supposed to take effect Dec. 15, Trump has decided not to be the Grinch who stole Christmas. But dialing down tariffs leaves him with less leverage to demand that China scale back the more predatory aspects of "state capitalism," like industrial subsidies, which many see as a more important goal. This agreement is largely a purchasing deal that merely restores the status quo ante.  Farewell to the WTOOf far more significance to global trade than the U.S.-China mini-deal was the demise this week of the World Trade Organization's appellate court after the U.S. froze the appointment of new judges. The WTO itself now faces an existential crisis. Not everybody would mourn its passing, though. Some critics, like economist Dani Rodrik, think the WTO has massively overreached and the world would be better off with a more laissez faire arrangement that allows countries to run their economies as they see fit. That is, as long as they accept that trading partners have the right to protect themselves. Others fault the WTO for not going far enough to rein in Chinese mercantilism. Think about trade conducted within the WTO as a polite game of tennis. China largely plays by the rules, and when it's called out for an infraction, it takes its punishment. But there's a whole area of trade conducted outside the WTO that looks more like American football—a game of power rather than finesse, and played by Chinese rules. This sport features hidden subsidies to state champions, unpublished government procurement rules and unwritten industrial regulation. Many of the referees are Communist Party officials who operate in almost total secrecy. This contradiction is explained in a paper by the Harvard professor Mark Wu. Although he was writing in 2016, Wu accurately forecast that "China's rise will exacerbate the diminishing centrality of WTO law for global trade governance." The irony is that China is tearing apart the very institution that turbo-charged its economic advance. This week in the New EconomyIndia's trade deficit widened as exports contracted for the fourth straight month while the decline in imports eased. For a second year, a rift between industrial and developing nations about how to use carbon markets risks watering down a deal that could unlock hundreds of billions of dollars in aid for climate-related projects. Local governments and the private sector are filling the space left by climate denying governments in places like the U.S. and Brazil. Still, some 50% of all the carbon dioxide humankind has put into the atmosphere since the Industrial Revolution was added after 1990. Fixing this is a task for which the world remains hopelessly unprepared. If the number of vegan food trucks at the United Nations climate conference in Madrid was a sign of global commitment to fighting emissions, things aren't looking up. There was only one. U.K. election lessons for U.S. DemocratsThe U.K. election that gave Boris Johnson a clear mandate to pursue Brexit was also an overwhelming rejection of the hard left policies pursued by Labour Party leader Jeremy Corbyn. U.S. Democratic presidential candidates who've been cooking up ideas to reform capitalism should take note.  "The solution is not to upend the system," argues former Treasury Secretary Hank Paulson, the New Economy Forum co-chair, and Erskine Bowles, who served as chief-of-staff for President Bill Clinton. "First, we must aggressively invest in our human capital. That starts with addressing the supply side of the education market, including investments in community colleges to provide more students the option to obtain a high-quality education and complete their degrees." The U.S. should also be making massive investments in science and technology. China does—and it's paying off. This year, China knocked the U.S. off its pedestal as the world's top power in chemistry research. How America rivals China as a surveillance stateOne of the many criticisms of China in the West is the way it is deploying artificial intelligence to create an Orwellian "surveillance state." Consider this statistic, though: The U.S. isn't far behind China in the number of surveillance cameras—one for every 4.6 people versus one for every 4.1 people. _______________________________________________________
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