limited options, China will have no choice but to do the same by addressing some of its non-tariff barriers.

The task for the international community is to take advantage of the emerging window to move more comprehensively on implementing measures to counter slowing growth, reduce the risk of financial instability, and ensure more inclusive prosperity. Such measures are less a problem of engineering (in the sense that most economists agree on what’s needed) than of politics (the need for decisive leadership and sustainability).

For starters, domestic pro-growth policies must be re-energized, both as an urgent standalone priority and to take pressure off trade. This is particularly important for China and countries in Europe, including six of the EU’s largest economies. The focus must be on productivity enhancement, structural changes to respond better to the realities of the global economy of today and tomorrow, more effective safety nets for the most vulnerable and displaced segments of society, and addressing market and government failures that frustrate growth and investment.

Moreover, existing trade arrangements need to be modernized, not only to fix existing problems, but also as part of a broader effort to enhance these arrangements’ agility in the face of rapid technological change. Particular attention needs to be devoted to improving the approach to big data, technology transfer, digital infrastructure, artificial intelligence, networks, and mobility.

It will be no less crucial to continue reforming the multilateral institutions in order to enhance their effectiveness and credibility.

Finally, the international community must guard against regional arrangements, such as China’s Belt and Road Initiative, which are intended to promote development but can end up undermining partner countries. This requires steps to enhance transparency on the terms and conditions of projects and debt undertaken through such initiatives, encourage greater reliance on local labor, and ensure that recipient countries are not encumbered with excessive liabilities. Excessively one-sided debt-for-physical-assets swaps, which can also raise genuine national security concerns, must also be resisted.

It is often said that with risk comes opportunity. What initially was viewed as an unfortunate US shift to protectionism may in fact have opened a window to improve the functioning of the global economy and world trade. The next few months will be critical.

Mohamed A. El-Erian, Chief Economic Adviser at Allianz, was Chairman of US President Barack Obama’s Global Development Council. He is the , most recently, of The Only Game in Town: Central Banks, Instability, and Avoiding the Next Collapse.

Copyright: Project Syndicate, 2019.
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