Bilateral pushback against China is failing, making joint WTO and IMF action key to tackling subsidies, under-consumption and an undervalued currency

Three main claims are made against China in modern trade policy discourse: 1) it subsidises its exports, 2) it under-consumes and 3) it keeps its national currency undervalued to serve its export-led growth model. We show that the World Trade Organization can be effectively used as a forum for most of the claims against China under the first category (subsidised exports). In practice, this has not been the case, for two reasons: counteracting Chinese subsidies does not solve all problems, as China will continue to under-consume and keep its national currency undervalued; and the WTO no longer enjoys the legitimacy it once had in the eyes of its members. Without cooperation between the WTO and the International Monetary Fund, the current unsatisfactory situation could be extended in the near future. WTO members should promote multilateral solutions instead of the current ineffective bilateral attempts to push back against China.

Source : Bruegel