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Jiandong Ju Proposes Four Principles of “Competitive Coexistence” in US-China Economic Relations

Time: 2019-10-28 13:50 Print

On October 27th, 2019, 37 scholars from China and the United States, including five Nobel laureates in economics, issued the joint statement of “US-China Economic Relations” in Shanghai, China. In the concurring statement, Jiandong Ju, proposed the four principles of "Competitive Coexistence " in US-China economic relations. He is the Unigroup Chair Professor of Finance, Chang Jiang Scholar of the Chinese Ministry of Education and Director of the Center for International Finance and Economics at the PBC School of Finance in Tsinghua University,

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The joint statement of “US-China Economic Relations” was drawn up by The China-US Trade Policy Working Group, which consists of four Chinese scholars including Justin Yifu LIN, dean of the Institute of New Structural Economics, professor and honorary dean of the National School of Development at Peking University, and former senior vice president and chief economist of the World Bank; Yang YAO, Chang Jiang Scholar of the Chinese Ministry of Education and Boya Chair Professor of Economics at the China Center for Economic Research (CCER) and the National School of Development (NSD) at Peking University; Feng Lu, professor of economics at the National School of Development (NSD) at Peking University and Jiandong Ju, Unigroup Chair Professor of Finance, Chang Jiang Scholar of the Chinese Ministry of Education and Director of the Center for International Finance and Economics at the PBC School of Finance in Tsinghua University, as well as six American scholars including Eric Maskin, Adams University Professor and Professor of Economics and Mathematics at Harvard University and Nobel laureates in economics; Dani Rodrik, Ford Foundation Professor of International Political Economy at the Harvard Kennedy School; Jeffrey S. Lehman, Vice Chancellor of NYU Shanghai and Professor of Law and Public Policy; Robert W. Staiger, the Roth Family Distinguished Professor in the Arts and Sciences and Professor of Economics at Dartmouth College; Robert Howse, Lloyd C. Nelson Professor of International Law at NYU School of Law, and Meredith A. Crowley, Reader in International Economics and Fellow of St. John’s College at the University of Cambridge. The joint statement is co-signed by 27 scholars from China and the United States including 4 Nobel laureates in economics: Robert Engle, the Michael Armellino Professor of Finance at New York University Stern School of Business, Edmund Phelps, Director of the Center on Capitalism and Society at Columbia University, Michael Spence, William R. Berkley Professor in Economics & Business in New York University Stern School of Business, and Joseph Stiglitz, university professor at Columbia University.

The joint statement states that the US-China economic relations have taken a very concerning turn, and it is aiming to offer an alternative intellectual framework that scholars believe the two countries could reasonably use as the basis and benefit for trade negotiations. According to the joint statement, the US-China negotiations have been grounded in an intellectual framework that presumes the only feasible possibilities going forward are (a) deep economic integration through domestic policy convergence to a common set of market economy principles, and (b) substantial “decoupling” into a world with dramatically diminished trading relations. This joint statement provides a third option between the “deep integration” and “decoupling” scenarios, one that preserves policy space for both countries – for China to conduct its industrial and growth policies and for the US to safeguard its labor markets and technological systems. Scholars believe that it is the best politically sustainable option that can preserve the enormous benefits of robust international trade.

On policy level, the joint statement has offered the “Four Buckets” Framework, and the categories (“Buckets”) of policies are as following. The “Prohibited” Bucket: “Beggar thy neighbor” policies are prohibited in this Bucket. The “Bilateral Discussions and Adjustments” Bucket: When Country A’s policies cause harm to country B without necessarily taking on a “beggar-thy-neighbor” character or entailing global economic losses, a mutually beneficial bargain can be worked out between the two nations that entails the removal of the policies in question. The “Domestic Adjustments” Bucket: When a mutually beneficial bargain cannot be negotiated, Country A keeps its policies and Country B is allowed to undertake well-calibrated domestic policy adjustments that demonstrably aim to reduce or minimize harm to its domestic economy. The “Multilateral Governance” Bucket: When Country A’s actions or policies (with or without any response from Country B) are likely to affect commerce with Country B in a way that is likely to cause spillover damage to the economy of Country C, it is appropriate that international norms and governance procedures be applied to manage such situations.

On the basis of the joint statement, six out of the ten scholars (including three Chinese scholars: Professor Yifu Lin, Professor Jiandong Ju, and Professor Feng Lu) also issued concurring statement.

In the concurring statement, Jiandong Ju proposed four principles of “Competitive Coexistence” on US-China economic relations. He argued that the key issue of U.S-China relations is about the evolving structure of the world order. The current global governance system is dominated by the United States. As China keeps growing, that United States dominance will inevitably have to be reformed. The question, therefore, is what would be a better global order in the future? Is it a “hegemony world order” dominated by one super country, or a Competitive Coexistence” world order structured to encourage competition among several big countries, together with the rest of the world? If one insists on “hegemony world order,” the United States and China could drift into seeing each other as enemies. However, if we could build a “Competitive Coexistence” world order, the US and China would be partners in building the future of the world, even with competition.  

Jiandong Ju also argued that US-China relations are structural, with mutual beneficial areas, competition areas and confrontation areas. Meanwhile, the world economy has begun to show the tri-polar structure of Asia, North America and the European Union. The combined GDP of the United States and China together accounts for 40% of world GDP. Therefore, whether US-China relations are cooperation or confrontation crucially depends on if the rest of world that account for 60% of world GDP choose the side and join the confrontation between China and the United States, or maintain their independence.

Jiandong Ju believes that the structural characteristics of US-China relations and the world economy makes that “Competitive Coexistence” world order is practical. He categorizes the policies into four categories and proposes four principles for each area. The first category: Mutually beneficial policies. The principle is to open more trade in comparative advantage sectors for both countries. The second category: Competing policies. The principle is that policies designed to help produce better products would be allowed; on the contrary, policies designed to destroy each other’s products would not be allowed. The Third category: Bilateral confrontation policies. The principle is that policies in this bucket would be symmetric. The Last category: Multilateral confrontation policies. There would be benefits for the global order if such global confrontation policies were prohibited. In that manner, the principle is that bilateral confrontations should not expand to the rest of the world. Neither country would force a third country to stand in its line against its competitor.

Jiandong Ju believes that expanding mutually beneficial policies and prohibiting multilateral confrontation policies are crucial in the “Competitive Coexistence” world order approach. Big countries, like the United States and China should limit their confrontational actions to bilateral and not expand to multilateral confrontations. The dual structural characteristics of US-China relations and the world economy would make “Competitive Coexistence” world order practical. The one that insists on "hegemony world order" will only isolate itself and results in chaos in the world.