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America vs China: “Free Trade Is Only for Friends,” Says Prof. D’Aveni

Bernice Napach
Daily Ticker

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China is the second biggest economy in the world and has been the engine for global growth. But now China is expected to grow at its slowest rate in 13 years, dragging down the rest of Asia with it. The IMF, in its global forecast today said China's growth will slow to 7.8 percent and won't return to double digits anytime soon.

Still China will remain a key competitor to the U.S.—the largest economy in the world — and a trading enemy, says to Dartmouth Professor Richard D'Aveni.

He says the U.S. is in an economic cold war with China that it could potentially lose because U.S. free trade policy can't compete with China's state-sponsored capitalism.

Related: U.S. Files WTO Complaint Against China: Is Detroit Really at a Disadvantage?

"The Chinese form of capitalism allows them to focus the massive power of the entire government to do whatever they want." For example, says D'Aveni, China can set the global price of steel due to economies of scale and massive sales—dumping—of steel at below-market prices.

Professor D'Aveni, author of "Strategic Capitalism: The New Economic Strategy for Winning the Capitalism Cold War," says current U.S. policy of filing WTO cases opposing Chinese trade policies won't work. "At the end the Chinese will make a very polite concession with some kind of slippery loophole in it, apologize and then go along with doing whatever they wanted."

He recommends that the U.S. "do away with free market capitalism" which dates back only to the early twentieth century, when the income tax replaced duties and tariffs to fund government and play hardball with the Chinese."Recognize that free trade is only for friends," he says.

If the Chinese want access to our markets they have to give us access to theirs, says D'Aveni. We should "disrupt their economic system the way they have with ours."

Related: China's Huawei, ZTE Threaten U.S. National Security Interests: House Intelligence Report

He also suggests the U.S., like China, align government policies to advance economic interests-- building a portfolio of industries to support, underwriting basic research, even creating a manufacturing technology incubator.

"Our leaders must take measures to be sure Americans get their fair share—and them some—to create a resurgent middle class in America. …We must go on the offense—play to win," he says.

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