It is hard to look back at a major policy decision and admit it was based on the wrong idea. But that is exactly what happened when the West opened the door to unlimited trade with China. As Edouard Prisse explains in his book We Are Funding China’s Growth That Must Stop!, the problem was not just the decision itself. In fact, it was the thinking behind it.
In 2001, when China joined the World Trade Organization, many believed that this would lead to economic and political change within China. It was thought that free trade would support reform, raise living standards, and bring China closer to Western norms. That belief turned out to be wrong, as we are witnessing the consequences of this decision as it is shaping the global trade and economy. But why was it so widely accepted?
One reason is that people misunderstood the nature of China’s transformation. For example, in the years leading up to WTO entry, China had already shifted away from strict state ownership. Under Deng Xiaoping, it introduced elements of private competition. This allowed China to become far more productive but without giving up central control.
At the same time, the West failed to recognize how China’s political system would use this opportunity. With tight control over labor, production, and investment, the Chinese government could keep costs low and output high. It was never an open market. It was a controlled system using the tools of capitalism to achieve state goals.
Another reason is that many experts ignored simple economic warnings. In 1986, economist John M. Culbertson published an article in the Harvard Business Review titled The Folly of Free Trade. He warned that free trade with a country that does not follow the same rules would lead to imbalance. That article was largely ignored. The idea of free trade had become so widely accepted that no one wanted to question it.
Prisse points out that we wrongly believe new ideas always drive progress. When something new, such as China’s entry into the global market, emerges, we tend to stop analyzing critically and assume everything will turn out fine. However, assumptions are not strategies, and wishing for positive outcomes does not replace effective policy.
The result was predictable. China became the world’s factory. The U.S. lost large parts of its manufacturing base. And the trade imbalance grew year after year. China’s economy expanded rapidly, while Western countries became more dependent on imports.
The issue was not just misjudgment. It was also a lack of macroeconomic understanding. Many of the officials making decisions at the time were not trained in the economic realities of global trade. Their focus was on short-term diplomacy, not long-term balance.
Even today, some leaders continue to act as if nothing has changed. Reports and policy proposals ignore the core issue: China’s ability to outproduce and underprice through state control. As Prisse notes, we cannot afford to keep repeating the same mistake.
Fixing this will not be easy. Powerful business groups benefit from the current system and may resist change. But if leaders care about long-term stability, they need to stop looking at profits for the next quarter and start thinking about the next generation.
The first step is awareness. Voters, consumers, and policymakers all need to understand what went wrong and why. The second step is action. Trade policy should not be based on hope. It should be based on fairness, balance, and strategic sense.
To learn more about how we got here and how we can still turn things around, read We Are Funding China’s Growth That Must Stop! by Edouard Prisse. It is a book that challenges old assumptions and offers a new path forward to help us make America a world leader in trade and the global economy.
Head to Amazon to purchase your copy: www.amazon.com/dp/1967963053.
