China's trade model is built on keeping others poor

THE WORLD has, for the most part, welcomed the trade truce between the US and China. Exporters, in particular, are hoping for a period of quiet that will allow them to adjust to a new world with higher tariffs and more restrictions.

- By Mihir Sharma

Yet for workers and companies across the developing world, the possibility of a return to a status quo ante isn’t an entirely comforting notion, either. A new normal that preserves China’s dominance of global trade hurts them far more than it does the US or other Western nations.

A new index from Bloomberg Economics that examines the export potential of various major economies explains why. China is still at the top of the table, and there’s a big gap between it and the closest competitor, India. Most emerging markets, according to the index, only marginally outperform developed economies.

This is not how it’s supposed to go. As labor costs in China converge with higher-productivity markets, it should look like a less attractive source of goods. Trade-driven sectors should start moving out of the country — or, in the index’s terms, other developing economies should demonstrate greater or at least comparable export potential.

Instead, China’s lead in other factors — from energy costs and logistics efficiency to straightforward technical know-how — is so great that it still has no peers.