While others will record and analyze the minute details of this dark...
2021-02-26 2 ENGLISH REPORTS
From this baseline picture of U.S.-China economic engagement in four channels, a conventional assessment of the costs of decoupling would assume a reasonable rate of growth based on past patterns and then project reductions in activity attributable to decoupling. But extrapolating the future based on pre-COVID baselines is no longer reasonable. The assumptions about growth rates, productivity, and even reliance on trade for pharmaceuticals, masks, ventilators, and innumerable other items deemed essential in a crisis are antiquated. Models such as GTAP traditionally used to analyze international trade policy shocks were showing their limits before the pandemic; calibrating them (as is required) with yesterday’s assumptions about GDP growth and productivity is an imperfect art.
Aggregate models are most useful for conceptualizing the complex eects of decoupling and getting the magnitude of impacts in four channels of engagement right. Industry case studies, presented in the next section, are more useful in understanding real-world dynamics and impacts. A note about the aggregate estimates below: In these four subsections, we look at ways to ascribe a ballpark value to these channels. These estimates are not comprehensive, nor are they adjusted to be on the same base year or to be compatible with each other. Each discussion stands alone and pertains to one channel, and the four cannot be cumulated to provide a precise reckoning, only a notional order of magnitude picture. That is su¤cient for our purpose—to gauge the broad stakes for the U.S. in pursuing a decoupling campaign, so that the necessary resources are considered. Throughout our discussion, the phrase full decoupling is defifined as bilateral flflows going to zero, and the less severe but still disruptive hard decoupling scenarios are defifined within each section.
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