China is at the center of the global trade map

Most maps you see in this country put the Atlantic Ocean at their center, with North America and Europe just off center stage. Asia is on a periphery.

My favorite map looks different. It puts China, not the Atlantic, at the center of the world.


That reflects reality. In 2014, China became the largest economy on the planet, if you calculate Gross Domestic Product (GDP) in purchasing-power parities; in other words, by measuring the production of final goods and services with a common system of international prices. China's new role as global superpower was celebrated with little fanfare. But it's the source of many of the global economy's recent shifts and shocks. My favorite way to explain the current situation is that we're witnessing a collective silent scream on behalf of the West in response to the loss of its worldwide dominion.

If you want to understand why, just look at my map. With China in the center, Europe is moved to the periphery. The relevant oceans become the Pacific and the Indian, from which China's growth radiates out. China's contribution to world growth increased from 3 percent in 1970 to 31 percent in 2015. That growth is rolling across South Asia and East Africa. It's also noteworthy that the Pacific countries in Latin America are doing better than the Atlantic countries there.

The transition may feel especially jarring because, since World War II, we have been living through a period in human history that is extraordinary in its absence of violent global conflict.

This period has also given space for economies around the world, and especially those in Asia, to catch up with Western countries.

Back in the 1950s, China had less than 5 percent of the per capita income of the United States. Today that number has increased to 25 percent. That lags well behind Korea and Japan, which are both at 80 percent. But as China leverages its size going forward, it will become more and more a source of global growth.

What is the best response to the backlash against trade? For me, that question reminds me of a saying we have in Spanish (I'm originally from Madrid) that translates as: "You kill the dog, no more rabies." You want to find ways to get rid of the rabies — or, to unpack the metaphor, the disease of unsettling change under globalization — without killing the dog.

This moment requires some hard rethinking. How well does free trade really fit with the other things we want in modern societies? I was just re-reading work on globalization from an economist colleague, Dani Rodrik, at Harvard. And he says you cannot have all three of the following things simultaneously: democracy, national sovereignty and free trade. For example, you cannot have international trade without some international rules, and those rules have to be enforced by somebody with international power. So if you want a globally integrated world, you have to give up some sovereignty.

Or you have to go the Chinese way and forget about democracy. You have trade and national sovereignty, but capital controls and top-down management.

I also find myself thinking of the Nobel laureate Paul Samuelson, and the famous challenge he was issued by the mathematician Stanislaw Ulam to "name me one proposition in all of the social sciences which is both true and non-trivial." Samuelson, who died in 2009, eventually answered by citing the concept of comparative advantage, the idea that gains from trade follow from allowing economies to specialize. If one country's economy is better at making computers than coffee, it makes sense for it to invest more in computers and export them, to be able to afford to purchase coffee from some other country.

Samuelson was right, but the problem is that too many people, including many in power, don't understand the concept. And they don't understand that even if the United States tried to fix its trade imbalance with China, there would be a backlash, retaliation and the demise of thousands of companies and jobs.

What we need is to adjust to the world as it is, not to the old maps on the wall, with the Atlantic Ocean at the center. We must recognize the value of trade, and do more for the losers. And we must reckon with the reality of China's ascendancy and the increasing role that machines will play in our lives.

Javier Díaz-Giménez is a professor of economics at IESE Business School, currently visiting UCLA Anderson School of Management. This essay is part of an inquiry, produced by the UCLA Anderson School of Management and Zócalo Public Square, into whether global trade has to be a zero-sum game.