Originally published in The Diplomat.

One report — from the German government — suggests a potentially significant departure in how the West deals with China’s challenge. The second report — from the U.S. government — provides a timely reminder of the extent to which China’s WTO compliance has come up short. And finally, a sobering report from the UN demonstrates just how counterproductive trade wars can be.

The just-released German National Industry Strategy 2030 signals a growing consensus in Germany that in order to respond to China’s challenge, government needs to be more proactive in fostering and supporting critical strategic industries. The strategy calls for, among other things, state investment in important technology firms to prevent them from being acquired by foreign entities.

This of course comes on top of Germany’s existing Industry 4.0 program, and the attempted (but disallowed) rail merger between Siemens and the French giant Alstom – a deal that was explicitly presented as necessary to permit Europe to compete against China’s state-backed national champions. Discussions are now underway as to whether EU antitrust policies need to be relaxed in order to allow greater latitude to meet the challenge posed by Chinese mega-firms. The implications are clear: as concerns over China mount, regulatory frameworks are being rethought, and state-directed industrial policies are gaining ground.

The West has been – implicitly or explicitly – making the argument for more than seven decades that free markets, free trade, and minimal government involvement in the marketplace is the path to development and prosperity. Is Germany now taking a tentative step toward reversing this thinking? Ironically, the conventional wisdom at the time of China’s entry into the WTO was that China would inevitably become more like the West. But could some countries in the West actually end up becoming more like China?

This of course raises the obvious but difficult question: Is it wise to counteract Chinese policies you disagree with by replicating them?

If Western countries adopt more state-directed economic policies, greater levels of direct and indirect subsidization, and compliant regulatory environments that facilitate the rise of massive domestic companies, will they continue to forcefully criticize China for doing precisely the same? And if China is no longer under persistent Western pressure to curb these policies; will it interpret that as a “green light” to intensify its efforts in support of national champions and China Inc? Or is it already a foregone conclusion that China will double down on these policies to address its vulnerabilities as exposed by the trade war?

Meanwhile, across the Atlantic in Washington D.C., the Office of the United States Trade Representative has just completed its annually mandated report to Congress assessing China’s compliance with its World Trade Organization (WTO) obligations. Few trade issues have been as well-cataloged over the years as the variety of ways that China’s WTO compliance has fallen short. The report outlines what USTR refers to as a “consistent pattern” of unfulfilled obligations in areas ranging from technology transfer to agriculture, and makes a compelling case that reality has diverged sharply from the optimistic hopes and aspirations held by the West at the time of China’s WTO accession.

And while there has been widespread global consternation over the unilateral U.S. application of punitive tariffs in response to China’s trade practices, there is also an underlying recognition among major trading nations that many of the United States’ grievances are in fact legitimate and that China needs to be – in one way or the other – held to account.