I\’m seriously having a difficult time digesting this.
Yes, I know, he\’s the Nobel Laureate in international and trade economics and I\’m just a lowly blogger.
But he seriously seems to be advocating a protectionist trade war against China.
Let me quote from a classic paper by the late Paul Samuelson, who more or less created modern economics: “With employment less than full … all the debunked mercantilistic arguments” — that is, claims that nations who subsidize their exports effectively steal jobs from other countries — “turn out to be valid.” He then went on argue that persistently misaligned exchange rates create “genuine problems for free-trade apologetics.” The best answer to these problems is getting exchange rates back to where they ought to be. But that’s exactly what China is refusing to let happen.
The bottom line is that Chinese mercantilism is a growing problem, and the victims of that mercantilism have little to lose from a trade confrontation. So I’d urge China’s government to reconsider its stubbornness. Otherwise, the very mild protectionism it’s currently complaining about will be the start of something much bigger.
And Smoot Hawley worked so well, didn\’t it?