Duncan’s Economic Blog

World Trade: Tensions Ahead

Posted in Uncategorized by duncanseconomicblog on September 16, 2010

So, Japan is unilaterally intervening in the foreign exchange markets to try and weaken the yen. This may be driven by domestic politics.

Meanwhile Japan is also complaining about Chinese purchases of its government bonds, which strengthen the yen.  

Paul Krugman thinks they are right to, that the US should complain to and that China is indeed cheating and “stealing” demand from other countries.

The US Congress is once again looking at the issue of the renmimbi’s value, against the backdrop of a large trade deficit and upcoming midterms.

Both respected international macroeconomist (and economic historian) Barry Eichgreen and the joint chief executive of the world’s largest bond fund are warning against the lack of international co-ordination in the macro policy response to the crisis.

Meanwhile, Chinese export focussed Shanghai has surpassed transhipment hub Singapore as the world’s busiest container port. And there are even calls in open Switzerland for some from of protection.

Whilst John Ross makes the case in defence of Chinese policy, against a background of high unemployment in the West I’m not sure how long the international consensus in favour of freer trade can hold.

The old style liberal call for an open international economy was usually coupled by a case for compensating the losers from free trade in the West. With stretched budgets and a lack of jobs generally, that’s harder to make.

With every major economy looking for “export-led” growth, how long before we see more currency intervention? Restrictions on foreign lending by banks? Tariffs?

3 Responses

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  1. Tim Worstall said, on September 16, 2010 at 10:27 am

    “The old style liberal call for an open international economy was usually coupled by a case for compensating the losers from free trade in the West. ”

    As I’ve remarked before. Are those gaining from the current restrictions upon trade compensating me, as I lose from such restrictions?

    No?

    Bugger off then.

    • Andreas Paterson said, on September 16, 2010 at 12:57 pm

      Do you really think it’s that simple? The losses from trade restrictions are likely to mean that one group of individuals are forced to pay a little extra for certain goods and are denied others. The other group of individuals are likely to lose their livelihoods.

      Personally I’m not entirely comfortable with the idea of exchanging major lifechanging events for minor inconveniences.

  2. Tim Worstall said, on September 16, 2010 at 1:08 pm

    “Do you really think it’s that simple?”

    Yes.

    I’ve had to change what I do for a living several times as technology has changed around me. Others should similarly get over it and get on with it.


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