World Trade: Tensions Ahead
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.
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?