Categorized | Currency

The dangers of half measures

I said some cautiously optimistic things when Geithner proposed limiting trade imbalances among countries in a recent G20 meeting.  I also said his proposal, imbalances of no more than 4% of GDP, was a bad goal.  The devastating U.S. trade deficit is only 3.2% of GDP.

The bigger problem is that the Geithner proposal provides fodder for distraction by two groups (1) free traders who think responding to cheating is protectionism; and (2) those supporting Chinese cheating.  The “multi-lateral talks” approach had previously been shown an abject, multi-year, economy-killing failure.  But the Geithner proposal could be a way for opponents to get the multi-lateralist bandwagon going again.

Case in point.  The NY Times editorial board has been dragged kicking and screaming to admit that China cheats, but has opposed legislation to neutralize that cheating.  (Note:  The WSJ editorial board has been dragged nowhere.  They continue to exist on another planet).

What go me worried was their editorial yesterday (10/31/10) praising Geithner’s proposal.

A new proposal could offer a way out. The Obama administration, which has been trying to rally pressure on Beijing, is calling on the world’s largest economies to agree to a target for the size of their trade imbalances.

They are wrong.  This is failed multi-lateralism in new clothes.

There is no evidence that the Obama Administration is proposing this Geithner/G20/IMF route as a way to kill the currency bill in the Senate.  However, some opponents may try to use this red herring to try avoiding a lame duck session Senate vote.

The multi-lateralism solution is on life support.  We need to insist upon and enforce a “Do Not Resuscitate” directive.

2 Responses to “The dangers of half measures”

  1. Vicky Davis says:

    Perhaps a good strategy might be to convince the military that we could put a 15% tax on the gross sales of all corporations grossing over $2 million a year - and that the tax money could be used to rebuild the manufacturing base to support both our nation and the military. Their support would be a useful counter to the free traitors.

  2. Frank Shannon says:

    Counter China’s mercantilism with an across the board CVD by executive order. Rachet it up until balance is achieved and then rachet it back down once balance ia acheived. Make the CVD automatic so balance is always maintained no matter what forms of cheating China employs.

    Nothing would do more to rebalance world trade and restore the world’s flagging economies.


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