Peter Gallagher

When an econ­omy has trade lever­age, the threat of dis­crim­i­na­tory duties need not be sim­ple protectionism.

“The US can help China make the nec­es­sary adjust­ments toward a reduc­tion in imbal­ances by adopt­ing a uni­form tar­iff of 10 per cent on all Chi­nese imports, based on their val­ues when they enter the US. Six months after the estab­lish­ment of this tar­iff, the rate would increase by one per­cent­age point a month until the Chi­nese trade sur­plus with the US declines to $5bn a month.” Extract from FT.com / Com­ment / Opin­ion — Tar­iffs can per­suade Bei­jing to free the renminbi

But who, other than China, would loose if this idea worked and the Ren­minbi was reval­ued? Most of the rest of the world. Espe­cially economies with a com­par­a­tive advan­tage in agri­cul­tural pro­duc­tion (Aus­tralia, New Zealand, Latin Amer­ica) for whom imported Chi­nese defla­tion of man­u­fac­tures prices off­sets the EU’s depres­sion of agri­cul­tural prices (and infla­tion of man­u­fac­tures prices).

In prin­ci­ple, too, every­one would loose from another U.S. defec­tion from the core mul­ti­lat­eral trade rules. But per­haps you could make the case that this kind of extra­or­di­nary action (like the 1980’s Nixon Admin­is­tra­tion ‘shocku’ blow against Japan) doesn’t really impact the rules.