| Has the great globalization experiment been | | | | to believe this could be an option, but it isn't |
| terminated? Will it all be rolled back? And if yes, rolled | | | | something that I can elaborate with expertise... |
| back to what? Can we even imagine a de-globalized | | | | Moving on, if the US succeeds in it's attempt to |
| world vividly enough to understand it's implications? | | | | force China into doing it's bidding, will it stop there? |
| These questions and more, are haunting both | | | | There are more countries that the US blames for it's |
| supporters and opponents of US protectionism today. | | | | economic woes. India's one of them and can very |
| Unbelievable as it is, protectionist voices in the US are | | | | easily be designated a Currency Manipulator, because |
| gaining ground. What was once a cathedral to free | | | | pretty much like China, it is one. |
| markets is now turning away from it's beliefs. And | | | | And Many countries in Europe believe that Germany |
| the reason, or so they would have you believe, is | | | | exports far more than it should to the rest of them. |
| alleged currency manipulation by China. The | | | | Right now, as part of the EMU, they have no |
| background to this has been discussed in detail in an | | | | protection, but the EMU isn't cast in stone. If |
| earlier post, China's Currency Policy, The Financial | | | | countries could opt in, they can opt out as well. Will |
| Crisis and the Future of Financial Reform. In summary, | | | | protectionism result in a disintegration of Eurozone? |
| US Dollar purchases by China, an attempt to prevent | | | | The point is, a protectionist step by the US would |
| the Yuan from appreciating, has distorted the perfect | | | | give legitimacy to protectionist forces everywhere. |
| markets required for "efficient globalization". | | | | And unleash a slew of legislation aimed at protecting |
| The solution, according to these protectionists, is | | | | domestic economies from foreign competition. Once |
| de-globalization. They propose to levy a penalty of | | | | set in motion, this movement's path cannot be |
| 25% on all goods imported from China. In their | | | | predicted, or even imagined, with any degree of |
| opinion, this could incentivize, or force, China to stay | | | | accuracy. |
| out of it's currency market, which it intervenes in | | | | As of now, more than 130 US Senators (Democrats |
| consistently and on an unprecedented scale. | | | | as well as Republicans) have introduced a Bill in |
| The implications of this discussion go beyond just US | | | | Senate seeking levy these penalties on Chinese |
| and China. If the US were to label China a Currency | | | | imports. Most of them have also signed a letter to |
| Manipulator, Europe won't be far behind. Lower | | | | the US Treasury Secretary and the US President |
| demand for their goods could result in the Chinese | | | | asking the administration to act against China. On April |
| economy contracting and force China to respond. But | | | | 15, 2010 the US Treasury Department will release it's |
| it's ability to respond economically is limited. It is the | | | | semi-annual report on global currency management |
| world's production unit and it's economic survival is | | | | practices and it is widely expected that this report |
| dependent in exports so a reciprocal import penalty | | | | will label China a Currency Manipulator. If this were to |
| on US goods won't serve any purpose. It is the | | | | happen, the China Currency Manipulation Bill will gain |
| largest lender to the US and could sell it's holdings of | | | | credibility and find the bipartisan support that it needs. |
| US Treasuries, drive up interest rates in the US and | | | | Leaders of the group of 130 are expecting that this |
| then sell US Dollars to weaken it. But that would only | | | | bill will become law by the end of May 2010. Which |
| mean a stronger Yuan which would be the opposite | | | | gives us just over 2 months to prepare for a strange |
| of what it needs to support exports. So how can it | | | | unknown world. |
| respond? Militarily? Opponents of protectionism Seem | | | | |