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Academic

: Conglomerate

Times Shocker: Nation Acts In Self-Interest

By Gordon Smith, Christine, Hurt, Vic Fleischer, Fred Tung, Lisa Fairfax, David Zaring

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To be fair, it is a Monday, which has never made the lives of news-seeking reporters easy, but the A1 story about China, suggesting that it uses WTO discipline to prevent other countries from excluding its exports, but gooses those exports by keeping the value of the RMB low - there is no international strength-of-currency discipline - is both wrong and trite, a rare accomplishment.  Let's count some of the ways:

  • It is trite because we've known that China, like all exporters (and economists think, all people), benefits from low trade barriers, which the WTO provides, for a very long time.  We've also been hearing about China's weak currency for years.  There's no news in those insights.
  • It is wrong because China isn't an active plaintiff in the WTO - though it is easily the most sued defendant - as the Times admits: "China joined the W.T.O. in 2001 and in its first seven years filed only three cases. But it has stepped up its pace recently, and has filed four of the 15 cases in the last year." China benefits from the WTO baselines, like all members, but it hardly "aggressively" uses all of its WTO resources.
  • The implication is that we should have some sort of global currrency discipline, as the EU had before it moved to the Euro, I suppose.  Such a discipline could be had by the lamented-by-few gold standard, I suppose.  But ... really?  Gold?
  • More to the point, I, like the Times, believe in international law and institutions - maybe we should have an international currency union!  But story that suggests that what China has going for it is membership in the iron-disciplined WTO and rogue-state status as a currency provider suggests that international law has much, much more power than it probably really does.  If the US and EU wanted to invoke safeguards and slap massive tariffs on Chinese goods, they could do it.  If they want to trade Taiwan arms sales for massive currency deflation, they could possibly do that as well.  Even without a WTO for the world's currencies. 

Full post as published by Conglomerate on March 15, 2010 (boomark / email).

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