I agree with Paul Krugman that we need to confront continued Chinese mercantilism squarely:
The bottom line is that Chinese mercantilism is a growing problem, and the victims of that mercantilism have little to lose from a trade confrontation. So I’d urge China’s government to reconsider its stubbornness. Otherwise, the very mild protectionism it’s currently complaining about will be the start of something much bigger.
I also should add that intellectual property rights, the #1 item on the U. S. agenda in world trade talks and on which we have, foolishly in my opinion, staked so much, can’t even make it on to the agenda, in large part because of Brazil, Russia, India, and China.
However, let’s do a reality check. We’ve got one political party that’s desperately afraid that the Chinese will turn off the spigot and make financing their social programs more painful and expensive and another that believes that imposing tariffs is wrong regardless of the circumstances. How likely are we to achieve enough political consensus to take any action?
There is one question I’d like to ask Dr. Krugman. In the paper of Paul Samuelson’s he quotes:
Let me quote from a classic paper by the late Paul Samuelson, who more or less created modern economics: “With employment less than full … all the debunked mercantilistic arguments” — that is, claims that nations who subsidize their exports effectively steal jobs from other countries — “turn out to be valid.”
what did Dr. Samuelson consider to be full employment?