I strongly recommend that you read this interview with Dani Rodrik at Talking Points Memo. Here are some little snippets from it:
Judis: During his campaign and presidency, Donald Trump has made a big issue of America’s trade deficit, and singled out China, Mexico, and Germany for blame. When Trump was in Europe recently, he attacked the Germans for having a trade surplus. He even threatened to block German car exports to the United States. Is there any basis for Trump’s complaints?
Rodrik: Like most everything with Trump, I think there is a significant element of truth in the causes that he picks up. He is addressing some real grievances. But then the manner in which he addresses them is completely bonkers.
I couldn’t agree with that more.
Judis: Are you saying that in the ‘90s, the United States should have been much more wary and cautious when it helped to found the main international trade group, the World Trade Organization (WTO), in 1995?
Rodrik: A lot of wrong turns were taken in the 1990s. The WTO had some good things in it, but as a trade regime, it exemplifies global overreach. It tries to fix global standards for intellectual property rights, industrial policies, and various health and safety regulations.
A key problem is that many of the countries in the world, notably China, simply do not have the civil infrastructure to regulate intellectual property rights. Believing that they could is an error of titanic proportions.
Read the whole thing. I think that he understates the degree to which large economies like Germany, China, and Japan maintaining mercantilist policies pose a problem.
I am confused. Trumps approach is completely bonkers and the various approaches since the mid 90’s are not?
To my eye the US has tried beniegn neglect and gentle chiding and we know what the results were. If you want different results….
Through Trump may fail, it will inform us what will succeed better then continuing as before.
Oh, I think the problem goes back before the mid 1990s. At least to the early 1990s when China pegged its currency to the dollar but likely before. Businesses actually used to invest domestically in something other than financial instruments.
CuriousOnlooker’s point remains though, and seems valid. It’s not that Trump’s approach is bonkers, it’s just boorish and some find that embarrassing. I’m not a fan myself but I can see the reasoning behind it.
I like your idea about foreign countries owning US Treasuries, but I would include private entities. I like his idea about capital controls, and the two could be combined. As usual, I strongly believe that an updated Glass-Steagall is needed. (There is not an outcry for it, but the absolute naysayers are dwindling.)
As opposed to his idea about foreign workers, I would close the door almost completely. Farmers need automation and machinery. If the primary place US dollars can be used, investment in non-financial investments will take place, and robots will be dumbed down to provide jobs for the cheapest US workers.
Did Henry Ford (and others) create more or less jobs, and by only having one task, did the assembly line allow dummies to work? People want jobs, and the modern type will do very well.
(If the software industry could have employed Indian workers sooner, would there be any higher languages? Higher languages allow the dummies to code, also. Do you need anything more than a text editor to code?)