From this weeks Economist:
America’s trade deficit in goods reached $836 billion in 2006. Congressional Democrats seized on the figures to lambast the Bush administration and called for “actions to stand up for America” by ending the “unfair trade practices” of the countries and regions that account for most of the deficit: China ($233 billion), the European Union ($117 billion) and Japan ($88 billion).
I wonder if these “unfair trade practices” include more efficiently produced and/or more attractive goods from China, the EU and Japan, as well as the current valuations of the respective currencies (witness the recent pressure from the US for China to revalue its currency, and the repegging of the yuan to appreciate against the US dollar) ?
Now I don’t know if the currencies are “reasonably” valued (however this may be assessed), but it does seem odd (although understandable in terms of US domestic politics) for the US to appear to attempt to protect its industries by increasing the costs of imports through revalued currencies. But maybe there are unfair trade practices. I don’t know.
Maybe any currency revaluations will constitute a form of protectionism. If the US dollar continues its general downwards trend, it may discourage US consumers buying imports and reduce the trade deficit, which seems a strategy of some US politicians. It’ll be interesting to watch US trade politics given that there is a stronger current of protectionism in Congress and the weakened President’s trade negotiating authority runs out in July this year.