A Real Remedy for a Currency Dispute
Saturday, November 28, 2009
The Nov. 24 editorial "The currency quarrel" correctly argued that China is unlikely to respond to U.S. requests that it stop intervening in the currency markets to keep the yuan undervalued vs. the dollar. It was also correct to argue that Washington should stop harassing the Chinese and simply take its own corrective measures. But the editorial's proposal for an "exit strategy" for fiscal and monetary policy falls in the category of necessary but insufficient.
China and other Asian countries systematically undervalued their currencies even when the United States had budget surpluses and relatively high interest rates. Beyond fiscal responsibility, the United States should be initiating discussions at the World Trade Organization and the International Monetary Fund about nullification and impairment of trade agreements, indirect export subsidies and violation of currency manipulation commitments. Washington could revisit the Nixon-era debate on the same subject for guidance.
Clyde Prestowitz, Potomac
The writer is president of the Economic Strategy Institute.