Daniel W. Drezner

Gee, do you think trade protectionism and undervalued currencies are related?

Gee, do you think trade protectionism and undervalued currencies are related?

Apparently the Chinese premier feels like everyone is picking on his country and that’s not fair

China’s premier Wen Jiabao on Monday lashed out at the growing number of countries pressuring Beijing to strengthen its currency, making it clear that European officials made little headway in their efforts over the past two days to persuade the country to allow the renminbi to appreciate

Speaking at the conclusion of an EU-China summit in the eastern Chinese city of Nanjing, Mr Wen said: “Some countries on the one hand want the renminbi to appreciate, but on the other hand engage in brazen trade protectionism against China. This is unfair. Their measures are a restriction on China’s development.” (emphasis added)

Wen has a legitimate complaint here about the rise in protectionism directed against China in particular.  Of course, this begs the question of whether maybe, just maybe, the undervalued yuan might be driving some of that protectionist sentiment. 

It would be interesting for the U.S. Trade Representative and the EU Trade Directorate to make the following proposal: 

Hey, Wen, you’re right about the unfair tire tariffs and the like.  Let’s make a trade deal:  you allow the yuan to appreciate, say, 20% against the dollar over the next twelve months.  In return, we will announce a voluntary two-year moratorium on any new anti-dumping and escape clause measures targeted against Chinese imports.  What do you say?

To be honest, I’m not sure if this is legal, but it would be an interesting gambit. 

Question to readers:  which side would blink first at this deal?