Saturday, September 25, 2010

A Better Approach To China

Peter Coy is right on the issue of China-instead of complaining about the currency, the U.S. and other countries should complain about the barriers to imports China has on certain goods. Revaluation/appreciation of the yuan would do little to reduce the U.S. trade deficit, while representing no economic efficiency gain-indeed the extra exchange rate uncertainty would produce an economic efficiency loss. By contrast, while removing Chinese tariffs may not have a dramatic effect on the trade deficit either, it would create economic efficiency gains.