tag:blogger.com,1999:blog-3622225605650065211.post7705640674960272050..comments2024-02-15T03:13:49.505-08:00Comments on Economic Policy Advice for Barack Obama: Blog Topic of the Day: ChinaUnknownnoreply@blogger.comBlogger1125tag:blogger.com,1999:blog-3622225605650065211.post-33110314739839055292010-01-02T13:37:14.874-08:002010-01-02T13:37:14.874-08:00I think there is a lot more to consider with the i...I think there is a lot more to consider with the infant industry argument. I don't argue that because of economies of scale, historical market control etc that emerging markets are hindered from prospering when international trade is open. However, I think there are other issues to consider here.<br /><br />In terms of protectionism, currency devaluation is probably the "safest" since it's a less direct form; but I think retaliation can play a major role in hindering your industries from growing. China is a bit different because we rely on a lot of there goods and so we can't play too many games, but for other emerging markets it could surely occur. To me, that's a dangerous game since if other nations retaliate your industry surely won't prosper in the long-term. Yes, we have historical examples where this didn't hold (the U.S. tariffs of the 1800s and up into WWII, obviously did hurt us in the long run), but I think we are in a different world now where free trade is considered the benchmark for every nation and if one doesn't buy into the orthodoxy, surely retaliation is on the table. I think sooner or later we are going to see this with China if they don't revalue their currency. <br /><br />I think another component to this is countries that still aren't nearly developed as China, but are still "developing." I fear they will see what China has done with their currency, saw that it worked, and mimic. I worry that because of the emerging orthodoxy that retaliation will be much more swift because it will be easier than imposing it against China, and that will ultimately prevent some countries from emerging from "developing" status. I would also expect the World Bank and the IMF to be less willing to assist if some developing nations pursued those policies. <br /><br />I just think the infant industry argument doesn't hold in the modern world, it's time has run out because the major powers believe free trade is how it should be and, I believe, will retaliate if too many countries adopted such policies. China is so essential to the global economy right now, I think retaliation would be put off as long as possible; but for other emerging powers I think it would be on the table and I think it would be counterproductive to their growth in the long-term, even when considering "infant industry."Tednoreply@blogger.com