It is time to move beyond the global imbalance perspective and see China’s exchange rate policy for what it is: mercantilist trade policy, whose costs are borne more by countries competing with China – namely other developing and emerging market countries – than by rich countries. The circle of countries taking a stand against China must be widened beyond the US to ramp up the pressure on it to repudiate its beggar-thy-neighbourism. But progress also requires that the silent victims speak up.
Today, also in the FT, Jeffrey Garten of Yale makes a complementary argument, looking to the longer term. Garten, too, argues that broad groupings of nations need to cooperate to help move Chinese policy to serve the common interest. But he's looking not so much at short-term goals around which coalitions can coalesce, but rather in effect to gradually build a new world order: to strengthen existing multipolar organizations like the WTO and build new ones in which China will want to participate:
The only policy that could move China from its deeply entrenched positions would be to weave a web of multilateral arrangements into which China could fit, and by which China would be bound. China would, of course, need to have a substantial say in the shape of such arrangements.
The best existing example is the World Trade Organisation, where China is obliged to play by the rules that a number of leading countries have subscribed to, and which has an orderly process of adjudication. While it still has leadership clout, the centrepiece of US efforts ought to be marshalling multilateral support for other such arrangements. It should press for a new, strengthened global monetary system based on multiple currencies, with enforceable rules for currency management to which both it and China would subscribe. Washington should redouble efforts to work with a number of countries on an enforceable climate change treaty. It should garner other nations’ support for global arrangements regarding the operation of the internet.
Both Subramanian and Garten are working from the assumption that the United States' unipolar moment has passed: Garten asserts baldly that " the US is a pale shadow of what it was a decade ago." Both, however, see the U.S. as still powerful enough to shape multilateral action.
Garten's program sounds like a mission ideally suited to Barack Obama. Obama thinks long-range; he is good at convening large groups with diverse interests and moving them toward broad goals; and like all Presidents, he can conduct foreign policy without worrying about Congress at every step. Of course, if James Fallows is right, China in the next few years may prove as recalcitrant as the Republican Party back home.