These policy principles should also include consequences for currency manipulators and export-driven "beggar-thy-neighbor" traders. Here are three important cases to think about.
Newswires reported last Monday (December 26) the announcement of Japan's Cabinet Secretary Yoshihide Suga that the yen's exchange rate was a top government priority to rev up the economy via export sales.
He mentioned that Japan's Ministry of Finance, Financial Services Agency and Bank of Japan had a working group to manage the exchange rate issue. And the message was not lost on Japanese businesses; survey results are showing that they are gearing up their export machine for an American-led stimulus to the world economy.
Germany – running the world's largest trade surplus of $300 billion – is also worried about its export-driven economic growth. Ingo Kramer, President of the German Employers' Association, is quoted as having said on December 27 that "… increase in protectionism would be devastating for Germany which relies on exports for about half of its economic output."
I hope Washington's stimulus strategists are hearing all this. The Japanese exchange-rate statement is particularly worrying. Europeans have repeatedly warned that the Bank of Japan was aiming to boost exports with a weak currency. But Washington kept looking the other way – toward Beijing.
China, to my knowledge, has never made a Japanese-style RMB policy statement. China's exports in the first eleven months of 2016 are down 7.5 percent from the year earlier, and China's sales to the U.S. declined 3.5 percent in the year to October. The 2016 will also be the second consecutive year when net exports have taken 2 percentage points out of the growth of China's domestic demand.
More important, Beijing has made a structural move away from exports as a key growth driver. The largest part of growth is now coming from consumer spending and investments. Private consumption, for example, contributed 71 percent of GDP growth in the first three quarters of this year – a clear progress from 66.4 percent in 2015.
Do Mr. Trump's advisers still consider China a currency manipulator? They may wish to think again. It would perhaps be more useful to take a harder look at U.S. companies producing Chinese exports to the U.S.
Building on the Fed's stimulus to the economy, the new administration could deliver on expectations of stronger growth with supportive fiscal, structural and trade policies.
The trade war talk is nonsense. But an urgent trade consultation with countries running large and systematic trade surpluses with the U.S. is long overdue.
The forthcoming political changes in Europe will respond to people's demand for greater security, better public services and a stronger employment creation. The ECB will continue to work toward a faster economic recovery in the euro area.
In Asia, China is unloading huge public sector projects to underpin demand and output. Japan would do well to patch up its vitally important relations with Beijing; that would do more for its economy than all the money printing presses and the cheap yen policies.
Greater attention to jobs and incomes in the U.S., Europe and China – more than one-half of the world economy – will support stronger economic growth and equity market values on a global scale.
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