Talk of a new "trade war" over the allegedly undervalued Chinese currency is yet again echoing through the corridors of power in Washington. The U.S. Senate seems determined to pass a bill penalizing China for manipulating the renminbi to keep its value artificially low. Beijing has responded by "regretting" the Senate's action and saying that it would violate World Trade Organization rules.
Sadly, the measure demonstrates the dysfunctionality, especially of the American political and economic system, but also of what I hesitate to call the global system, because there is hardly any global economic governance.
American economists and politicians have huffed and puffed against Beijing for years claiming that it practices unfair trade by keeping the currency undervalued to boost Chinese exports and jobs and, by implication, to damage the U.S. economy.