Here's an excerpt from an article by economist Mark Perry, arguing that Chinese currency manipulation is good for Americans:
1. China's currency manipulation is a form of foreign aid, and to the direct advantage of millions of U.S. consumers, especially low-income groups, and to the direct advantage of thousands of American companies buying inputs from China.
2. Forcing China to revalue its currency would benefit some American manufacturers competing with China, but would significantly harm those American consumers and businesses currently buying undervalued imports. On net, there would be more harm to American consumers than benefits to American manufacturers, which would reduce our overall standard of living.
3. Like other forms of mercantilism and protectionism, forcing or pressuring China to appreciate its currency would favor certain domestic producers over millions of consumers and import-buying companies, but would make the United States worse off, not better off.
4. Finally, instead of complaining, we should be thankful for China's foreign aid to Americans through an undervalued yuan, overvalued dollar, and undervalued goods that collectively save American consumers and companies billions of dollars every year.
If any of this blog's readers agree with Perry's view, I'm curious to hear responses to the following questions:
-- Can a government's action to keep its currency undervalued be characterized as "protectionism"? That is, assuming such an action is designed to give domestic producers an advantage over their foreign competitors, can we call it protectionist?
-- If so, is it the case that certain kinds of protectionism can be good for other countries, e.g., Chinese protectionism can be good for Americans?
