Freitag, 27. Februar 2009

Trade Wars?

Various commentators keep arguing that the various "surplus countries" (usually defined as China, Germany and Japan, though some smaller countries such as Singapore and Switzerland could also be added to the last) are somehow to blame for an impending trade war that will lead to the disintegration of global trade. For instance, Martin Wolf of the FT has been harping on this for quite a while now, and Michael Pettis at Chinese Financial Markets keeps bringing it up as well.

It seems to me that those stubborn surpluses are in the process of autodestructing anyway, so there isn't really much point in telling the "culprits" to do something about them:

- Japan's exports have collapsed so thoroughly, that the country has been showing a trade deficit for several months now. Would have been quite unthinkable just a year or two ago.

- German exports are also undergoing a spectacular decline, whereas imports are largely holding up. As you would expect if your exports are largely capital-intensive goods (cars, machinery), while your imports are standard consumer-goods. My guess is that Germany's 2009 current account surplus will drop by at least half compared to 2008, and quite possible more than that.

- That leaves China as the "main culprit". Apparently, China's trade surplus has even increased of late, as imports have been falling much faster than exports. But the thing is: Chinese imports are to a large extent components to be processed further in China and then reexported. So it's entirely natural for exports to lag behind imports for a few months. If so, the Chinese surplus should stark shrinking, and shrinking fast, in February or at the very latest in March.

So it seems to me that while there are lots of things to worry about right now, stubborn trade surpluses posted by the "usual suspects" shouldn't exactly be at top of the list.

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