.........."The next president needs to recognize that globalization is deeply geopolitical and should pursue a new set of agreements over the rules of globalization. It needs to have as its central aim the replacement of the U.S.’s unilateral role as buyer of last resort with new arrangements that accomplish the same goal of providing demand, especially at moments when global recessions loom, but in a more equitable and sustainable way.
For its own long-term economic health, it would be nice if the United States could just decide to remove the dollar from being the key reserve currency. But it cannot and, even if it could, should not do so hastily. A better approach would be for countries such as Japan, China, Germany, and South Korea to keep promises they have repeatedly made to switch from investment- and export-led growth to internal consumption–led growth.
A weakness of the post–World War II trading system has always been that there was discipline on countries who ran chronic trade deficits but none on countries who ran chronic surpluses. What is needed now is for countries running chronic, large trade surpluses to be subject to the discipline of surcharges on their exports and limits on the accumulation of foreign assets.
There should also be surcharges for other beggar-thy-neighbor behavior that threatens the global economy. One of those is “dumping”—flooding world markets with products at below home market and/or-cost-of production prices, often as a result of overcapacity driven by export-led growth policies. At the moment, for example, China has more than enough steel production capacity to supply total global demand all by itself. This is ruining the steel industries of Europe, Japan, and the United States, which otherwise are perfectly competitive. Another behavior deserving sanctions is the practice of countries offering subsidies—tax holidays, free land, training of workers, capital grants, utilities at half price—to lure companies to their shores, companies that are competitive where they are. Government-supported hacking operations that steal corporate intellectual property also need to be reined in.
We need a new set of international agreements over the rules of globalization. The U.S.’s unilateral role as buyer of last resort must be replaced with new arrangements whereby all the leading economies share the burden."