Meena Thiruvengadam reports:
The head of the World Trade Organization is fighting back against the perception that trade has been a major driver of the world’s economic woes.
“At worst, trade has been a mechanism of transmission but surely not the cause of collapse in demand,” WTO Director-General Pascal Lamy said Friday at the Peterson Institute for International Economics.
Who has claimed that “trade has been a major driver of the world’s economic woes”? I haven’t seen anyone say that.
Jonathan–I have to fess up that might be me. Not that folks like Lamy necessarily buy the notion, but by accounting identity, current account imbalances result in concomitant capital account imbalances. Insofar as countries like China have provided the US seemingly limitless amounts of vendor finance, recent increases in trade have resulted in (a) higher indebtedness of Americans and (b) fuel for “financial innovation”, both of which are now unwinding to spectacular effect.
I once wrote the same idea on my blog when a commenter claiming to be “Pascal” took issue. Who knows, maybe it was the real McCoy, I mean, Lamy. More balanced and sustainable trade, yes. More imbalanced and unsustainable trade like what’s occurred over the past few years, no.