A few weeks ago, I posted a few lines about "neo-mercantilism" in the Doha Round. I am intrigued now to see that my impulse to use the word "mercantilist" in a pejorative sense is in fact widespread.
Just yesterday, Jayant Dasgupta, the Indian joint secretary of the commerce ministry, said that the Agriculture Text has not yet addressed livelihood concerns on agriculture and that "The mercantilist interests of major agricultural exporters was the reason behind the lack of consensus".
In an another surprising context, according to Newsweek Editorialist Robert J. Samuelson, the most typical mercantilist policy of today is the Yuan undervaluatiion:
Mercantilism was an economic philosophy that favored large trade surpluses. At the time, this had some logic. Trade was an adjunct to military power. Exports earned gold and silver coin, which financed armies and navies. But mercantilism fell into disfavor as a way to promote national prosperity. Free trade, argued Adam Smith and David Ricardo, would benefit all countries, because each could specialize in what it did best—the doctrine of "comparative advantage." The post-World War II economic order took free trade as its ideal, even though trade barriers were lifted slowly. Now mercantilism is making a comeback, as governments try to manipulate markets to their advantage.
The undervalued renminbi is the most glaring example. China's leaders have staked their country's political stability on export-led job creation, driven by an artificially cheap currency that puts competitors—Mexico, India and other developing countries as well as the United States and Europe—at a disadvantage. Naturally, China's trade surpluses have swelled. In 2007, the current account—a broad trade balance—will register a $400 billion surplus, about 12 percent of gross domestic product, up from $21 billion, or 1.7 percent of GDP, in 2000, according to economist Nicholas Lardy of the Peterson Institute. As a share of GDP, China's current-account surplus is "triple Japan's level in the 1980s when Japan bashing was at its peak."
Finally, the retreat from global trade agreements also reflects the new mercantilism. The Doha Round of worldwide trade talks is floundering. Countries feel more comfortable with nation-to-nation and regional agreements, where they have more control over the terms. The World Trade Organization counts more than 400 such agreements.
The problem with such pejorative adjective as "mercantilist" is that you are never sure of the precise technical sense in which they are used. I must admit however that I am impressed by the link made by Samuelson between the Yuan undervaluation, Bilateral-Regional Agreements and Mercantilism. This link was not obvious!
