I enjoyed reading the interesting article about the WTO and USTR LIghthizer
I have been following some of the same issues in Europe in this PPP Lusofonia.
I would discuss diagnosis and treatment separately:
The diagnosis was half right.
Yes, the US -China trade imbalance is unsustainable, even though it is facilitated and financed by China's huge purchases of US Treasury bonds. This is the external divergence.
But the divergence of fortunes within the US between the Rust Belt and the financial markets has not been properly compensated and managed. Steelworkers' sons are not migrating to Silicon Valley, which has certainly more engineers from India than from Indiana and its neighbors. This internal divergence is the second part of the problem.
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Trade X-M should work like a pendulum, and there are real-life limits to divergence.
We see the same problem in the Eurozone.
Germany's trade surplus with the other EU members is also unsustainable because it is financed with debt, in practice suppliers' credits. That's why we had such a severe Eurozone financial crisis in 2010 ..., such huge and dangerous divergence of fortunes among the EU trading partners.
From first-hand observation, I see both China and Germany are thoroughly obsessed with EXPORTS. Buying a bottle of Portuguese wine was sacrilege to my German colleagues. Foreign creditors stepped up car loans to Portugal in the depth of the 2009-2012 crisis.
Thus the solutions to unsustainable trade imbalances are more complex and more difficult to manage.
But trade balances, X-M <> MUST tend to zero, on average, over time.
And the net exporters (of goods AND services) have to become net importers some of the time. There ARE limits to Divergence.
If the US tries to cut imports from Mexico, it will probably have to import ... more Mexicans.
The Rio Grande is not that wide.
Neither is the Mediterranean.
Mariana Abrantes de Sousa, economist
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