The Problem of Chinese Mercantilism

http://www.nytimes.com/2010/01/01/opinion/01krugman.html

I rarely will post Krugman articles.  However, he makes a good general point here.  China's mercantilist policies are creating major problems for its trading partners.  Nonetheless, I will disagree at the point he is hinting at--that is we should respond in kind with our own drastic protectionist policies.  It is important to note that many countries "peg" their currencies to the U.S. dollar and, in so doing, artificially value their currencies (most of the Asian "tigers" have done so for decades, but we ignore it because they are our allies). 

To unilaterally start using protectionist policies against China would set a bad precedent and might encourage (or create political pressure for) the use of those policies against many of our other trading partners.  A better suggestion by Krugman would be concerted efforts with other similarly situated trading partners to pressure China into free-floating their currency.  China is currently the world's third largest economy by nominal GDP.  It should indeed start acting like it.