In part, this is because China has learnt from Japan’s mistakes in the 1980s. Japan refused to have anything to do with Western companies, spurning attempts by them to get a foothold on the Japanese mainland. China, though, has actively encouraged inflows of foreign direct investment from Western companies. And, because of this, China’s relationship with the rest of the world is, whether the US likes it or not, one of mutual dependence. Hurt China and you may, inadvertently, hurt yourself.Workers in Western manufacturing industries have good reason to feel threatened by China’s rapid growth. Yet this sense of foreboding is nothing new: Western manufacturing has been on a declining trend for decades and China’s arrival only continues that trend. So why do politicians ever go down the protectionist route in the first place? The obvious answer is votes.

Politicians think they look tough when they’re rattling a few sabres and standing up for the “national interest”, and there’s no doubt that Congress and, more recently, the US Administration think that a bit of China-bashing can only do some good.It’s not obvious, though, that the latest bellicose approach really is in America’s national interest. Countries, now cut adrift from any kind of intelligible monetary framework, found themselves facing inflationary and financial market turmoil.The bottom line is that protectionism is an extraordinarily blunt instrument, a policy that leads to unintended and, all too often, unfortunate consequences. At the beginning of the 1970s, President Nixon imposed import tariffs on other members of the Bretton Woods exchange rate system, and removed them only when the other countries agreed to revalue their currencies against the dollar.China would do well to look carefully at these two episodes before acquiescing to US pressure. China’s emergence as an economic powerhouse cannot be denied, but to see China’s emergence purely in competitive, antagonistic, terms is fairly silly. George Soros’s forerunners suddenly realised they could bet on the likelihood of further currency appreciation: by the beginning of 1973, the whole system was blown apart.

But the revaluation revealed to speculators that the Bretton Woods system was no longer one of fixed exchange rates but, instead, a system of adjustable exchange rates. Japan’s trade surplus did come down – as Congress had demanded – but the cost to Japan was, ultimately, enormous: a stock market and land price bubble, a serious misallocation of resources and, eventually, a sad descent into deflation and economic stagnation.In the early 1970s, the initial revaluation of exchange rates within Bretton Woods didn’t amount to very much. In the 1980s, Japan did exactly what the US demands of China now: the yen rose, Japanese interest rates were cut and the Japanese economy boomed. The rest don’t seem too bothered about China’s aspirations at all, instead preferring to think about the threat to America, and to American jobs, that stems from persistently cheap Chinese exports. In the midst of all these worries, protectionism is rearing its ugly head: Congress is pondering whether to impose huge tariffs on Chinese exports unless China agrees to revalue the renminbi within the next few months.This is not the first time the US has demanded action from a recalcitrant trading partner. And, as if to add insult to injury, no lesser man than Alan Greenspan, the chairman of the Federal Reserve, has suggested that it would be in China’s own interests to revalue the renminbi because the alternative – excessive domestic liquidity, a side effect of persistent foreign exchange intervention – would eventually lead to rampant Chinese inflation.At least Mr Greenspan had the courtesy to argue that a revaluation of the renminbi might be in China’s interests.

Over the years, the US has frequently pointed its finger at others and demanded action. In the 1980s, Congress threatened Japan with tariffs unless the Japanese allowed the yen to rise and, at the same time, boosted domestic demand. The Treasury Department has decided to adopt a more “Rambo-esque” approach to Sino-American relations, demanding that Beijing should revalue the renminbi not next week, and not even next month, but now.America, so it seems, needs immediate action from China: anything less just isn’t good enough. This charming approach to international trade relations no doubt went down well in front of the Senate Finance Committee last week but the reaction from Beijing will, presumably, be somewhat more frosty (a good thing too: a cool reaction will help to soothe the burns.)
America’s new-found hostility towards China doesn’t stop there.