A potential agreement could contain many “win-win” elements, notably concerning intellectual property rights and export subsidies. But pushing China to commit to a more stable exchange rate risks creating major problems when the next big Asian recession hits.
It is a post-financial-crisis myth that austerity-minded conservative governments always favor fiscal prudence while redistribution-oriented progressives view large deficits as the world’s biggest free lunch. This simplistic perspective badly misses the true underlying political economy of deficits.