Daniel Drezner appears to get a great many things wrong:
Daniel W. Drezner: So I see Paul Krugman has thrown his lot in with the neoconservatives who disdain multilateral institutions and prefer bellicose unilateralism when they confront a frustrating international situation. His op-ed today is about China's currency manipulation... he closes with... "In 1971 the United States dealt with a similar but much less severe problem of foreign undervaluation by imposing a temporary 10 percent surcharge on imports, which was removed a few months later after Germany, Japan and other nations raised the dollar value of their currencies. At this point, it’s hard to see China changing its policies unless faced with the threat of similar action — except that this time the surcharge would have to be much larger, say 25 percent."
Whoa there, big fella!! That's a nice but very selective reading of international economic history you have there. It's certainly true that the dollar was overvalued back in 1971. What Krugman forgets to mention -- and see if this sounds familiar -- is that the Johnson and Nixon administrations contributed to this problem via a guns-and-butter fiscal policy. They pursued the Vietnam War, approved massive increases in social spending, and refused to raise taxes to pay for it. This macroeconomic policy created inflationary expectations and a "dollar glut." Foreign exchange markets to expect the dollar to depreciate over time. Other countries intervened to maintain the dollar's value -- not because they wanted to, but because they were complying with the Bretton Woods system of fixed exchange rates...
I count four big howlers:
Paul Krugman is not a neoconservative.
There is no no multilateral institution that manages exchange rates within which the U.S. could work.
The current overvaluation of the dollar vis-a-vis the renminbi is in no wise due to large current U.S. budget deficits.
At the start of the 1970s other countries kept their pegs to the dollar rather than revaluing not because they were obliged by treaty to do so but because they wanted to: they had rejected U.S. requests for revaluation under Bretton Woods procedures.
Why would anybody do this?