Industrial policy vs. currency devaluation

Over the past year I find myself reading more and more economics-probably because I know sol little about the field.  Anyway, I have to say I found this paper by Dani Rodrik (which I found via Brad Delong) to be fascinating.  I knew that currency devaluation was a big factor in China’s huge currency reserves and their trade surplus; I never thought to link that to them joining the WTO and abandoning targeted industrial policy.  This makes me think that something major has to change with respect to China and the rest of the world.  They are following the rules as best they can given their domestic constraints, but those choices are having major external repercussions.  So then the question is, how is anyone going to change the rules, and do so in a way that everyone can agree to?

I suspect climate change will figure into this as well.  Wow, what a mess.  Makes me glad I’m not a politician…