Fighting a myth: globalization and disinflation (amv)

I usually disagree with Dani Rodrik on many things, yet he rightly calls attention to a widespread fallacy. This fallacy claims that 'globalization reduces inflationary pressure (and thus may allow central banks to be more accommodating).' In Rodrik's words:

"Advocates of globalization love to argue that free trade lowers prices, and the argument seems sensible enough. Think of all the cheap goods from China that we can buy at Wal-Mart. But anyone who understands comparative advantage knows that free trade affects relative prices, not the price level (the latter being the province of macro and monetary factors). When a country opens up to trade (or liberalizes its trade), it is the relative price of imports that comes down; by necessity, the relative prices of its exports must go up!"

If prices of imports sink, purchasing power is set free to chase for other goods and services. As long as there is no reflux of credits (and there is no reason for this to happen) there is no tendency for the price level to fall! Globalization has many merits but it does not allow for lower interest rates!