Blog

Blatant protectionism

Geoff Riley

30th March 2009

Evidence mounts of a return to protectionism - much of which is being practiced by the countries who will gather in London for the G20 conference this week.

A World Bank report published last week found that 17 of the G20 countries had built trade barriers over the last year. According to the FT, “It named nine major traders, including the 27-nation European Union as one, that have taken steps to restrict imports of footwear, 11 that are discouraging steel imports, and 12 offering special help to their domestic car industries.”

Protectionism can come in many guises such as wider use of import licences, bound tariffs and also governments blocking takeovers. Just a few days ago Kevin Rudd’s Australian government blocked the proposed takeover of Oz Minerals by China’s state-owned Minmetals largely on the grounds that the mining group’s flagship mine is located in a military zone.

I am grateful to Willem Buiter for pointing out one of the most blatant examples of the new protectionism taking hold as de-globalisation becomes a reality.

American Recovery and Reinvestment Act of 2009 (Recovery Act) are an example:

“SEC. 1605. USE OF AMERICAN IRON, STEEL, AND MANUFACTURED GOODS. (a) None of the funds appropriated or otherwise made available by this Act may be used for a project for the construction, alteration, maintenance, or repair of a public building or public work unless all of the iron, steel, and manufactured goods used in the project are produced in the United States.”

World trade could shrink by more than 10 per cent this year and for trade dependent countries this is incredibly bad news. A deep economic slump invariably makes short term protectionism appear more attractive but in the long run trade enhances growth, jobs and living standards. It takes strong politicians to actually practice what they preach and over-ride the claims of the corporate lobbyists.

This Independent report carried more examples from the WTO report:

In the footwear sector alone, Argentina, Brazil, Canada, Ecuador, the EU, Turkey and Ukraine have enacted or are considering measures designed to slow imports from China or Vietnam, the report showed.

Australia, Brazil, Britain, Canada, France, India, Russia, and the US were cited for automotive tariffs, subsidies, credits, licences or other changes deemed dangerous to trade.

Argentina, the EU, Egypt, India, Indonesia, Malaysia, Philippines, Russia, Turkey, the US and Vietnam were listed for protective steel regulations.

More here

Geoff Riley

Geoff Riley FRSA has been teaching Economics for over thirty years. He has over twenty years experience as Head of Economics at leading schools. He writes extensively and is a contributor and presenter on CPD conferences in the UK and overseas.

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