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Protectionism and global economy
From CopperWiki
Protectionism is defined as any attempt to restrict the free flow of imports into a country. At the heart of globalization lies global competitiveness, but governments may, especially during economic downturns, resort to protectionism to protect their non-competitive production facilities. This is done to protect domestic production and thus protect and create jobs and help strategic (infant) industries temporarily so that they can compete in the global economy or recoup investments.
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[edit] Why should I be aware of this?
There are fears that the present deepening economic crisis, and the failure to complete the WTO's long-running Doha round on freeing up global commerce, will tempt some countries to block imports from their trading partners so as to protect jobs at home. If such protectionism led to retaliation from other countries, the crisis would intensify, as happened in the 1930s during the Great Depression.
If every country increases import tariffs, hoping to protect its domestic industry from foreign competition, global trade will fall in all directions, hurting everybody. Put another way, increased tariffs are a negative-sum game.
Demand for protectionism is on the rise because with incomes stagnating or falling. The integration of the world economy has boosted productivity and wealth creation in the United States and much of the rest of the world. But within many countries the benefits of this integration have been unevenly distributed. There is a strong link between individuals' labor-market interests and their policy opinions about globalization. Also, in the past several years labor-market outcomes have become worse for many more Americans -- and globalization is plausibly part of the reason for this poor performance.
[edit] All about protectionism and global economy
In major economies, advocates of world economy are warning of a protectionist drift in public policy. Even U.S. policy is becoming more protectionist as a result of stagnant or falling incomes. Public support for engagement with the world economy is strongly linked to labor-market performance, and for most workers labor-market performance has been poor.
Gains from globalization have been large all over the world. Stupendous rates of productivity growth in China and India have hundreds of millions of people out of poverty. International market forces related to trade and FDI have been instrumental in bringing about this success. In Chinese manufacturing, foreign multinational companies account for over half of all exports. And in the Indian IT sector, Indian and foreign multinational firms account for two-thirds of sales.
[edit] The Doha Round
The Doha Round, the current trade-negotiation round of the World Trade Organization (WTO) which commenced in November 2001, was launched shortly after 9/11 to remedy the widespread perception that previous rounds of trade negotiations had treated poor nations unfairly by failing to open the very sectors -- such as agriculture -- whose openness would most likely help the world's poor.
[edit] What can we do?
It is difficult to eliminate calls for protectionism, but there are ways we can retard its growth and mitigate its harmful effects. Here are a few ideas:
- Governments should make efforts to introduce policies to reduce frictions include training, education and relocation assistance for people experiencing change due to rapid global growth.
- Bring about an education system that gives people the tools to adapt to change by emphasizing problem solving over rote learning.
- Flexible labor market policies can make it easy for companies and workers to change the nature of the work they do.
- Policies that increase people's overall sense of security, such as reducing corruption, predictable rule of law, and a healthy environment with clean air and water.
- A stable monetary environment with a predictable price level and a moderate, predictable tax system.
The reason why certain countries go for protectionism is the desired impact it will have on the lives of families and to give them a better future. Protectionism attempts to stop change. But as change is inevitable, it is a better to use resources to prepare people for change by giving them a stable society with a growing economy and by forward-looking education which will give them the skills and flexibility they will need for the jobs of tomorrow's global economy.
[edit] CopperBytes
- It was 'protectionism' which caused the worst recession the world has ever known in the 1930s. The introduction of some trade barriers by the US, in the form of the 'Smoot-Hawley' Tariff of 1930, so this popular wisdom goes, raised duties to record levels, worsened the depression, provoked extensive foreign retaliation, and destroyed world trade. [1]
- Globalization has brought huge overall benefits, but earnings for most U.S. workers -- even those with college degrees -- have been falling recently; inequality is greater now than at any other time in the last 70 years. [2]
- In the USA, according to the US Department of Labor's own statistics, "protectionism" destroys eight jobs in the general economy for every one saved in a protected industry. [3]
- Japanese consumers pay five times the world price for rice because of import restrictions protecting Japanese farmers. [3]
- European consumers pay dearly for EC restrictions on food imports and heavy taxes for domestic farm subsidies. [3]
[edit] References
- Protectionism - the real threat to growth, stability
- Policymakers sound alarm over protectionism
- A New Deal for Globalization
