Protectionism On The Rise

According to a recent post in The World Bank, there is worry about protectionist measures taken place by countries around the globe.

While there may be a strong urge for companies and citizens to focus more on domestic trade, a bigger picture must be taken into consideration, especially during a global financial crisis that faces serious challenges.

Since the last G-20 Summitt, 17 countries have implemented 47 measures that restrict trade at the expense of other countries, a new World Bank study shows.

World Bank Group President Robert B. Zoellick comments:

“Leaders must not heed the siren-song of protectionist fixes, whether for trade, stimulus packages, or bailouts. Economic isolationism can lead to a negative spiral of events such as those we saw in the 1930s, which made a bad situation much, much worse.”

There are several ways to decrease the flow of imports. Such as — tariffs, import quotas, voluntary export restraints, domestic content legislation, antidumping actions, and regulatory standards.

Current examples of protectionism:
1.  Russia raises tariffs on used autos.
2.  Ecuador raises tariffs on more than 600 items.
3.  China bans Irish pork as well as rejection of some Belgian chocolate, Italian brandy, British sauce, Dutch eggs, and Spanish dairy products.
4.  India bans toys made in China.
5.  Argentina imposes licensing requirements on auto parts, textiles, TVs, toys, shoes, and leather goods.
6.  Indonesia requires that five categories of goods (including garments, footwear, toys, electronics, food and beverages) would be permitted in only five ports and airports.
 
Protectionism can come at a very high price. For example, take a look at the auto industry. The United States subsidization of the auto industry has weighed heavily on taxpayers. Consumers often pay twice — through bailouts, and higher prices of cars.

In the end, consumers must ultimately decide what is best for their country.

Free trade versus protectionism is a highly debated subject. This is like a chess game. There will be winners and losers. It is unavoidable. Finding a balance of trade is essential.