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Globalisation in Retreat - The New Protectionism?


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As money markets tighten, production plummets and unemployment soars, Asian governments like their counterparts in the west are slowly and silently making policy changes. Jargon such as tighter environmental laws, ‘place of origin’ rules and anti-dumping are being added to inter-regional trade documents to raise import barriers. Even as ASEAN and APEC leaders recently pledged to reduce trade protectionism and promote FTAs, governments are fiercely promoting domestic sales.

While India has imposed restrictions on Chinese toys and the import of some types of steel, Vietnam has increased import tariffs on dairy and paper products. Similarly, the Indonesian and Malaysian governments are publicly prompting their people and ministers in specific to buy locally produced food, drinks, shoes, clothes, music and films or face penalties. In China, farmers in certain provinces are being given a 13 percent subsidy if they buy locally made refrigerators, televisions, mobile phones and washing machines. While construction companies producing publicly funded infrastructure projects in other parts of China are being encouraged to use locally produced steel, concrete, doors and windows, glass, wiring and electrical equipment. Local car manufacturers are also having inspection fees for new vehicles waived so as to become more competitive.

A majority of Asia depends on exports so governments cannot publicly be seen to promote protectionism, as a result trade barriers are being raised in guise. This however, is a path to self destruction economic experts warn. When trade barriers rise, competition drops, economic efficiencies fall, prices rise, people buy less, unemployment rises and economic growth falls. The World Bank has already predicted that the worst is yet to come and that the global economy will shrink to its lowest since World War II.

Asia should learn from history, if not its own, its largest trading partners. When the great depression hit in the early 1930’s the U. S. Congress passed the Smoot-Hawley Tariff which aimed to protect companies and jobs in the United States. But as time went on, other counties with whom America traded also increased trade barriers resulting in a virtual collapse of international trade and commerce.

After WWII, recognizing their error in protectionist thinking, America decided to liberalize international trade by initiating the General Agreement on Tariffs and Trade, the forerunner to the World Trade Organization.

This article was written by Nazia Vasi for the Asian business news website is a news forum dedicated to Asian business news focussing on investment in China and India. It is contributed to by the Asian foreign direct investment law and tax practice Dezan Shira &Associates who have been doing business in China for over 20 years.


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