Ever heard the term "buy American"? I know I have, most recently it cought my attention when the house of representatives of the u.s. congress wanted to impose a provision in astimulus package. Thankfully the final version passed by the senate not only removed such statement, but acknowledged an obligation to avoid protectionist trade policies. Lets take a step back and see how the dictionary defines protectionism:
protectionism
n 1: the policy of imposing duties or quotas on imports in order
to protect home industries from overseas competition
At a quick glance, it is certainly tempting to boost own industry on the expense of othe countries. With unemployment rates spiking globally, political pressure towards job creation is enormous. Hopefully, however, the politicians doesn't go for what seems to be the quick fix. The world stretches past the domestic market, and global competition increases efficiency. Granted there can be a claim for macroeconomic correction of externalities and other market imperfections, but the point still remains. I have no doubt that e.g. the US automaker industry would've been in a better position today had it not been for politics such as "buy american". Instead, it seems General Motors will file for bankrupcy, maybe it will be restructured, maybe it won't . What is interesting to see is how, seemingly , Ford is doing so much better. With an anticipation of changed to consumer preferences towards smaller and more fuel-efficient cars can be one possible reason. In Europe, incentives towards cars with less emissions has been , mostly, driven by taxes and governmental regulations.
Moving away from the automaker industry, however, lets have a look at agriculture. This is a sector where most countries , especially Norway and a few other countries in Europe, should be particulary ashemed of. The level of taxes on foreign products and the amount of subsidies on domestic products is devastatingly high (looking at it from a taxpayer perspective). It can also be argued on moral grounds, in terms of the less fortunate countries in the world. Norway prides itself on the amount of foreign aid it provides, yet what is demanded the most by participants is market access. Free trade stimulates growth, and they know it.
Thankfully so does the Asia-Pacific Council of American Chambers of Commerce , an organization representing more than 10,000 U.S. Businesses. The organization urged the government to avoid protectionism and move toward expanding trade agreements with Asia *. In order to avoid another 1930 situation in the real economy, we have to avoid protectionism. Indeed, argued by Joseph S. Nye, hard economic times are correlated with it ** ***. 17 out of the G-20 countries have already entered into some form of protectionistic measure since the beginning of this year ****. But guys, lets try to avoid another Smoot-Hawley Tariff Act as we saw in 1930. Ultimately it is a matter of game theory, if you face a rational expectation of what others will do to counteract a move by yourself, you might find that you're better off not making the move at all, and sadly, protectionism is increasing while global trade shrinks.
