Dan's comments on new protectionism:
The Washington Times sees the case of Ecuador - what it calls the "the world's most protectionist response to the global economic crisis," with restrictions on "everything from Peruvian shampoo to Chilean grapes and U.S.-made running shoes" - as a bellwether heralding the possible spread of protectionism around the globe.
The combination of falling remittances, its debt default, and plummeting oil prices have put the country in a very difficult spot, but autarky and import substituting industrialization are not the way out.
Wednesday, March 4, 2009
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2 comments:
Then what is? More of the same? Open up wide, this won't hurt a bit... Hmmm, that really hasn't worked out too well here either. In a previous post you called this 'new protectionism' "worrying". Worrying for whom? The poor of Ecuador? I don't think so. Protectionism, like most things in life, has its place. You need only look at the history of the Far East. But market fundamentalism doesn't allow us to acknowldege that. Come on down to Ecuador and see things for yourself - macro views don't get up close and personal enough.
Chris, sorry for not noticing this earlier, and thanks for your comment.
Check out the World Bank and WTO reports for better general explanations of the dangers of protectionism than I can give.
In the Ecuadoran case, the flower industry is a good example. Flowers are an enormous industry in Ecuador, employing and generating income for many thousands of low-income workers, and they aren't grown for domestic consumption. The industry depends heavily on trade preferences and tariff exemptions, which are threatened when Ecuador imposes unilateral trade barriers. Protectionism creates a spiral of retaliation that threatens to severely restrict global trade. That trade is not a good in itself, but creates jobs and lowers prices.
Additionally, those trade barriers make imports more expensive, and the poor suffer most when things like shoes from China or soy from Brazil get more expensive.
I have been to Ecuador and the level of poverty is dismaying, but the benefits of international trade in terms of employment, cost of living, government services, etc do have an impact on the poor in Ecuador. Look at Chile, Colombia or Brazil, where gradual reform towards open markets and political stability have allowed for enormous gains in living standards. It's not a silver bullet, obviously, but it is the best path to sustainable progress.
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