Protectionism is the policy of imposing duties or quotas on imports to protect home industries from overseas competition. As the economic crisis heightens, governments feel the need to keep safe their countries from the impending synchronized global collapse, thus they find new ways of protection, which in turn discriminate against foreign firms, workers and investors often in subtle ways. Take for instance the Democratic Congressional Leadership in the United States demands that stimulus cash comes in hand with “buy America” strings and “the British jobs for British workers” on the other hand, avoiding an influx of less costly labor from Latvia and other places in Eastern Europe.
According to WTO director-general, Pascal Lamy (2009) such measures are seen as catastrophic as according to him, the minute imports are restricted or cut off altogether, the same happens to exports to other nations. While it is politically inherent for nations to want to protect their national economies from any financial crisis, Lamy insists that it is the latter that leads many a nation into the protectionist trap. President Barrack Obama is in agreement that protectionism would be a gross mistake for America and a slippery road to take barring in mind that the world is currently watching America. If they did, President Obama was certain that this would send a message of selfishness to the rest of the world. Coincidentally, his remarks came on the very day that a report on the same was released from the Peterson Institute.
Protectionism forces have already come up and will establish as the regression deteriorates. So far, the only thing that has yet to go haywire in this recession is a protection recession spiral and the G20 nation should put measures underway to ensure that the latter does not happen. According to Richard Baldwin and Simon Evenett’s 13th March 2009 article on Yale Global, protectionism threatens Global Economic Recovery. Keep the “peace” by preparing for war is one way to ensure that nations across the divide are well equipped with legal and another relevant measure to act against nations that impose harmful protectionist measures. The issue of tough love as a way of maintaining the much-needed sanity, especially during the time of crisis comes across as the only lasting and effective solution to protectionism.
Other proposals are more traditional and have a devotion to a detailed and wider take on new protection seconded by a real-time surveillance mechanism, a pre-commitment to negotiating the eviction of all-crisis linked measures in three years’ time and a leaders-level negotiation that would get the Doha talks back on track. In any international trade scenario, there involves a process of acquisition by a certain company from the other. For both parties, this international trade presents a potentially sharp double-edged sword in that one may never get his goods delivered for one reason or the next while the other faces payments uncertainty. In an attempt to bridge this gap, the banking institutions of both buyers are often presented with paired letters of credit. Unfortunately, the fruit of globalization that the world is currently enjoying was fully encouraged and even financed by globalists who displayed unusually high levels of general reckless and irresponsible behavior. The logic argued by these globalists was simple; encourage cheap labor and goods, release large volumes of money into the economy and even encourage the misguided belief that individuals have it all when in fact, they had nothing but credit card bills. It is very disappointing that at the time when making protections for domestic industry and labor is most likely to be widespread and it is also the time when imposing those protections makes the least economic sense. Unfortunately the extent to the damage by the reckless globalists has resulted in a state where national economies have no ability to be remotely autonomous and any attempt at autonomy would be devastating. All this is due to the tendency of governments to defer responsibility and fail to put in place corrective measures when short-term discomfort due to rising prices as a result of inflationary trends. As seen in this global financial crisis, the consequences have been dire, to say the least.
In conclusion, protectionism is nothing but a hidden attempt, conscious or otherwise, to harm trade counterparts, in fact, can be called a “beggar thy neighbor” strategy. Inevitably, this is likely to result in negative ripple effects. We have to realize that we are all part of the global economic crisis, we can’t solve these issues as individual entities; there is power in “we”.