From the TUC

Protectionism: this is why it’s so dangerous

26 Mar 2009, by Guest in Economics, International

I have written before about why progressives should be very, very cautious before they flirt with protectionist sentiment. Two articles in The Financial Times today reinforce the point.  The first gives a detailed account of the Chinese Government’s unexpected decision to forbid what would have been the biggest foreign takeover of a Chinese company: Coca-Cola’s $2.4 billion bid for Huiyuan Juice.  There is widespread speculation that this was a protectionist measure and fears are growing of a retaliation from the US or possibly Australia where Chinese moves to take over mining companies has caused political disquiet. (UPDATE 28/3/09: The Australian Government yesterday blocked the takeover of Oz Minerals by the Chinese company Minmetals.)

The second article gives an equally detailed account of growing military, political and economic tensions in the South China Sea with South-East Asian countries tussling with China for control over potential energy reserves in the area.  Worryingly this is not just a regional spat. The US is involved.  Hawks in America are already worried about increasing Chinese aggression, the smaller regional powers are looking to the States for support and there was the incident recently when Chinese ships harassed a US Navy vessel.

These two articles are entirely unconnected and both of the issues they cover may well come to nothing of global significance. But it doesn’t take a Professor of International Relations to see how the combination a tit-for-tat trade war between the US and China and a fragile situation in the South China Sea could feed off each other and turn this recession into something even worse.  I’m not saying this will happen but the point is, it could, either in that part of the world or elsewhere.  And the very fact that it could means we have to resist the temptation of protectionism.  The stakes are simply too high.

One Response to Protectionism: this is why it’s so dangerous

  1. Charlie Marks
    Mar 31st 2009, 5:43 am

    I’m sorry, but why should working people be eager to see enterprises sold to foreign capitalists by domestic capitalists?

    This isn’t something we should be worrying about, and doing so is itself quite risky.

    When we’re calling on the government to halt the privatisation of Royal Mail, won’t they turn around and say “ah, there you are being protectionist!”