The difficult global economy has already created a simmering trade war between nations. The U.S. and Europe have issued a bevy of protectionist regulations in a bid to appease domestic interest groups, while key developing nations have raised their own trade barriers in response.
Problem is, while we’ve all heard the argument that free-trade benefits the entire world in the long-term, there might be another reason for developed nations to worry about protectionism.
A global trade war would be worse for the U.S. and Europe than for Asia according to Liam Halligan at The Telegraph. ‘The West’ probably has more to lose from trade barriers than ‘The East’, going forward.
Telegraph: Over the last year, the US – the global “free-trade champion” – has imposed 46 separate protectionist measures on goods and services crossing its borders. The EU, disgracefully, has implemented 90. The likes of China and India have retaliated, introducing 51 and 29 new anti-trade measures respectively. Little wonder that world trade volumes remain 13pc below their pre-sub-prime peak.
In 1950, international trade accounted for only 8pc of global GDP. That share has since more than tripled – with values increasing 24-fold – due to a relatively liberal global trading regime created by the WTO.
A few years ago, Pascal Lamy, the WTO’s long-standing director-general, told me that some Western nations retained “neo-colonial” attitudes towards the rest of the world. The man spoke the truth. Having bought into the WTO, many developing economies are furious at what they see – rightly, in many cases – as Western intransigence. There’s now a real danger they will go their own way, cutting bi-lateral trade deals that exclude the West.
The bottom line is that “we” as Westerners have more to lose than “they” do. “They” are growing fast, “they” are driving the recovery in trade we’re now seeing and “they” will soon account for the lion’s share of the global economy. Over the coming decade, such realities will become stark. Western leaders need to bite the bullet and complete the Doha round. The reality is that, from our perspective, the terms can only get worse.
Thus if the U.S. and Europe continue along their protectionist path, they could be left behind in the years ahead, achieving lower economic growth due to lower trade. Meanwhile developing nations will create their own separate trade blocs and speed ahead as their exchange of goods and services explodes.
Note China is already working on just such a plan, forming the largest free trade bloc in the world, separately in Asia.
AFP: China and Southeast Asia establish the world’s biggest free trade area (FTA) on Friday, liberalising billions of dollars in goods and investments covering a market of 1.7 billion consumers.
Eight years in the making, the ASEAN-China FTA will rival the European Union and the North American Free Trade Area in terms of value and surpass those markets in terms of population.
Officials hope it will expand Asia’s trade reach while boosting intra-regional trade that has already been expanding at 20 per cent a year. “In 2010 we are sending a strong signal that ASEAN is open,”