Tuesday, April 11, 2006

Protect this...

Has globalization hit a wall? Have nations realized their very relevance is threatened by global economics and turned to protectionism?

I have no idea. The best I can say right now is, "Maybe".

It could be that the pace of global competition is unsustainable for the wealthy sector, like the US and EU.

The infamous Doha round of trade negotiations... wait..

Pop Quiz:

Doha is*

1. A small socialist country in SE Asia

2. The capital city of Qatar [the land without a "u"]

3. An eastern meditation practice

4. A seaside resort city is Azerbaijan

Anyhoo, the latest round of trade negotiations are in serious trouble. It is largely to do with agriculture in the developed world. But in the past few months further liberalization has run into stiff opposition from environmentalists, labor unions, and other political groups which would embarrass older farmers to be seen among.

Globalization may be inevitable, but it can be slowed down considerably. What we forget in the West is that power is a function of people, not wealth. Just between China and India is sufficient human horsepower to reshape world economics. This will occur, I believe regardless of trade barriers or even military might.

In fact, the rising power of China is suddenly a huge issue for US policy makers inasmuch as they are loosely allied with Iran. And in case you haven't been paying attention, our government seems to be determined to attack Iran, for reasons that oddly enough are far more sound than the Iraq rationale. The China connection may be the one thing preventing this next military - even nuclear - confrontation. Hence I think we can reasonably expect serious China-bashing in the near future.

But back to business. My guess is with EU knees buckling on immigration and free trade, we should able to keep our ag protectionism intact just long enough to ensure American Program Farmers are both few and non-competitive. Indeed we may sacrifice the very industries that the US has world leadership in an arguably vain effort to keep 500-acre farmers going.

Services, which include everything from finance to law and insurance, are America’s strongest export sector. In documents released last week Portman points out that America runs a $56 billion surplus in trade in services despite barriers erected by developing countries, and that liberalisation of such trade “could account for fully 72% of the economic gain from the Doha round”. But the developing countries are about as ready to open their insurance and other markets as the French are to abandon agricultural protection.
[Rest of article here]

Whether protectionism will work is not the point. The point is will it delay global competition long enough for me to make my exit?

*Answer here.

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