Protectionist policies will save your companies, but only for so long as they don't beg for euthanasia!
The only 'right' turn in international trade today is, the 'American turn'; all others will fetch you a 'wrong-turn' ticket! Allow us to sound a tad out of proverbial tune here, but isn't that the truth? When the US government wanted the US economy to move from better to best, it allowed everything from offshoring to H1B visas, and God allowed it. Then, when it was time to save the world (and America of course), it is putting in place all sorts of protective policies, one of which was the American Recovery and Reinvestment Act of 2009 on February 17, 2009, a massive $787 billion stimulus package; and God is allowing it! So how is this a vile definition of 'protectionism'? Section 1110 of the Act reads: “None of the funds appropriated or otherwise made available by this act may be used for a project... unless all of the iron and steel used in the project is produced in the United States”. Clearly, this "buy American" clause for worse, will firstly erode the competitive edge of the so-called American MNCs, and secondly, it will only encourage more such 'protectionist policies' from other nations in retaliation! There would be tall import trade barriers set by even emerging economies. Finally, lack of growth in local consumption, would force the US government to 'liberalise' its policies. But, the emerging economies would maintain the roadblocks; for isn't 'ego' a crucial 'international trade' trait?
Yes, our predictions sound far too pessimistic, but allow us to justify. The third largest economy in the world – China, has already taken the 'American turn'! And this seems justified, for why should China behave like a Third World nation and stand challenged by US hegemony? So there it is. On one hand, ensuring that an American MNC like Coca-Cola stands no chance in growing big on Chinese lands and on the other voicing out loud the purpose behind acquiring a First World MNC – Rio Tinto.
The only 'right' turn in international trade today is, the 'American turn'; all others will fetch you a 'wrong-turn' ticket! Allow us to sound a tad out of proverbial tune here, but isn't that the truth? When the US government wanted the US economy to move from better to best, it allowed everything from offshoring to H1B visas, and God allowed it. Then, when it was time to save the world (and America of course), it is putting in place all sorts of protective policies, one of which was the American Recovery and Reinvestment Act of 2009 on February 17, 2009, a massive $787 billion stimulus package; and God is allowing it! So how is this a vile definition of 'protectionism'? Section 1110 of the Act reads: “None of the funds appropriated or otherwise made available by this act may be used for a project... unless all of the iron and steel used in the project is produced in the United States”. Clearly, this "buy American" clause for worse, will firstly erode the competitive edge of the so-called American MNCs, and secondly, it will only encourage more such 'protectionist policies' from other nations in retaliation! There would be tall import trade barriers set by even emerging economies. Finally, lack of growth in local consumption, would force the US government to 'liberalise' its policies. But, the emerging economies would maintain the roadblocks; for isn't 'ego' a crucial 'international trade' trait?
Yes, our predictions sound far too pessimistic, but allow us to justify. The third largest economy in the world – China, has already taken the 'American turn'! And this seems justified, for why should China behave like a Third World nation and stand challenged by US hegemony? So there it is. On one hand, ensuring that an American MNC like Coca-Cola stands no chance in growing big on Chinese lands and on the other voicing out loud the purpose behind acquiring a First World MNC – Rio Tinto.
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
and Arindam Chaudhuri (Renowned Management Guru and Economist).
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