Saturday, March 28, 2009
A CASE FOR ECONOMIC PROTECTIONISM?
Ecuador recently imposed trade restrictions that put tariffs on certain imports. The cry has gone out that this is “protectionism” and hinders free trade. Economists around the world have become fearful that such actions may be followed by other nations as a tool to boost sagging national economies. The questions to be asked are what are so bad about some form of protectionism? Is economic globalization really that great? Do such actions really hurt a free market economy?
Ecuador uses the dollar as its currency. With our economy in the dumps, there is little wonder that a nation like Ecuador would have concerns. According to some in Ecuador, the tariffs, while slowing imports and hurting those companies that rely upon foreign goods; the tariffs have been a boon to locally based firms. Is this a bad thing? Is it wrong not to depend on foreign imports to meet local economic demands?
We hear a lot of talk about free trade. But how free are the global markets? In a perfect world, firms producing products should be able to sell their products anywhere without fear of trade restrictions. The theory being that those with the best product for the best price gets the sale. However, the world markets are far from free. While many products in the U.S. come from China, they are not from Chinese companies which are paying their employees decent wages. They are often from American companies who pay the Chinese workers dirt cheap wages. We are all familiar with sweat shops and child labor abuse in foreign nations. Are these the features of a free economy?
In colonial days the economic system was called mercantilism. Mother countries exploited their colonies for their raw materials and then made the colonies buy finished goods from them. Next came imperialism, where powerful nations extended the spheres of economic influence and once again, controlled the businesses and markets of other nations. Now we call it globalization, where mega-corporations exploit the economies of third world nations. In both mercantilism and imperialism, the systems were overtly run by the exploiting country’s governments. In globalization, support for exploitation is more covert and hidden under the mantra of free trade. We are all too familiar with the mass exodus of U.S. manufacturing and service sector jobs to Asia and Mexico. This was done because wages in those nations were pennies a day and business regulations almost non-existent. In the absence of tariffs, the products are then sent back to the base country at prices far below those of local firms. Clearly, the globalized world economy is under the control of the few.
So, back to Ecuador. With trade restrictions, local farmers are doing better. Local manufacturers are doing better and overall, locally based firms are growing. Who is hurt? Those companies that exploit foreign workers and undercut local trade. In a capitalist economic system, trade barriers are touted as an anathema. Nations that tax imports are called the dirty word, ‘protectionists.’ Until such time as there are universal labor laws, fair wages, uniform business regulations and monitoring and equitable access to labor and resources, the so called ‘free market’ system is simply not free at all. If a nation has the capacity and the resources to produce products locally, why should their businesses be undercut by unscrupulous and foreign corporate giants? Certainly, if a product cannot be produced locally, markets to import such products should be free and open. Business and labor, competing freely and on equitable terms is a worthy goal. But, I do not want my clothing produced in child sweat shops. I do not want most of my food imported from foreign nations that have no environmental regulations. I have no issue with bananas from Panama, we can’t grow them here. I have no problem with hand painted dishware that is reflective of a foreign culture. I have no problem with bamboo products from China. The point is, to me, globalization should not be just a new name for imperialism. It should be a system that allows nations to freely exchange products that are best produced by each nation under a truly free set of rules and regulations. Protectionism may not be all that bad after all and it just might bring home jobs that never should have left.