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.

WHAT'S IN YOUR WEATHER FORECAST?

Weather calamities seem to have an eye for Asia this summer although many other parts of the world are far from immune to “Mother’s” growing chaos. In case you do not follow the weather news, here are some of the latest headlines:
“Romania on Flood Alert”
“South Asia monsoon toll passes 2,000.”
“At least 13 dead in Pakistan rains.”
“Rivers above alert levels as rain subsides over central Europe.”
“Storms batter Ohio.”
“Extreme floods hit 500 million people a year.”
“Floods, landslides kill 35 in China.”
“Floods show need for disaster risk reduction: UN.”
“Hong Kong issues cyclone warning.”
“Did global warming cause NYC tornado?”

There are a lot more headlines dealing with the tornado in Brooklyn, rising death toll in Asia due to flooding, sweltering heat that is still rampant in parts of the U.S., deaths from flooding and starvation in Vietnam, deaths from storms in the Philippines, a ‘mini-tsunami’ in Algeria and an announcement by the UN that many parts of the world have confronted record breaking heat waves, floods, storms and cold snaps including snowfall in Africa.

What is evident from many of these stories is that governments are not ready to deal with repeated natural disasters. In 2005 an agreement, the International Strategy for Disaster Reduction, was signed by 168 countries in Kobe, Japan. Between 2001 and 2005 84% of deaths due to natural disasters were caused by flooding. It is clear that, like many well meaning agreements, that many governments have not taken their commitments to heart. Given that more and increased flooding is inevitable, what will governments do to prevent further loss of life and property? When will governments get their heads out of the sand and realize that climate change is a much bigger threat than terrorism?

The ISDR says that modest investments in early warning systems, evacuation plans, public education and better building standards can greatly reduce the loss of life and property. Unfortunately, many nations are too poor for even these modest efforts and if disaster strikes, limited funds must go to relief. The richer nations have tended to take an “It won’t happen here attitude” and the effects of that line of thing have been clear in the U.S., England and central Europe.

One must keep in mind that much of this flooding is due to heavy and long rains and does not include what may happen in terms of hurricanes and monsoons. Add to these equation problems from heat waves, earthquakes, droughts, freak snows and tornadoes hitting the downtown areas of cities and it is evident that we could be facing some real problems. All of these natural disasters are costing billions of dollars in property loss, disrupting economies, creating social chaos and costing lives. How deep are the pockets of relief agencies and charitable organizations?

We are standing in the middle of the environmental highway and Mother Nature is driving right at us. There is a lot of talk and very little action. Policy makers are still acting like we have scores of years to “begin” to solve these problems. Perhaps it is so out of hand that governments fear telling people how bad things may get. Panic is not a pretty sight. It has been said that disasters can bring out the best in people but events in Pakistan and India have put that notion to a severe test; the grade is not encouraging.

It is a little easier to offer assistance when only a relatively small or remote population is affected by disaster. When disaster is widespread, however, disaster brings out the worst and not the best of human nature. As the American economy begins to falter under the pressures home foreclosures and increasing debt, will the U.S. be so generous to foreign lands drowning under monsoons and other environmental disasters? When we face another Katrina, how much will be left for others particularly when we do know how to effectively and efficiently deal with such issues? As it is said in the “11th Hour,” the clock is ticking. What is in your weather forecast?