Calibrating protectionism

. . . is the topic of my Trade Tripper column in this Friday-Saturday issue of BusinessWorld. Excerpts:

"One thing nevertheless is clear: protectionism is not the answer. In fact, protectionism, like economic nationalism, is a lie. It protects nothing, not consumers, competitiveness for industries, not proper employment, and not a country’s growth or real incomes. A reversion to protectionism would be self-defeating and would only exacerbate the global downturn.

This perspective is equally relevant particularly when analyzing probabilities of any country resort, due to policy capture, of any protectionist measure. It would seem that the only realistic option is to use, to the maximum extent possible, any legal economic mechanisms that are already available. Although international or multilateral pledges to refrain from resorting to protectionism seems to be the norm, it is equally true that such pledges are easily forgotten, most unfortunately by the developed countries who should actually be leading any rational progress toward greater economic momentum.

Interestingly, it is indeed observable that any credible possibility of legally retaliating against others’ protectionism should not necessarily arise from or be initiated by collective action (although multilateral promises to avoid new trade barriers seems to be the rule). Should a significant trading partner resort to retaliation, it inevitably invites others to follow suit. Should a major trading power be actually motivated to enforce the idea that protectionism by other countries will result in prolonging the delay of any longed-for economic recovery, then categorical proclamations against protectionism should be accompanied by a firm determination to hold transgressors accountable through legal dispute mechanisms allowed under the global trading system. In some instances, unilateral self-help in this regard could even be explored.

In fine, the clear idea that could make the national leadership of any country reconsider any resort to protectionist measures for purposes of short-term, specific constituencies’ satisfaction, is the probability that such could actually end up costing the country more in terms of greater political and real economic damage. Indeed, declarations by countries to use available legal mechanisms that are allowed under the multilateral trading system for purposes of correcting any measure by another country that results in loss of benefits for another will definitely be effective both in the short term and in the longer term institutional sense."