No Time for Trade Fundamentalism
Concerns that the current backlash against globalization augurs a surge in growth-hampering protectionism are highly exaggerated. In fact, as was apparent in the 1980s, some tempering of hyper-globalization may be a highly effective way to maintain a reasonably open world economy.
CAMBRIDGE – “One of the crucial challenges” of our era “is to maintain an open and expanding international trade system.” Unfortunately, “the liberal principles” of the world trade system “are under increasing attack.” “Protectionism has become increasingly prevalent.” “There is great danger that the system will break down … or that it will collapse in a grim replay of the 1930s.”
You would be excused for thinking that these lines are culled from one of the recent outpourings of concern in the business and financial media about the current backlash against globalization. In fact, they were written 35 years ago, in 1981.
The problem then was stagflation in the advanced countries. And it was Japan, rather than China, that was the trade bogeyman, stalking – and taking over – global markets. The United States and Europe had responded by erecting trade barriers and imposing “voluntary export restrictions” (VERs) on Japanese cars and steel. Talk about the creeping “new protectionism” was rife.