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Tuesday, 10 February 2009 08:28 |
During the Cold War the US and its allies were concerned about the "domino effect" - if one country fell to communist control then it would set off a series where other countries would also fall. An editorial in the Feb. 10 Business Daily from Kenya ('We should protect our industries from collapse') shows that the "buy American" clause threatens to start tipping over the dominos of international trade when or if other nations respond in similar fashion. The editorial states..."The paragons of free trade have become protectionists. As a nation, we cannot afford to sit back and assume that all is well. With all the protectionism going round, we need to look back and reassess our position."
The full editorial and links are below. It is a tough but fair assesment from the perspective and thinking of another nation. And a potential harbinger of actions in upcoming months if policy makers in the US and elsewhere cannot learn from history avoid the mistakes of the past, such as the Smooth Hawley Tariffs - as pointed out by The New York Times in an editorial on Feb. 6 'Those Who Ignore History...':
"With the global economy staggering, wealthy countries need to pull together to produce a concerted economic stimulus, protect the free flow of trade and rescue the poor and small countries that cannot possibly make it on their own. What the world is getting — from the United States Congress and other governments — is the kind of policy blunders and retrenchment that unleashed the global depression almost 80 years ago…"
Business Daily (Nairobi, Kenya) - www.bdafrica.com
Editorial: We should protect our industries from collapse
February 10, 2009: With the sweeping financial and economic turmoil around the globe, Western governments are doing the opposite of what they stood for in Doha in 2001.
The so-called Doha Round on Development is either dead or facing a serious haemorrhage. As we watch, they have become protectionists. They want to protect their economies from collapse and they have started to intervene and embrace the same Keynesian principles they had abandoned in yesteryears.
The paragons of free trade have become protectionists. As a nation, we cannot afford to sit back and assume that all is well. With all the protectionism going round, we need to look back and reassess our position.
The American and British governments have taken ownership of several banks and financial institutions and a tit-for-tat protectionism is now starting to take shape. The US has led the way with its “Buy American” provision in the draft stimulus package and others might follow.
What this means is that projects that will benefit from the proposed $800 billion bailout will have to source materials from US only and Americans will be psyched to go for locally manufactured goods.
One of the growing fears is that this protectionism will lead to isolationism, which will damage the global economy further. There are also genuine fears that it will lead to more subsidies and dumping of goods in developing nations, which will hurt our economies further.
While we concur with the World Trade Organisation Director General, Pascal Lamy, who rightly said last week that free trade should be part of the solution to the current downturn, we also believe that strict rules should be put in place to safeguard developing nations against cheap subsidised imports.
The problem is that different countries, including the US, have come up with different formulas on how to calculate the dumping margins. But the US wants to have its way against everyone else in the so-called zeroing mechanism.
As a nation, we must be ready for a hard landing and hard bargains. The stimulus packages advocated by the US for its economy are no more than subsidies that WTO members have been fighting against for years since they distort the markets.
There are murmurs around the world about the “Buy American” clause in the stimulus package for if replicated it will lead to retaliation and trade wars, especially at the WTO level.
As a result, we must follow these moves keenly for they will have deep ramifications on how we trade and relate to some of the global trading partners.
The WTO, where we had pegged some hope, is going nowhere.
The differences that were exhibited at the last WTO ministerial meeting before they were recalled last week for another session are still there. But a lot has changed since then.
The countries that opposed protectionism are now embracing it. They have also started to subsidise key sectors of their economies and there is little will to lower the tariffs that discriminated against developing countries.
Unless developing nations team up at the WTO and negotiate with one voice there is real danger that they might accept unorthodox packages in the light of the current economic turmoil.
For the umpteenth time, let us say that any package that does not meet the developmental mandate agreed in Doha in 2001 should be rejected in totality. While we advocate for a free-market economy, we also believe that developing nations should be allowed to safeguard their vulnerable economies.
The new US trade policy, while geared towards revival of their economy, is purely anti-free trade. Other nations are soon going to follow.
If that happens, Kenya should take a stand and promote local industries and products. For only that way can we cushion ourselves from economic demise.
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