Over the past few decades, increasing freedom in international trade has led to greater prosperity for industrialized countries. However, this trend appears to be showing signs of slowing. If this recent resurgence of protectionism accelerates, the free trade system will give way to a managed trade system that will foster the emergence of separate trading blocs in the coming years. This could result in enormous economic losses, particularly for emerging economies.
The problem stems from the shortsightedness of governments in developed countries, which prioritize their domestic economies above all else. As a consequence, a wave of threatening protectionism is looming, which I consider misguided, both in its justifications and its objectives. When things go wrong, when there is a crisis, protectionist pressures always emerge; it is one of the most typical and well-known reactions, which, moreover, quickly garners support from the least productive sectors, and even from those least affected. Recent examples include the imposition of tariffs on imported steel by the Bush administration, met with cries of protest from exporting countries like Brazil. And there is Le Pen's anti-European protectionist program, which aimed to take France out of Europe, reinstating trade barriers to protect French jobs and production. This program pledged to give French citizens priority in access to employment and to grant social benefits only to French nationals. But France has opposed Le Pen with its votes. The European Union and MERCOSUR are also confronting US trade protectionism at the WTO.
Often, to protect themselves, the argument of "social dumping" is invoked; that is, that emerging countries compete unfairly because working conditions are appalling, with no social security and poverty wages. This argument is vulnerable for two reasons. Wages in these countries are low because the standard of living is still low, but they are increasing as the standard of living rises, as is logical. The response from these countries is clear, and in my view, irrefutable: we are doing it the way you taught us, that is, through hard work and sacrifice, because you taught us there is no other way. They even add now that we are opening our borders and basing growth on exports, just as you taught us it should be done. I believe, therefore, that the argument of social dumping only makes sense if we forget our own history and our exhortations to these countries. Secondly, the problem isn't so much that these newly industrialized countries are invading our markets, which are already quite saturated and heavily reliant on intra-community trade, but rather that they are seizing control of external markets—those that offer better prospects. There is another compelling reason: protectionism against these new competitors is not the solution. The argument is simply that they are precisely our best commercial hope, and therefore, if we have any interest, it is in their growth. If they grow, they will buy from us. The answer to protectionism should be clear, and in my view, irrefutable, since protection eliminates the best incentive for improving competitiveness. This rule never fails. Protection hides the problem, but it doesn't solve it. If the disadvantage is one of cost, putting up a protective barrier doesn't solve the underlying problem; it masks it. And what's worse: it stagnates it. Because in economics, there is no other way to stimulate cost and quality competitiveness than through competition with others. The example of the former communist countries should leave little doubt about this. As well as the Common Agricultural Policy (CAP), clearly protectionist and one of the biggest aberrations of the European Union (EU), which has prevented many poor countries from exporting food to Europe and thus obtaining the foreign currency they need to finance their economic development.
That is why, for some years now, the EU has been reforming the CAP in an attempt to achieve a more efficient and competitive policy. With the disappearance of the protectionist system, competition has emerged, revealing that under the guise of fairness, social justice, or income redistribution, subsidies had been fueling inefficiency. This inefficiency now has to be paid for by restructuring a protected sector, in this case, the agricultural sector.
International trade will continue to play a fundamental role in the economic growth of countries in the future. Therefore, governments will continue to pursue trade agreements, such as those signed last week by the EU and Spain with Chile and Canada, which involve reciprocal concessions and allow for reductions in both tariff and non-tariff barriers. Alongside these trade agreements between countries, the WTO will continue to promote multilateral agreements, through which developing countries will gain a greater share in the international trade of goods and services. Partnerships between countries will thus be the essential element of trade relations in the coming years. These will be complemented by the harmonization of legislation in e-commerce, the environment, and health regulations.
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