Opinion: Protectionism a world-saving instrument?

The end of globalization seems to be nigh. To a lot of people around the globe, this may be perceived as good news. But it’s not really for a number of reasons, says DW business editor Henrik Böhme.

Container port Bremerhaven (picture-alliance/dpa/U. Baumgarten)

Sports equipment maker Adidas, once an staunch supporter of moving facilities to countries with low labor costs, is now taking production back to Germany. This sounds like good news, doesn’t it? But it’s not, I’ll come back to it later.

US President-elect Donald Trump scored in the election campaign by promising to bring jobs back to America, particularly from China and Mexico. That, too, sounds like good news especially for Americans with low-paying jobs or no jobs at all who have been struggling to make ends meet. But it’s not good news, either.

Globalization an instrumentalized term

Globalization is at the heart of the aforementioned developments. The term has been instrumentalized by various camps in recent years. But let’s make no mistake: Global interactions in the world of business, cross-border production and the worldwide flow of goods are no invention of neoliberal and radical capitalists.

In the middle of the 12th century, Low German merchants realized it would be better to open up borders to trade and represent economic interests together. Their Hanseatic League is understood to be the world’s first free trade agreement among different nations. Western European nations traded their finished products for raw materials from northern Russia.

Since then, global trade has experienced a boost. Technological progress put even emerging economies in a position to become production locations. Of course, many of these are just “extended workbenches” of big companies from the industrialized world in pursuit of maximum profits and cost-cutting opportunities. Nonetheless, you cannot call into question that globalization has helped almost a billion people worldwide to leave poverty behind. Also, for people in industrialized nations, many goods and services are now considerably cheaper because of globalization effects.

The fate of those left behind

And few would question the dark sides of globalization, among them inhumane working conditions in poor nations, exploitation and even slavery. In the industrialized world – people, who’ve lost their jobs as their employment has become too expensive. In short, lot’s of people who’ve been left to their own devices and now see themselves as losers of globalization. Among them many people, who voted for Donald Trump, who had promised them to bring back jobs to their own country.

Of course, the groundswell of opinion against globalization is not directly linked to developments in 2016. Ever since the start of the global financial crisis in 2007/2008, resistance to free trade has been underway. Even though G20 nations pledge to keep up free trade and remove existing obstacles at every summit, the opposite is happening.

Boehme Henrik Kommentarbild AppDW business editor Henrik Böhme

Since 2008, the World Trade Organization (WTO) has registered more than 2,000 small and larger trade barriers. And according to the International Monetary Fund (IMF), between 2012 and 2015 global trade grew only half as strong as in every decade since the 1960s.

Subtle protectionism

What’s grown rapidly instead has been policymakers’ resolve to protect national economies and domestic companies. Protectionism is the buzzword, but, certainly,  no German economics minister would use this word while standing in the way of of a takeover by a German high-tech firm by a Chinese enterprise. It’s more likely that security concerns are articulated and new regulations enacted – a subtle form of protectionism, if you will.

Again, this is not really new. And yet, 2016 could go down in history as the year that ushered in the end of globalization. Just think of the incompetently brokered free trade agreement between the US and the European Union (TTIP) which was de facto buried in 2016. It had been the target of globalization opponents, with tens of thousands taking to the streets in protest of the proposed deal.

Dim prospects

Protectionism may yield short-term benefits, but the truth is it’s only there to cover up home-grown economic problems. Have we done enough to take people aboard the globalization journey, a trip to a new and complicated world? Have we invested enough in education and our social networks? If Donald Trump wants iPhones to be made in the US in future, has he thought about where the raw materials will come from and how expensive the smartphones would be then? Who could afford them in future?

No, the end of globalization is no feel-good prospect. Not for industrialized nations (Germany as an export-oriented country would suffer a lot), nor for emerging economies. Trade barriers have always eventually lead to less well-being. What the world needs is a just trade system, not a spiral of protectionist measures.

Back to Adidas’ shoes made in Germany. There’s one major snag about the company’s pilot facility in Asbach in southern Germany – it basically doesn’t need any workers. And that makes production even cheaper than, say, in Vietnam where a lot of manual labor was still required.

That’s why Adidas’ relocation is not really good news. Not for workers in Vietnam, nor for Germany. But it tells us a lot what we’re headed for.

Have something to say? Add your comments below. The thread is open for 24 hours from posting.

 

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gabugo

Author, Pastor, Development and Valuation Surveyor, CEO LandAssets Consult Ltd., Publisher, The Property Gazette.

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