Trade protectionism and cartels threaten democracy

Andris Piebalgs, Member of the European Commission in charge of Development, went to Asunción to represent the EU in the ceremony of inauguration of Horacio Cartes, who was elected President of Paraguay in April this year. (EC Audiovisual Services 15/08/2013).

Andris Piebalgs, Member of the European Commission in charge of Development, went to Asunción to represent the EU in the ceremony of inauguration of Horacio Cartes, who was elected President of Paraguay in April this year. (EC Audiovisual Services 15/08/2013).

Trade protectionism is a very dangerous medicine for economic illnesses. On most occasions it is like a drug that kills the pain and the symptoms but at the same time it dilutes the possibility to cure the illness that causes them. If an economy loses its competitiveness in a certain sector or in the entire productive machine, protectionism is usually the first cure that the administration and the government put on the table.

Incidentally the European Commission published yesterday a report on trade protectionism across the world. According to it “There has been a sharp increase in the use of measures applied directly at the border, especially in the form of import duty hikes. Brazil, Argentina, Russia and Ukraine stand out for having applied the heaviest tariff increases”. It’s not by chance that in all those countries their bigger or smaller democratic deficit goes hand by hand with the protectionist attitude in applied economic policies. The common denominator is that all of them suffer from a pronounced ‘statism’ in politics and the economy.

At the beginning protectionism has no political cost internally because foreign producers do not vote in the country. On the contrary it ‘sells’ easily under a nationalistic banner. At the same time however it undermines slowly but surely the abilities of the local producers to become more competitive and stand out in local or foreign markets. Protectionism is also an addictive drug and usually the patient needs all the time increased doses.

Then a time comes when the commercial partners of the protectionist country decide to do the same. It’s not exactly a trade war but the consequences are equally devastating. At the end of the day international trade is drastically reduced and every country produces only for internal consumption using expensive resources and outdated technologies. The higher cost to produce more internally, leads invariably to a fall of the overall output after some time because consumers cannot afford to pay dearly for everything.

From protectionism to rationing

If the logic of protectionism is dragged to its limits then a large part of the home markets becomes ‘black’ with smugglers of cheap foreign products gaining the advantage. Then severe administrative measures are needed and the inadequate internal production ends up being rationed. This is the end and the country will soon collapse not only economically but politically too.

Argentine and Venezuela are the closest examples of this process. The monetary part of the Argentinian crisis was the last act in the sequence. After years of protectionism and inadequate internal production to cover the needs of the country and increase exports, the government tried to maintain artificially the parity of the peso with the dollar, in order to indirectly subsidize the internal consumption of imported products. A negative external account however brought soon internal monetary disintegration and crisis.

Still today Argentine is trying to restart its economy on the same protectionist principles and the small success it achieved during the past few years cannot be attributed to a betterment of the economy and an increase of internal productivity. It was the rise of raw material prices in international markets that helped Argentine, because the country is well endowed in this domain. But this blessed with abundant natural resources country can today barely feed its population.

It is true that the abundance of natural resources in many countries has become a ‘curse’, because it nurtures a rentier attitude to the local elites even to entire populations. In Argentine and more so in Venezuela this tendency led to ‘populist’ politics and semi totalitarian rule promising everybody to live as a ‘rentier’ on a public employ’s salary. In Venezuela where an army officer, the late Hugo Chavez, governed the country as President for fifteen years, promising everybody to live like a rentier. The result is that this country also blessed with huge deposits of oil, coal, bauxite and even gold to barely be able to feed its people. Both Argentina and Venezuela applied and still impose severe trade protectionist measures, while the governing elites cultivate also a chauvinist and xenophobic attitude in politics and the economy, to facilitate the longevity of their closed political systems.

Democratic deficit

All in all the free economic play needs also a free political system. The problem is that our world doesn’t suffer only of ‘statism’. Our free and democratic western economies are now threatened by the alarming trend for more and bigger monopolies and cartels in key industries. The latest acquisition of Vodafone’s operations in the US by Verizon for $130 billion stands out in this respect.

Protectionism and ‘statism’ in the developing world and monopolies and cartels in the West present increasing threats to democracy and the economic liberties.

the sting Milestones

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

UN ‘determined to lead by example’ on disability rights: Guterres

Uzbekistan wins its long fight against malaria, as global rates continue to rise

The European Sting @ Mobile World Congress 2014, Creating What’s Next for the World. Can EU Policy follow?

Sri Lanka PM: This is how I will make my country rich by 2025

UK: Crawley group wins European Citizens’ Prize

Why is black plastic packaging so hard to recycle?

These 4 leaders are working to improve integration in Southeast Asia

EU4FairWork: Commission launches campaign to tackle undeclared work

New EU energy labels applicable from 1 March 2021

How to harness the energy of social innovators for an inclusive recovery

Brexit: No deal without marginalizing the hard Tory Eurosceptic MPs

EU Covid-19 Certificate: a European solution for free testing is needed

Outbreak of COVID-19: The third wave and the people

Drinking water: new plans to improve tap water quality and cut plastic litter

A better answer to the ventilator shortage as the pandemic rages on

New Mozambique storm rips off roofs, brings lashing rain as aid response kicks in

The hidden downside to ocean data and how to make it more sustainable

Two rhythms and a sharpened pencil: how art can help us heal and make sense of the world

Parliament supports European Green Deal and pushes for even higher ambitions

The European Union’s Balkan Double Standard

GSMA Reveals Global Partners for MWC21 Barelona

5 ways to be a better humanitarian

Further reforms needed for a stronger and more integrated Europe

Universal access to energy is a major challenge for the Arab world. Here’s why

Commission and Germany’s Presidency of the Council of the EU underline importance of the European Health Data Space

Energy of African youth ‘propelling’ new development era as UN ties bear fruit

Work Together to Build a New Type of International Relations and a Community with a Shared Future for Humanity

Deal agreed to protect consumers against misleading and unfair practices

Security Council urged to help spare Syrians from ‘devastation’

MWC 2016 LIVE: Getty chief says one in four new images from phones

Link between conflict and hunger worldwide, ‘all too persistent and deadly’, says new UN report

How a ‘fourth-sector economic strategy’ can help us build a better future for all

Amidst ‘high political tension’, UN chief appeals to G20 leaders for stronger commitment to climate action, economic cooperation

‘Think beyond farm jobs’ to reach sustainable development, UN agriculture chief advises African youth

UN rights experts call on Russia to release Ukrainian film-maker whose life is in ‘imminent danger’

Use “blockchain” model to cut small firms’ costs and empower citizens, urge MEPs

Antitrust: Commission provides guidance on allowing limited cooperation among businesses, especially for critical hospital medicines during the coronavirus outbreak

Gender Disparity in Medicine: Why and How Do We Close the Gap?

More than 100,000 people have recovered from COVID-19

Why is Merkel’s Germany so liberal with the refugees? Did the last elections change that?

Why cities hold the key to safe, orderly migration

How India will consume in 2030: 10 mega trends

Europe led by Germany seems vulnerable to Trump’s threats

Sustainable finance: Commission welcomes deal on an EU-wide classification system for sustainable investments (Taxonomy)

These are the 4 most likely scenarios for the future of energy

How do we go about improving mental health in the community and reducing suicide rates in the 15-29 age group?

Reception conditions for asylum-seekers agreed between MEPs and Council

Heart attacks and strokes are more common on high pollution days, data shows

Protecting migratory species in a rapidly changing world

China’s New Normal and Its Relevance to the EU

6 ways China and the United States could jumpstart trade reforms

GSMA Announces New Speakers for Mobile 360 Series – MENA, in association with The European Sting

Employers hold too much power over information. Workers must claim their data rights

New citizenship law in India ‘fundamentally discriminatory’: UN human rights office

Quality Education on the table at the European Parliament

The fight for female medical leadership

EU-China relations under investigation?

Thought AIs could never replace human imagination? Think again

Anti-Semitism ‘toxic to democracy’, UN expert warns, calling for better education

Beating cancer: Better protection of workers against cancer-causing chemicals

More Stings?

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s