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2016: The year of protectionism

Protectionism

By Rakesh Choudhary

On the 21st of December, the United States once again placed Taobao on its blacklist of ‘notorious marketplaces.’ Taobao is an online marketplace unit of Alibaba, the Chinese e-commerce giant. Alibaba has already alleged that this ban may be influenced by politics. This event exactly sums up the past year, which has been marked by a strong revival of protectionism across the globe.

A protectionist revival

Protectionism did not make a sudden appearance in 2016. For the last few years, there has been a slowdown in global trade and a rise in protectionist measures. According to the Global Trade Alert (GTA) annual report published in July 2016, global trade has plateaued since the start of 2015. The report highlights that in first four months of 2016 more than 150 protectionist measures were implemented globally. However, between 2010 and 2015, the number fell between 50 and 100.

For the last few years, there has been a slowdown in global trade and a rise in protectionist measures.

In 2016, nationalism and it’s entry in politics has supplemented protectionism. Until now, tariff and non-tariff measures were mundane economic policies with critics limited to economists, experts, intelligentsia and industrial lobby. With ‘Brexit’ and Trump’s election, chauvinism has once again become a political fad.

It seems that this trend is quickly spreading to other nations. Italy’s Five Star Movement played a decisive role in defeat of referendum, leading to resignation of Italian PM Matteo Renzi. Though the organisation’s ideological leanings are yet not clear, it won’t be surprising if they take a populist stance on issues like the European Union and immigration. In Germany, the right wing party, Alternative für Deutschland (AfD) is rapidly gaining vote share in regional elections. AfD is an anti-immigrant party that was founded with the objective of opposing Germany’s EU membership.

Protectionism

A graffiti mural of Donald Trump and Boris Johnson kissing, sprayed in Bristol | Picture Courtesy : Fortune

Slow death of multilateralism

Now that WTO negotiations are almost dead, we should not expect any breakthrough in global trade. Regional arrangements such as the Trans Pacific Partnership (TTP) and Regional Comprehensive Economic Partnership (RCEP) were seen as an escape from deadlock of WTO negotiations. However, Trump’s intention of withdrawing his state from the TPP may begin a downward spiral for such agreements as well.

Increasing unease over the threat to multilateralism is quite apparent among free-market proponents. Canada and Japan are already busy realigning their strategy post Trump’s announcement on TPP. Japan’s Prime Minister Shinzo Abe has already said that TPP would be meaningless without the US. At the APEC summit in Lima, Peru’s President Pedro Pablo Kuczynski issued a warning against any US attempt at shielding it’s market from imports.

Protectionism

The stakeholders of TPP | Picture Courtesy: Thomson Reuters

Skepticism towards multilateralism will lead a shift towards bilateral negotiations. Between competing powers like the US and China, bilateral trade could initiate fierce trade wars.

On the other hand, between unequal powers, it will lead to heavily biased treaties. Multilateral bodies provide weaker nations with the bargaining power to demand favourable trade concessions from developed nations. But, such agreements are likely to come to halt.

The coming year will see the formulation of a Brexit strategy and elections in Italy, France and Germany. The outcomes from these events may decide if neo-liberalism, which started in 1970s, will be able to keep a hold on global economy. Going by current trend, it seems highly likely that we may see a revival of regulated economies of the past.


Featured Image Source: Bitcoin News
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