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Understanding the Rise of Global Protectionism
Key Term of Interest
The topic of Protectionism was chosen out of academic curiosity. While on active duty with the United States Navy, I lived on mainland Italy from 1993 to 2001, Japan from 2001 to 2004, and Sicily from 2007 to 2010. While stationed onboard the USS Belknap and USS LaSalle throughout the 1990s, I visited several countries around the Mediterranean Sea. During some of those port visits, I was introduced to the concept of countries importing and exporting with one another. Looking back on it, I notice that some countries had certain things from some countries but appeared to have access to nothing from certain other countries.
Explanation of Key Term
Satterlee (2018) summarizes Protectionism as “the economic policy of restraining trade between nations.” Restrictive government regulations on imports, prohibitive quotas, and high tariffs on imported goods are some of the systems to enforce such limits. These limits are designed to guard domestic industry against foreign takeover or competition. Protectionism goes against free trade where such protective barriers are not used.
Nations also use protectionism in order to control foreign direct investment. Satterlee (2018) provides the example of China, which strictly enforces protectionist measures to control foreign involvement in its economy. Satterlee (2018) also notes that China recently changed its rules on foreign investment in real estate.
Major Article Summary
The major article selected for this topic is entitled “Understanding the Rise of Global Protectionism” (Enderwick, 2011, pp. 325-336). In this article, Ederwick illuminates that over the last three decades, the world economy has experienced an extensive liberalization and high-growth. Enderwick details the recent rise of protectionism – which he states is also called “global protectionism” – to examine how it is different from more traditional forms of trade protectionism.
Ederwick (2011) acknowledges that global protectionism is a large enough phenomenon to warrant efforts to gain a better understanding of it. He suggests that global protectionism has its roots in the concept of economic nationalism – which he described as “a set of attitudes that appear to predominantly reflect anxiety.” He summarizes that global protectionism differs from traditional (trade) protectionism in several ways; and compared to trade protectionism, global protectionism has a broader scope in terms of geography, application, concerns, and measures applied. At the same time, global protectionism has a much more selective focus in several cases that emphasize individual firms and deals. Ultimately, Ederwick asserts that global protectionism fails to offer an effective critique of the processes that brought some of the highest sustained economic growth rates the world has ever seen.
Ederwick (2011) highlights numerous challenges in theorizing the determinants of global protectionism, noting that what appears to be substantial vagueness surrounding its likely causes, in addition to difficulties in understanding relationships. On this note Ederwick concludes that more research is needed to clarify these processes. Ederwick’s discussion suggests a number of conclusions about global protectionism.
The first conclusion is that global protectionism grows gradually, thus it is impossible to determine a single causal factor or event. As a result, the variety of motives for, and different forms of protectionism highlights its complex process. The second conclusion is that global protectionism has several “novel features,” one of which is the fact that it is driven largely by the successes of globalization – in particular, the rise of new competitors, as opposed to failures. For this conclusion, Ederwick (2011) notes that additional adjustments in the world economy can only be postponed by protectionist measures.
The third conclusion is that not only is difficult to find any theoretical support for global protectionism; there are solid arguments for resisting it. To support this conclusion, he notes that a recent study finds no evidence in support of economic patriotism. Fourth, considerably more work is required to help us understand the subtleties of global protectionism.
Finally, Ederwick asks the question of whether the continuation of globalization is under threat from global protectionism, to which he answers in the negative. Ederwick states that the benefits of globalization are becoming clearer and its benefits are enjoyed by a growing number of economies and proportion of the world’s population.
Discussion
The work cited relates to the explanation of the key term.
The cited work relates to my above explanation and relates specifically to the content of the assigned module for this week. Satterlee (2018) states that historically, protectionism is applied via economic policies, such the applying tariffs on imported goods as a means of accruing government funding, as well as to decrease or eradicate the need to tax domestic industries. This traditional protectionism can be considered a form of sales tax on foreign goods, designed to alleviate the need to tax domestic products. A tariff is a tax levied as a fixed charge for each unit of a good that is imported into a country.
Protectionism is criticized with the reasoning that by possibly discouraging competition, weaker products might remain on the market. Also, protectionism may result in tariffs that increase the cost of imported goods. Consequently, the barrier-imposing government inadvertently penalizes the importing country, including its own citizens. As a result, protectionism can be the result of an isolationist policy that harms the economy.
The work cited relates to the other works research.
Yin & Wang (2014) conducted a study, discussing the success of China’s reforms and open-door policy, with the purpose of examining the main factors that contributed to its high growth over the previous 36 years. The study notes that some people incorrectly attribute China’s success mainly to its enormous international trade and significant trade surplus. The study found that for 15 years between 1978 and 1992, China actually depended largely on domestic interregional integration in the form of intra-national trade.
Ramos (2011) states that the economic crisis of 2008 emphasized that the structure underlying global governance needs to change. She highlights that one of the priorities to affect change is for countries to avoid investment and trade protectionism. She emphasizes that unlike before previous crises; this time major economies resisted protectionist pressures and reaffirmed their commitments to keeping their markets open, thereby heeding the advice of international institutions such as the Organization for Economic Co-operation and Development (OECD). Ramos concludes that maintaining these commitments will be difficult, as economies are currently faced with high unemployment, high deficits, slow growth, and price volatility.
Conybeare & Kim (2010) note that cross-border mergers and acquisitions are a major and often politicized component of foreign direct investment. Using data on individual transactions between 1970 and 2006, they examine the restrictions countries place on mergers and acquisitions, whether they use these controls to discriminate against foreigners seeking to acquire domestic firms, and what factors may predict the propensity to block foreign entry by this method of direct investment. They tested hypotheses that state intervention can be explained by characteristics of the countries whose firms are targeted by acquirers, including per capita income, democracy, trade exposure, market size, government share of national income and industrial structure. They found that democracy, trade exposure, and high government expenditure are associated with more stringent merger control laws, and that none of these attributes cause states to discriminate against cross-border mergers.
Puślecki (2016) conducted research that analyzed the current re-shaping of international business. He illuminated technical progress and the growth of economic ties between particular countries, and noted that participants in the world economy benefit from liberalized international trade. He also notes that freedom of movement of foreign direct investments become bigger not only for the industrialized countries, but also for emerging markets.
References
Conybeare, J., & Kim, D.-H. (2010). Barbarians at the Gates: State Control of Global Mergers and Acquisitions. World Economy, Vol. 33, Issue 9, 1175-1199.
Enderwick, P. (2011). Understanding the Rise of Global Protectionism. Thunderbird International Business Review, Vol. 53, Issue 3, 325-336.
Puślecki, Z. W. (2016). Current Reshaping of International Business. Research Papers of the Wroclaw University of Economics, Issue 450, 471-490.
Ramos, G. (2011). A New Era of Global Co-operation. OECD Observer, Issue 282/283, 52-53.
Satterlee, B. C. (2018). Cross Border Commerce: 3rd Edition. Raleigh, NC: Synergistics International Inc.
Yin, X., & Wang, Z. (2014). Revisiting the Role of Regional Integration in China from 1978–1992: Incentive, Pattern, and Growth. China Economic Journal, Vol. 7 Issue 2, 261-276.
