Rising Protectionism in Emerging Countries
Kyung-Hoon, Kim, SERI Quarterly
Protectionism, emerging economies, trade regulation, non-tariff barriers, "Buy National" policies
Key emerging countries are grappling with slowing economic growth rates caused by flagging exports due to the weak global economy and sluggish domestic consumption. Unlike 2009 - at the height of the financial crisis - governments have little leeway for massive fiscal stimulus, as their balance sheets are still recovering from the flood of government spending at the time. Abundant global liquidity and volatile resource prices are also stymieing attempts to increase the money supply even though inflation rates have fallen from their second-quarter 2011 peak.
Given these constraints, major emerging economies are trying strenuously to foster any growth that they can muster. This has led to a surge in trade protectionism (notwithstanding the G20 standstill agreement that prohibits the imposition of new barriers). Aware of the shift, the World Trade Oganization (WTO) cautioned in June 2012 that "protectionism has slid to dangerous levels for the first time since the global financial crisis of 2008." The following month, IMF chief Christine Lagarde also expressed alarm over escalating levels of protectionism.
According to Global Trade Net, a database of restrictions on international commerce, Russia has led the emerging economies in trade protectionism, followed by Argentina and India. Between July-November 2011 Russia adopted seven protectionist measures, followed by 57 more between November 2011 and June 2012.
In the same time frame, Argentina introduced 23 protectionist measures and increased them to 30, while India increased its protectionist policies three-fold from 6 to 18.
The extent of harm caused by protectionist policies is broad when the totals of four intermediate metrics are assessed: 1) discriminatory measures; 2) tariff lines affected; 3) sectors affected; and 4) trading partners harmed. India and Russia are among the top ten worst offenders in three of the four metrics.
PROTECTIONIST TRENDS IN EMERGING COUNTRIES
Methods of trade regulation among emerging countries have shifted from conventional tariffs and quantitative import restrictions to non-tariff barriers. In other words, opaque protectionism is on the rise, with more subtle measures outstripping overt protectionist measures. Tariff rates in emerging countries have either declined or showed little change since the global financial crisis erupted in 2008, partly due to the growth of vertical specialization in the global economy during the 2000s.1 Furthermore, emerging countries (e.g. Mexico) have concluded free trade agreements with large economies or joined the WTO (e.g. China).
Recent protectionist trends in emerging countries can be divided into three categories: 1) "Buy National" policies; 2) stiffer technical barriers and safety regulations; and 3) controls on foreign investment.
"Buy National" policies encourage the purchase of domestically produced goods and services. Their aim is to nurture the manufacturing sector and enhance the economic structure. The top two economies in the world, the United States and China, have led the Buy National trend. Both countries have actively promoted the use of domestic products for public construction projects to overcome the effects of the global financial crisis. The "Buy American" provision in the American Recovery and Reinvestment Act of February 2009 required the use of U.S.-made steel and iron in federally funded construction projects. In June 2009, China mandated that the purchase of foreign products or services in government-invested projects obtain approval by the relevant government authorities. This was expanded to other areas of government procurement, such as plans to limit official vehicle purchases to domestic brands. In May 2012, Beijing announced that its current policy would be kept in place …
Questia, a part of Gale, Cengage Learning. www.questia.com
Publication information: Article title: Rising Protectionism in Emerging Countries. Contributors: Kyung-Hoon, Kim - Author. Magazine title: SERI Quarterly. Volume: 6. Issue: 1 Publication date: January 2013. Page number: 51+. © Not available. Provided by ProQuest LLC. All Rights Reserved.