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'Fortress
Mercosur'
Other regions of the world, notably
Latin America, are similarly blowing hot
and cold in the same trade debate.
In
retrospect, the 2005 collapse of the ambitious
Free Trade Area of the Americas (FTAA) plan,
which would have included all 34 of the
hemisphere's democracies, marked the global
turning of the tide against wholesale trade
liberalisation.
Not
long afterwards, the Doha world trade talks,
held under the auspices of the WTO, entered
their current moribund state, dispelling
hopes of lowering trade barriers around
the world.
Now
Argentina is spearheading moves in South
America's biggest economies to batten down
the hatches and fend off imports from outside
the region.
Argentina
and Brazil are the most powerful members
of the Mercosur trading bloc, which also
includes Paraguay and Uruguay.
Argentina
has proposed to Brazil that the external
tariff levied on goods from outside the
Mercosur region should rise from 10 to 35
per cent, the maximum allowed under WTO
rules.
At
the same time, the cash-strapped government
in Buenos Aires is desperate for Brazil
to buy more of its goods and is pressing
Brasilia to remove its import barriers to
certain Argentine goods, including pharmaceuticals
and citrus fruits.
Argentina's
then president, Cristina Fernandez's economic
nationalism manifested itself in her government's
expropriation of Spanish-controlled oil
company YPF.
Her
"fortress Mercosur" approach is
demonstrated why some economists think trade
blocs, or indeed bilateral trade agreements,
do not actually promote free trade but merely
divert existing trade.
India
has taken both sides on the issue. At one
time, comments by Indian politicians have
echoed those of China in denouncing protectionist
sentiment, particularly on the part of the
US.
But
India is still reluctant to give foreign
firms greater access to its economy, as
shown by the political trouble over its
much-delayed decision to open up the supermarket
sector to global giants such as Wal-Mart,
Tesco and Carrefour. And then, having opened
the market, places onerous restrictions
on foreign players that give domestic rivals
the upper hand.
Single-brand
firms such as Starbucks and Ikea are already
allowed to open stores in India, but only
provided they buy 30 per cent of their goods
from domestic suppliers. From a British
perspective, such restrictions are frustrating.
The list of UK companies that have passed
into foreign ownership is endless, from
Cadbury's to Jaguar Land Rover.
Yet
while Foreign Secretary William Hague has
pledged to "argue relentlessly"
around the world in favour of free trade
and against protectionism, UK firms seeking
to make acquisitions abroad do not always
have reciprocal access to those foreign
investors' home markets.
At
the same time, leftist commentators in the
UK doubt if protectionism is such a bad
thing after all. Ditto in the United States
where Donald Trump has been in ascendant.
The
UK's left-wing Compass pressure group caused
a stir when it published a paper arguing
that globalisation was "the underlying
cause of today's economic and social malaise"
and that "progressive protectionism"
was the answer.
This
is defined as "encouraging and allowing
countries to rebuild and rediversify their
economies by limiting what goods they let
in and what funds they choose to enter or
leave the country".
This
prompted a heated response from a senior
fellow at a free-market think tank, the
Adam Smith Institute, who described the
idea as "fascist economic policy"
that was "stuck in some sort of 1700s
mercantilist time warp".
But
given the current ambivalent mood of politicians
and voters alike in the face of global economic
crisis, a return to widespread protectionism
can hardly be ruled out.
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