Tit-for-Tat Protectionism

First, the French government decides to give itself the right to veto foreign ownership in 11 “sensitive” industries. This was done primarily to derail Italian energy group Enel's bid for Suez, a French concern. French Prime Minister Dominique de Villepin spoke of the measure as an example of economic patriotism. Protectionism known by some other name stinks just as much, but that was of no concern to him. Predictably, the Italians got angry, with some of their politicians advocating blocking French attempts to buy over Italian companies. Not to be outdone, the Spaniards have said they will “do everything to ensure Spain's energy companies remain Spanish”, and even the Poles have begun making protectionist noises. In the meantime, in the United States, the hysteria over a Dubai company acquiring operational control of six US ports continues unabated – as well as unaffected by fact or reason. Globalisation would seem to be under attack, if not in peril. There is a growing anxiety among people in the West that they are losing control of their own fates. Should one be concerned?

In part, this anxiety reflects sub-par economic performance, especially in Europe. With unemployment still high in many European countries, it is not surprising that people there fear they might lose out if their economies were to liberalise further. That such concerns are occurring within the European Union, directed against other EU members, especially new ones from Eastern Europe, suggests this is a generalised concern, and not directed specifically at emerging economies in Asia and elsewhere. That, however, does not lessen the risks, for Asia as much as the rest of the world would suffer if globalisation were to stall. A full-scale retreat from open markets is unlikely just now, but there is a risk the tit-for-tat protectionism of the kind Europe is indulging in now might spread. At the very least, the current acrimonious atmosphere is not conducive to the successful completion of the Doha Round of trade talks.

Strong leadership might counter this depressing state of affairs, but there is little possibility of that at the moment. The US is mired in Iraq, and US President George W. Bush's political capital is fast depleting. With nobody forcing the pace of globalisation, the best one can hope for is that there is no wholesale retreat, only a temporary stalling of the forward movement.