TOPICS: Fear of revival of protectionism
Wonders will never cease. Against the background of predictable Congressional opposition to the commercially agreed takeover by Dubai Ports World of several American port operations as part of its purchase of P&O, President Bush has intervened to say US lawmakers must ‘step up and explain why a Middle Eastern company is held to a different standard’.
After Bush’s adventures in the region, this is quite something. Perhaps it means that, just as he did not invade Canada’s Alberta for the oil, he regrets having applied a different standard to Iraq. This Pauline conversion should surely be posted on the Dick Cheney ‘Shoot a Friend’ website. But the Congressional opposition to the deal is an important sign and has been lent weight by the support of Senate majority leader Bill Frist who said he would introduce legislation to place the deal ‘on hold’ in the absence of intervention from the White House.
Why is this an important sign of the times? Because one of the worries that has surfaced in international financial circles is fear of a revival of protectionism. This was a major theme of the recent meeting of the World Economic Forum in Davos, and, behind all the frantic special meetings of trade ministers and officials concerned with the Doha Round of trade talks is the terrifying thought that failure to agree so far may not just be ritual stuff but may actually reflect insolubly intransigent positions.
Most of those concerned seem to be convinced that, unless there are tangible signs of progress, the eventual result will not just be an impasse but the beginning of the taking of retrograde steps. So we have a concurrence of stalled trade negotiations and great political difficulties over cross border mergers. Such difficulties even arise within the European Union, which is supposed to be a single market in which cross border mergers ought to be welcomed as an integral part of the process of economic integration and the achievement of what economists call economies of scale.
Charlie McCreevy, the European Commissioner for the ‘internal market’ complained that France’s attempt to protect the steel group Arcelor and other firms from cross border takeovers was against decades of European legislation.
Paul Hofheinz, President of the Lisbon Council, said this week: ‘If the EU doesn’t fight protectionism, then nobody else will.’ This may seem a bit far-fetched, but everyone is aware of the protectionist tendencies of the US Congress.
The irony of protectionist forces on both sides of the Atlantic is their very different economic backgrounds. Thus with unemployment so persistently high in the EU, it was not surprising that protectionist sentiment and anti-globalisation reactions were factors behind the No vote on the European Constitutional Treaty. The US economy is supposedly riding high under the leadership of the retired Alan Gree-nspan. If protectionist pressures are rising against this background, goodness knows what is in store if the pessimists about the US economy turn out to be right. — The Guardian