China: protectionism is no cure to crisis

(Xinhua)
Updated: 2009-02-10 00:27

Protectionism a double-edged sword

Trade protectionism seems to protect domestic industries and jobs but actually hurts the interests of every country, said Zhang Xiaoji.

A man selects clothes at a boutique at a shopping mall in Beijing, China Monday February 9, 2009. As the "Buy America" provision raises alarms against trade protectionism, China on Monday said "no" to a similar plan that bans foreign products in domestic stimulus projects. [Agencies]

"It's a double-edged sword," he said. "While exporters suffer from restrictions, consumers in the importing country will be forced to buy more expensive domestically made goods."

Moreover, impeded international trade could risk prolonging the spreading economic woes, as proved by history, he said.

In the 1930s, sweeping trade wars sharply slashed international trade and contributed heavily to the decade-long Great Depression, as most economists have concluded.

The worldwide protectionist tide was triggered by the US Smoot-Hawley act in 1930 that raised tariffs on foreign imports by an average of 20 percent.

"In logical thinking, such a huge mistake will not be repeated, " said Zhang Xiaoji. "But today's world trade rules are not perfect ... Politicians can easily turn to protectionism in the wake of rising unemployment amid deepening crisis."

In Spain, authorities started in November to pay lump-sum unemployment benefits to immigrants who went home and stayed away for three years.

Late in January, thousands of people went on strike across Britain over the use of foreign labor.

Despite signs of protectionism in some countries, things are unlikely to lead to trade wars, said UIBE trade expert Zhang Junsheng.

He said the World Trade Organization rules out the possibility of tariff hikes and state leaders will be more careful to avoid trade wars.

When meeting in Davos last month, leaders from Britain, Mexico, the Republic of Korea and South Africa called for a resumption of stalled free trade talks to combat a dangerous turn to protectionism.

Mei Xinyu, an MOC trade expert, predicted a trend of protectionism will last for a certain period, advising the Chinese government to actively strive for fair treatment for its own industries.

That could be done by immediately reviewing whether China's trading partners have breached the WTO rules, said Mei. He also suggested applying anti-dumping and anti-subsidy duties appropriately.

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