What’s the Line Again? Rising Tide of Protectionism…

By March 22, 2009Economy, Trade

From The Independent (U.K.): “France in protectionist row as Renault switches Slovenia jobs“:

France was embroiled in a protectionism row yesterday after the government announced that the assembly of some Renault cars would be shifted from Slovenia to the Paris area, creating 400 new jobs.

President Nicolas Sarkozy later insisted that the move would not cause any job losses in a fellow EU state, but the European Commission said it planned to launch an investigation.

M. Sarkozy infuriated eastern European members of the EU last month when he linked €6bn (£5.6bn) in cheap loans to the struggling French auto industry to a guarantee that car-making jobs would remain in France. He even questioned why French car firms needed plants in eastern Europe at all. Alarm bells rang in Brussels and across eastern Europe yesterday morning when the French Industry Minister, Luc Chatel, announced that production of some Clio cars would transfer from Slovenia to a giant Renault assembly plant at Flins in the Seine valley, west of Paris.

Los Angeles Times, “U.S.-Mexico relationship hits some bumps“:

Reporting from Washington and Mexico City — Secretary of State Hillary Rodham Clinton ventures south of the border this week at a moment when the tricky dynamics of the U.S.-Mexico relationship are on full display.

It’s too soon to call it a rough patch, but a flap over cross-border trucking and unwelcome words about the drug war have led Mexico to push back against its powerful neighbor recently.

The trade dispute got tetchy last week when Mexico raised tariffs on scores of U.S. imports — retaliation for Washington’s decision to stop funding a program that allowed some Mexican trucks on U.S. highways under a free-trade agreement.

We don’t want to oversell the “rising tide of protectionism” theme. The Mexican tariff reaction was relatively modest unless you’re in agriculture in Oregon, Washington and California, and the Administration has signaled it desire for commercial comity.

It also seems a good time to link to this piece by Dan Ikenson of the Cato Institute, a free trader through and through, “A Protectionism Fling: Why Tariff Hikes and Other Trade Barriers Will Be Short-Lived”:

Despite some episodes of backsliding, the world is unlikely to witness a significant departure from the trend toward trade and investment liberalization that has been evident since the end of World War II. An increasing number of governments have come to recognize that optimal economic outcomes arise under conditions where policies enhance—rather than limit—the freedom of people to transact with others, including foreigners. Protectionism limits choices and thereby undermines human liberty and economic efficiency.

Reasonably well-respected trade rules and the reality of a global economic system that renders trade openness an imperative for success are some of the reasons to believe that any protectionist outbreak will be fleeting. Indeed, policymakers would be advised to respond to the downturn by reducing their trade and investment barriers unilaterally because doing so expands choices, reduces costs, and spurs the kinds of structural reforms that facilitate economic growth.

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