Trade Barriers Going Up Around the World

By David L. Brown

Protectionism is rising as nations struggle to protect their economies in the face of a growing crisis. According to the Financial Times today, Mexico has announced it will place new tariffs on $2.4 billion worth of U.S. products. The action came in response to the cancellation of a pilot program to allow Mexican tractor-trailers to travel over U.S. highways.

According to the FT story, the targeted list is expected to include “politically sensitive” agricultural products. Under the North American Free Trade Agreement, cheap American corn and other farm produce flooded our southern neighbor, forcing millions of subsistence farmers off the land. Many moved to Mexico City and other population centers, causing urban decay and poverty to spread. Others migrated North as illegal aliens to seek jobs in America.

As the specter of famine looms over the world as a result of dwindling food resources, greater demand, and high costs, we can expect more nations to take protectionist actions. Already a number of Asian countries have banned exports of key foodstuffs such as rice. The intent is to assure enough food for domestic consumption, but the result is to reduce the amount of food available in world markets. In effect this constitutes hoarding at the national level.

What we are witnessing is the unwinding of so-called Globalization, a return to a world economy enmeshed in a tangle of trade barriers and protectionism. That bodes extremely ill for nations that rely heavily on exports and whose revenue streams could dry up as trade barriers rise. Ironically, it is also bad news for nations that rely on imports, particularly of food. It seems there can be no winners. Many poor nations are already facing potential famine and actions that raise the cost of food will only fan those flames.

The dream of Globalization advocates may have been misguided, and in fact I believe it was unwise to assume that all nations could enter into international trade as equal participants. However, having gone down that road, if many nations begin to make U-turns toward new isolationist models it will create chaos.

The world is experiencing a “perfect storm” of colliding factors, including the pressure of over-population, collapsing economies, resource depletion and climate change. No matter where you look there are serious problems that need to be addressed, and yet no resources are available with which to do so. At this time of greatest need, most of the world’s nations are essentially bankrupt. We are like people trapped in a house with fires breaking out in every room,  no fire extinguishers at hand and the local fire department on strike.

Like the governments of other nations, the U.S. has been culpable in this, through such actions as placing limitations on bail-out money stipulating that the funds must be spent on products made in  the U.S.A. While such knee-jerk actions seem reasonable and patriotic on the surface, they are seen by our trading partners for what they are: Old-fashioned protectionist trade barriers.

At the heart of the dispute with Mexico are similar factors, with the Teamster’s Union raising a stink about the perceived competition from non-union Mexican drivers. It has been claimed that Mexican trucks are unsafe, and yet studies have shown that in many cases American trucks are even less so.

The spread of protectionism is just one aspect of the overwhelming tide of change that is taking place in  the world. Things will never again be like they were, and there is little reason for optimism about the direction in which we are heading.

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