1. The rising of protectionism

1. The rising of protectionism

Brexit series for FT.
Brexit series for FT.

“The difficulty is not to understand new ideas but to escape from old ones.” (J. M Keynes)

After the British vote in favour of Brexit, recent events related to CETA confirmed the inexorable rise of anti-globalisation feeling, protectionist behaviours in Europe and other countries (see the large part of the American electorate which adopt the protectionist speeches of Donald Trump).

This last Sunday, the headline of Brussels website Politico was : “ EU and Canada win a trade battle — but not the war- Leaders say they’ll have to redouble efforts to rescue trade agendas from hardening anti-globalization sentiment.”

Facing a fast moving world, a large part of the public opinion are convinced that globalisation is the cause of their social, economic and territorial downgrade and that governments deemed to be guilty for their inability to fight the multinational power, the European Commission deemed to be guilty for not respecting citizens and democracy, etc.

Within this period of fears and doubts, loss of bearings and direction, Protectionism appears for them to a miraculous saviour. The proliferating sovereignist speeches, the easy slogans suggest that closing borders, inward-looking policies or even “beggar-thy-neighbour” tactics will solve societal, political and geopolitical challenges we are facing.

Is The “happy” globalisation finished? “Is the wind of history spinning? Are we moving towards a pattern of trade less “global”, towards regionalisation or even re-nationalisation? Is the era of free trade in being completed? Will this second globalisation end like the first by a nationalist backlash?” (Eric Le Boucher in French economic newspaper Les Echos).

Regional integration and free trade have been, for years, sources of economic, social and environmental pledges, partially kept :

  • China’s emergence as a global economic power,
  • emergence of middle economic power countries even if they are currently facing major political and social internal issues,
  • growth for many countries and regions driven by international trade,
  • slow but steady growth of the African economy.

If global trade is currently slowing down, it’s basically because the globalisation of the world economy is realised. It’s returning to the pace of overall growth which remain very low.

But Trade remains remains as vital to growth, employment and competitiveness. For every 1 billion Euros got in exports, 14,000 extra jobs are created across the EU. And more than 30 million jobs, 1 in 7 of all jobs in the EU, now depend on exports to the rest of the world.

Without going into details of economic theory, free trade, based on comparative advantages, led to a general decline in prices on many goods and services. For years, substitution jobs have been found (for instance, services industry or mass distribution). But today, due to the acceleration of technical progress and the digital revolution consequences, these substitution jobs are missing while at the same time, wages are stagnating and the mass unemployment is not decreasing in some countries at an high level rate.

Except if we adopt a new economic model (for instance, the decrease growth one), globalisation remains as a fact and the challenge is to find the solutions towards a better regulation for both current and future.

We believe that this awareness, albeit belated, is underway.

In a speech dated November 7, the IMF Managing Director, Christine Lagarde claimed :

“Advanced economies remain stuck in a low-growth, low-investment, low-inflation cycle. The social and political consequences are becoming all too apparent. Inequality remains too high in too many countries. Conflict and migration exert a terrible toll. Trade has become a political football. And supporters of economic integration – and cooperation – are on the defensive. If our founders were here today, they would surely be concerned. They shared a conviction that trade and openness are beneficial to those who embrace them. They agreed that multilateral dialogue is key to the stability of the global economy. And yet, we know that openness and international cooperation are needed more than ever to improve the lives of people everywhere. We also know that they are needed to face the challenges posed by demographic pressures, climate change and new technology.”

But, to meet this challenge requires to understand the territorial impact of globalisation, namely the metropolization of our economies and its consequences.

Manavao’s team – Toulouse, November 1st, 2016.

manavao.com – Launch November 15th

 

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