The Protectionist

Let me start with the resolutions of the G20 summit held in Washington D.C. last year. Almost unanimously it was agreed upon that economic protectionism should not be allowed in any form at any place in the world. Protectionism was one of the key points in the 7 point speech of Dr. Man Mohan Singh.


Today EU leaders coming out of their meeting on current economic situation made it clear that there should not be ‘iron curtains’ around the economies.


Now let’s have a look at a few highly talked about points of the Bailout bill passed by the new US administration.

1. No tax sops for the firms taking jobs out of USA (or discourage investment outside USA)
2. Buy American clause (suppress competition in the market)
3. No H1B hiring if the firm is going for bailout. (No immigrants if you need government funds)


To me it sounds like creating walls around the economy or protectionism in other words. Coining the names like patriotism in economy can not hide the fact the largest economy in the world so far is trying to build a great wall of economy around itself.


Protectionism is like economic reservation and has it’s own disadvantages in long run. “Restricting competition for material, manufacturing and men would result in inefficiencies and inflated prices”*. It may be worth reminding that the great depression of 1930s was partly due to “trade-stifling prescriptions of senators Reed Smoot and Willis Hawley”*.


Finally, I feel that the protectionist policies of US government will not cure the disease they are suffering from. I read that if America sneezes the world gets cold but is it possible for America to be well when entire world is suffering from viral fever?



*from BusinessWorld March 2nd 2009 edition