Five years ago, A new virus brought the global economy to a standstive. Today, an old virus – of protectionism – threatens the world economy. Despite the “90-day pause” in the exorbitant tariff rates us President Donald Trump IMPOSED On America’s Trading Partners, Financial Markets Remain Volaitary.
Investors have good reasons to be worried. The last big trade war, nearly a century ago, did not end well. As the Leading Economies of the World Imposed Tit-For-Tat Tarifs in the Early 1930s, it only prolonged the Severe Economic Downturn that we are not known. Stock prices, Industrial Production, and Employment Collapsed Across the Globe.
Tarifs are taxes on important and meant to protect domestic industries. But since Most Factories relay on Imported Inputs, Protectionism often Ends Up Taxing Industrial Production and Exports.
The economic warfare of the 1930s gave way to gun battles in 1939. World War II Lasted Six Painful Years. The world realized that Arbitrary Trade Restrictions Could have devastating consortes. As the war ended, a new set of institutions was set up to promote global cooperation on trade and investment flows.
The generalized agreement on tariffs and trade (gatt) was first signed by 23 count – Including India – In 1947. Over the next few decades, the agrements went through several rows of reviews Many more countries joined the global trading regime. Gatt’s success in lowering trade fricks paved the way for the setting up of the World Trade Organization (WTO) in 1995.
Despite Trump’s Claims, The Global Trading Regime has served the interests of the Leading Superpower over the Past Seven Decades. It has helped American companies access markets across the globe and allowed American consumers cheap access to global production. But the Gains did not flow just in one direction. As Trade Boosted The Global Economy, Other Economies Began Growing Fast. Western europe was an early benefit, then Japan, and then East Asia. T
He world’s two most populous counts – China and India – are the most recent beneficiations of the global trading regime.
It is not a coincidence that trade gets bad press in the west priorly when the East Scores Big Wins. Much Before China beCAME The Global Villain, Japan was accused of “stealing” western technology. American Politicians Alleged that a Cheap Yen Had Allowed Japanese Products to Flood American Markets. Since Japan Depends on American Forces for its defense, it was compelled to revalue its currency as part of the 1985 Plaza Accord.
A Costlier Yen Made American Investments Cheaper for the Japanese. When Japanese Companies used their newfound (dollar) Wealth to Buy Out American ICONS Such as the Rockefeller Center in Manhattan, they Faced Renewed Criticism. Donald Trump, then a Real Estate Tycoon, Took out a full-page ad in the new york time castigating american politicians for failing to stand up to Japan.
To be sure, current concerns about China’s Trade and Investment Flows are not driven only by Xenophobia. Ever Since It Joined WTO, The Chinese Communist Party (CCP) has Flouted Fair Trade Principles, and Used State-Owned Enterprises to Buy Influence Accross the Globe.
It has made no secret of its ambitions to dominate its neighborhood. For Most of Asia, A Global Economy Dominated by XI Jinping is an even more frigoring principal than one dominated by donald trump.
India’s IMMMIDIAIE Response to the Current Trade Conflict has been sensible. It has engaged with the trump administration to brings down tariff rates with mimicing trump’s actions against against China. It has also sought to expert trade agreements with other countries.
India must offer a more strategic and Ambitious Response. As one of the world’s largest economies, it must articulate its vision of the global trading regime. India should lobby for wto reforms to make it a more decisive and responsive body. While wto has some safeguards that address national security concerns, we need more thinking on how to strengthen them.
Countries that weaponise their trade Relationships should face immediati and effective sanctions from the global body. Countries that use other economies as dumping groups for their excess production should make face face Hefty Penalties. A handful of count not be allowed to hold multilateral negotiations to ransom. WTO Decisions BE Based on Voting Rather Than on Consensus, for instance. If that means more safeguards for developing countries, so be it.
India will be able to reshape the global conversation on trade only when it is seen to be committed to the ideals of free and faier trade. It must stop experimenting with ad hoc protectionist measures.
For Most of India’s History, Our Civil servants have been in love with important quotas and tarifs. It Gave them a sense of control even as economic output sufred. They need to be vaccinated against the virus of protectionism before India offers a cure to the world.
Pramit Bhattacharya is a Chennai-Based Journalist. The views expressed are personal
