UK’s auto bailout package; protectionism rising

Great Depression became a global event because of a couple of reasons : one Gold Standard and two rise in protectionism ( I am still reading on the subject and would post as I come across more evidence). We dont have a gold standard but some countries follow a fixed exchange rate system dubbed as Bretton Woods -II. I don’t really know whether the crisis has deepened in these economies because of sticking to exchange rates (if they are).

However, what is surely happening is rising of protectionism. The rise is not as straight as Smoot-Hawley Tariff Act that raised US tariffs on 20,000 products. However, it is happening indirectly

  • After US, Germany, France (see this report), UK has launched its auto bailout plan (see this as well). These plans protect their domestic industries leading to protectionism.
  • Increase in antidumping (mainly against China)- WTO reports a rise in anti-dumping cases in Jan-June 2008 period (85 cases) compared to 2007 period (61 cases). Max cases on China -37. WTO is investigating China’s retaliation
  • US Treasury Chief Geithner is supposedly working on Chinese currency suggesting stern measures would be taken against China for not appreciating its currency. (see NYT). If this is true China is sure to retaliate and protectionism soars. (Read Buiter’s criticismon Geithner move)
  • Financial Protectionism – Banks are getting nationalised everywhere. Buiter points to another indirect move which surfaced in Italy. The Italian central bank has just created a Collateralised Interbank Market. The Central bank will serve as the universal counterparty, guaranteeing settlement in case of default.  The arrangement is, however, only open to Italian banks (the statement is here, in Italian). Italy is a member of Euroarea and this facility should be extended to all the members. It beats me why Italy and not ECB is introducing this facility. The EU is simply getting more factitious as pointed in this report.  

Despite policymakers assertions that we would not repeat Great Depression and lessons have been learnt, the similar causes are being repeated. Let us just hope all this protectionism does not retort to direct measures as well.

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14 Responses to “UK’s auto bailout package; protectionism rising”

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  5. kraltvmp3 Says:

    thanks so this post

  6. Avid Reader Says:

    Interesting! I wasn’t aware of all them. Sadly, protectionism is a given. Roubini was saying that there was very little hope for coordinated global action against the crisis. To put it simply, politicians care only about their respective local constituencies. So they will not coordinate.

  7. Bob Taylor Says:

    Hi,

    Protectionism is not the cause of the great depression. see this link:
    http://findarticles.com/p/articles/mi_m2465/is_/ai_71634857
    This article was written in 2001 but is very topical. The scare tactics of protectionism are used by multinationals to ensure they can continue to pillage third world countries to avoid a responsible attitude to business. I know my company went to Singapore and India with the loss of 800 graduate and skilled jobs and the devastation of a small market town’s economy. I now live in France where they take local jobs seriously and back French Industry.

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  14. Becky Roland Says:

    This is pretty eye-opening stuff. I didn’t realize this issue of protectioninsm was so prevalant.

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