Sunday, 15 February 2009

Trade protectionism

BEIJING, Feb 15 (Reuters) - China's official Xinhua news agency slammed the "Buy American" requirement of the U.S. economic stimulus package, saying in a commentary that trade protectionism is a "poison" that will harm poor countries.

The remarks are the first indication of the reaction in Beijing to the U.S. measure, which has been criticised by U.S. business groups that fear it could invite other countries to keep American goods out of their own stimulus programmes.

"History and economic theory show that in facing a financial crisis, trade protectionism is not a way out, but rather could become just the poison that worsens global economic hardships," Xinhua said in the overnight commentary, issued in response to the passing of the U.S. plan.

The U.S. Congress approved the $787 billion plan to jump-start the world's biggest economy on Friday, stipulating that public works and building projects funded by the stimulus use only U.S.-made goods, including iron and steel.

The plan does require that procurement be carried out in a manner consistent with U.S. obligations under multilateral and bilateral trade pacts -- potentially giving Canada, the European Union, Japan and some other countries the chance to benefit from the additional spending.

But countries such as China, India, Brazil and Russia, which are not members of an international government procurement agreement, would be shut out.

Xinhua cited the example of the Great Depression of the 1930s as showing that moves to protect domestic markets, and ensuing trade wars, could have only negative effects on the global economy.

"Trade protectionism will also cause catastrophic effects to some poor countries, making the current financial crisis one of a humanitarian crisis as well," it said.

This is all so true, and very sad to see the "land of the free" going this way - KT

2 comments:

thelonelytrader said...

Interesing article. (Wish you would post more of this stuff. You seem to find the best information, IMO.)

Part of me thinks this is rather more about China looking for an angle to excuse itself from its own protectionist policies...as it has always done. Certainly, the point is taken wrt US protectionism -- or, rather, US measures to stimulate the domestic economy by supporting its manufacturing and industry with more supportive policies. Both China and the US should be as careful with their rhetoric as they are with their economic and trade policies. China more so, since its words more often belie its actions.

Kiwi Trader said...

The danger now is rioting on unemployment, both in China and Europe.

THAT will prompt more protectionism, as MPs move to soothe the populace.

However don't see that in the US, because, whether you believe in the actions taken or not, at least the US is trying to sort it out, more than you can say for Europe!!

....if they could agree on a plan!!