Dangers of protectionismThe American president-elect, Barack Obama, met with outgoing President George W. Bush Monday and the two shared views about urgent economic issues.
Obama reportedly asked for emergency contingency measures for the Big Three U.S. auto companies, including GM. President Bush in return asked for Obama’s support on free trade deals. But they failed to reach an agreement, according to sources.
It is true that the United States is in a critical situation. The three companies employ 250,000 workers. Combined with their partner companies, their workforce totals four million.
Clearly, bankruptcy of the three companies would have a tremendous impact on the world economy.
It is not surprising that President-elect Obama is prioritizing the revival of GM as a most urgent task, saying that the auto industry is the backbone of the U.S. manufacturing industry.
But the historical fact that trade protectionism emerges whenever an economic crisis occurs weighs heavily on our minds.
It is worrying that Obama’s campaign presented policies that only emphasize domestic views. With the global economy in turmoil, an open-minded viewpoint is desperately needed.
Trade protectionism is nothing but a temporary painkiller. In the end, protectionism damages the competitiveness of domestic products and comes back as a curse that makes everyone poorer.
The world is uniting through the G-20 meeting. The financial crisis made us aware of the necessity of global cooperation once again. For the past two decades, the United States has led global cooperation and free trade. It championed the World Trade Organization and many countries signed bilateral free trade agreements. It was judged that free trade was the best measure to stimulate economies without causing inflation.
Free trade is not the cause of the current economic crisis. The crisis was caused by a flawed financial system and bursting of bubbles. Therefore, trade protectionism is not the right measure to manage the crisis. It will instead worsen the situation.
Korea has particularly bad memories about trade protectionism. In 1997, under the U.S. trade law’s “Super 301” provisions, Korea was one of the first countries listed for trade barriers. Soon after, it fell into a foreign exchange crisis.
Therefore, we hope more than anyone that President-elect Obama will compromise between his pledges and reality and take a discreet approach.
Extreme conflicts over trade or economic isolation won’t do any good to national interests. Trade protectionism is not the right answer.