[Letters] Protectionism will not solve crisisMany economists and journalists have been writing articles about rising protectionism as a global issue. Despite their efforts many countries such as the United States and Malaysia have been noted for starting to institute protectionist policies particularly in the steel sector.
But can protectionism sustain the global economy? We are living in a global web-like economy where each country has financial stakes deeply entangled with other countries.
Because of this highly complex structure, the current global economic crisis has emerged. It is natural for governments to try to protect their own people from the crisis. However, walling themselves off from others is no solution.
First of all, demand for products is decreasing because of the job crisis, which is also caused by the economic downturn.
According to Economist.com, the unemployment rate has hit 10 percent in Spain and 14 percent in lreland.
Some believe that protectionism can lift the economy by taxing imported goods, which will make the market more competitive for local goods. But since unemployment continues to rise, demand for products - from anywhere - will continuously shrink.
When applications for unemployment compensation were at their peak in September 2008, the total number of cars sold fell 26.6 percent compared to September 2007 in the United States, according to some reports. Although steel companies might manage to provide domestically made steel, there is no guarantee that these companies will be able to avoid failure.
Furthermore, not only major enterprises such as GM and AIG, but especially smaller enterprises are already close to bankruptcy. That means that numerous companies will not be able to afford manufacturing costs even with the adoption of “buy local” policies.
Accordingly, in order to minimize deficits, companies will have to find the cheapest-for-quality resources for manufacturing their goods. Protectionism will limit the companies’ choice of materials; eventually this would hurt their ability to produce goods or offer low prices.
With the G-20 summit successfully completed, positive changes are expected to revive the global economy. However, there was no clear agreement on prohibiting protectionism.
The leading economists warn that protectionism will only make the financial crisis worse. Their arguments are helping the people understand why protectionist policies cannot be the solution to the current global economic crisis.
Park Jun-bum, student, Bundang high school