A rose by any other name is still a rose, and the same goes for economic protectionism. The current trend in world political economics has been a move towards more mercantilist policy, justified by thinly veiled excuses of national security or domestic interest.
This type of policy is harmful to the citizens and governments of not only the individual countries concerned, but to the entire world. Not only does this create a precedent of 'legitimate protectionism' but the sort of excuses which are used only add another layer of haze to an already opaque economic policy.
The most recent example of this is the debacle surrounding Dubai Ports World. The major complaint in the controversy surrounds the fact that an Islamic nation could control U.S. ports. Any national security concerns are extremely over-inflated, and foreign ownership of our ports makes logical sense.
The House of Representatives has refused to strike the section from an unrelated bill for funding of the Iraq war which would prevent Dubai Ports World from owning U.S. ports, despite the fact that they have announced their sale of these assets to a U.S. company. The deal is now dead, but the implications of the political maneuvering will have a strong impact on future deals.
The underlying motivations of the deal's death are the most worrisome. The Dubai Ports World deal was killed because of xenophobia. U.S. residents (70 percent) could not bear to have their commercial gateways to the world managed by people of the same color skin as those that their GI's are shooting halfway around the world.
To many people's shock, President Bush actually stood behind this deal. Whatever his political motivations may have been, Bush stood on the rational side of the issue. However, he could not muster the country's support in the face of growing American protectionist sentiment. While Bush himself has contributed to this mentality with his steel, agricultural, and other commercial policies, there is a growing trend among western nations to engage in defensive protectionism.
In Europe, the planned merger between Gaz de France (GdF) and Suez was initiated by the French government in order to protect national assets from being taken over by another European competitor, Italy's Enel. This decision had little to do with economics, and even less to do with common sense.
One of the fundamental principles of economics is comparative advantage. Essentially, if someone can produce a good or service cheaper and better than you can, trade should occur such that you offer the good or service in which you have superior production capacity. In both the Dubai Ports and the GdF deals, nations sacrificed this principle of comparative advantage to pander to political feelings of xenophobia.
Western nations were able to achieve their positions of dominance thanks to international trade. Americans - with their paltry savings and credit based consumption - rely on the international community to sustain their way of life.
It would be both hypocritical and irresponsible for these nations to turn their back on the world once they have achieved a position of dominance. There are plenty of continued benefits to be derived from trade, for developed and underdeveloped nations alike. Protectionism will produce beggar-thy-neighbor results, and obscuring the issue with convoluted excuses will expedite the process.
