Global Growth and Trade Barriers

Subsistence farming never worked because being self-sufficient was firstly nigh-on impossible and secondly limited as well as being dependent on the climate. Subsistence farming finished largely in Europe before World War I and went on until the 1950s in the USA. But today the only ones still practicing it are the developing countries. We did away with it decades ago now because we realized that self-sufficiency is all well and good, but you can’t grow everything everywhere. But, today we are returning to that mode of production, not just for agriculture but for everything. Or, at least, that’s what we will end up if the number of trade barriers continues to increase year in year out.

Global Growth

It’s not surprising that economic growth of the world will be revised down by the World Trade Organization next week from 3.3% in 2013 to just 2.5%. 2014 will also see its global economic growth revised with a downgrade from 5% to an estimate of 4.5% for the moment.

The global outlook for trade already looks very difficult and it certainly won’t get any better while the G20 summit in Russia going on right now is marred by talks about the impending attack on Syria. The G20 is largely a back-slapping event of a few leaders of the largest economies in the world that have a few cocktails and numerous dinners. Or is it the other way round? But it has largely proved to be ineffective in dealing with world economic problems Or at least decisions are taken, everybody jumps on a plane home and then forgets what was decided because either they didn’t take notes or they don’t care because little would happen to them anyhow if they didn’t do what they said they were going to do. Isn’t that the definition of a political leader, these days? At any rate, the G20 was not meant for discussion of international relations. It was meant to solve worldwide economic problems, wasn’t it? Oh, well, yet another world failure to add to the list. Anyhow, how could things get better on any level: the UK is just a small island that nobody listens to, according to Vladimir Putin. What’s their definition of the USA then? I wonder: A big country that thinks that everyone listens up when they open their mouths and speak; but in actual fact it’s the US who is doing the listening (in) these days, isn’t it?

Protectionism

Protectionism has always been the mainstay of troubled economic times. But, this time, it can only bring the economies of our countries down in a modern-day version of a return to the past of subsistence farming. If we are going to set up more and more protectionist legislation for our economies, then we might as well fire all of the World Trade Organization, the International Monetary Fund and also get rid of any Central Banks and at the same time revert to bargaining as a form of payment. There, problems of the world solved. Isolation and protectionism. Will probably lead to more wars in the world, but that hardly matters right now as the USA and France prepare to launch World War III and IV at the same time. But, on second thoughts getting rid of all of those costly organizations might not be a bad idea after all.

The focus today is not so much on tariff and export subsidies. That is far too obvious today. The majority of protectionism takes place today through insidious administrative paperwork that has encroached on trade or on new regulations and stringent application of regulations. In the last year alone there have been 154 trade restrictions that have been introduced in the world. If we go back to 2008 and the early stages of the financial crisis, then there have been a total of over 700 since then. How many regulations or restrictions have been done away with over the same time period? Everybody does the newspeak and waffle thingy, whereby the politicians spout on about how we need to have closer ties for the benefit of everybody, and yet nothing happens, just whistling into the wind, isn’t it?

The countries that have introduced the most restrictions are Brazil, followed by the Ukraine and Russia as well as Argentina.

China

Just a few weeks ago China announced that it hoped to be able to open up further to foreign investment and abolish or at least temporarily suspend laws that controlled investment in free trade zones. The State Council will debate the possibility of changing laws controlling joint-ventures that are agreed upon between Chinese and foreign companies. Foreign direct investment in the PRC stood at $38.3 billion in the first quarter this year, which was an increase of 1.2% on the figure for last year.

Introducing barriers to trade and new regulations can only be detrimental to recovery of the economies of the world. Either we stop trading entirely and return to a self-sufficient lifestyle, or we cut the restrictions and trade more. The words are out of sync with the actions right now. But, newspeak has always been tiresome. The trade talks between the EU and the USA are already tense with the spying scandal of the National Security Agency and restrictions that will be exceptions to any agreements (protection of the film industry, for example).

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tothetick

Professional team of writers/analysts analyzing the financial markets.

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2 Comments

  • tom kauser

    Reply Reply September 8, 2013

    These same luncheoneers will be happy talking about productivity until the cows come home. The only organic growth these leaders agree on is happiness by the dashboard light? Printer light! Could you see our leaders if Fed was tightening instead of trimming? Which raises two points; if banks cant make money with this yield curve than when will they? Growth against back drop of abnormally low long rates means higher short rates and long talks about productivity over drinks? Rates back up 150bps central banking calmer than calm and mortgages get hammered and with it growth? Why would fed want anyone let alone everyone doing better? Technocrates turn stomachs and cant be bothered to feed them unless its boot leather Italian always?

  • tom kauser

    Reply Reply September 8, 2013

    The world economy is like a ship in a bottle! The bottle is old and cracking yet the ship inside is brand new and has value. Focusing on breaking glass is all the rage and has a purpose of keeping you off the boat? There might also be productivity and cash rewards from freeing bottled up capital? And getting paid for pain?

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