Who Are the Protectionists Now?

The United States and Europe, leaders of the global economy, seem to be going on the defensive.

February 28 2006 by Chief Executive


As the old adage goes, it takes three incidents to create a “trend.” Consider these three items:

  • The U.S. Congress forces the state-owned Chinese oil company, China National Offshore Oil Corp. (CNOOC), to withdraw a bid to buy Unocal. 
  • The U.S. Congress threatens to scuttle the purchase of six U.S. ports by Dubai Ports World, even though there are no U.S. companies involved in operating ports.
  • The French government blocks an Italian company from buying Suez, the power and water group, because of “the strategic importance of energy for France.” Instead, the government engineers an all-French deal.

This trilogy is not totally conclusive by any means because there are some examples to the contrary. But all caveats aside, these incidents suggest that the Americans and Europeans, the nations that created the global economy and have dominated it for many decades, could now be throwing up barriers to the very sort of free and open trade they have long advocated.

 

Suddenly, it seems countries such as China, India and Dubai (part of the United Arab Emirates) are forcing the pace of globalization. China’s Lenovo did manage to buy IBM’s personal computer division and Mittal, run by Indian billionaire Lakshmi Mittal, is attempting a hostile takeover of Europe’s Arcelor steel company for a cool $22 billion. Dubai is making a major push on many fronts to transform itself into a hub of the global economy.

 

So at a time when the Americans in particular are retreating into a nasty, short-sighted kind of protectionism, it seems that the new boys on the block are hungry for richer, more sophisticated forms of economic interaction with the rest of the world. The Chinese economy, although certainly difficult in some respects, is far more open than Japan’s ever was or will be. Entire factories are being disassembled in the U.S. and shipped to China. India also is absorbing massive amounts of Western managerial expertise and technology.

 

Could it be that we’re witnessing an important transition in world power? As wealth builds in China, India and elsewhere, it seems just a question of time before many other assets in the coddled First World will appeal to the newcomers.

 

The overarching question is if Americans believe in globalization, they believe that they can prosper by hitching their wagons to the growth that is occurring around the world. That implies an open economic model. But if they don’t have the courage of their convictions and start shutting borders, they could lose out on many of those opportunities.

 

It seems that a moment of truth is at hand. What do you think? Write me at bholstein@chiefexecutive.net.


Response to: Who Are the Protectionists Now?

Everyone has disregarded the fact that P and O was a foreign company, albeit British. However, a case can be made that there are as many radical Islamic fundamentalists in Britain as there are in Dubai. Americans don’t realize that many U.S. port and airport facilities, terminals and loading docks are already on lease to foreign companies and they operate efficiently and in a secure environment. At the same time, quite a few transportation facilities around the world are being operated or leased by American companies, or American companies are providing the management.

For those that have been to Dubai, another case could be made for the foresight in free trade, the logistic expertise of the government, and the thrust to make Dubai the transit hub of the Middle East. Perhaps that type of modern thinking could be an asset in our port areas.

Recently, ARKIA, Israel’s second largest airline entered in to a code sharing deal with Qatar Airways. This is a product of globalization and if this concept of free and open world trade has any chance working, it should be left in the hands of commercial people with minimal interference from politicians.

Sincerely,

L. Kravitz, President, Paragon Lines, Inc. – a global shipping company


Response to: Who Are the Protectionists Now?

Wow!! I could write an entire treatise on the topic of protectionism!! The average American sees jobs going overseas and blames American companies for taking advantage of low-cost Asian labor. What the average person fails to understand is that this trend is totally unstoppable!!

If American companies don’t move overseas, all of our foreign competitors will, and then they will sell products in the U.S. at prices at least 50% lower then American companies can sell them when using American labor. Do you think Americans will pay twice as much for an American-made product — just because it’s made in America? Not on your life, they won’t!!! So those American companies that don’t move overseas will go bankrupt, the jobs will be lost anyway, and the American economy — the true source of our national wealth — will be undermined by an unending string of bankruptcies in which American shareholders (pension funds, mutual funds and most other investors) will lose everything!!

You would do America a great service if you could get the American rank and file to understand this basic concept, and then teach them that the way out of this dilemma is to make sure that American entrepreneurialism stays at the forefront of technological innovation. Our greatest advanatages in the process of globalization are our willingness to take risks, to bet everything on an idea, to start companies based on those ideas, and to develop new technology faster than anyone else. These are the things that have made America wealthy, and we do this better than anybody else on the planet.

But our present educational system is woefully inadequate to support that kind of position for America. We need to dramatically improve our primary and secondary educational system to the point it properly prepares motivate our young people to participate in this coming global revolution.

Best regards,

Ronald E. Sager, CEO, Quantum Design


Response to: Who Are the Protectionists Now?

I am just an independent consultant who has spent a lot of years in business, but I couldn’t agree with you more.

If we are going to live in a global world, we need to think and behave globally. Messrs. Sager and Kravitz are spot-on with their points.

Our public needs to understand the realities of a global environment and begin to learn it and live with it.

Ed Maier, The Maier Consulting Group LLC


Response to: Who Are the Protectionists Now?

“Do you refuse to differentiate between a foreign government purchasing a privately-owned and operated entity versus a private/public entity doing the same? At what stage does foreign (state-controlled) ownership of the assets of another country permit that entity to control the destiny of the country it occupies? Perhaps the answer is to let these wealthy countries purchase all American assets, French assets, etc., and then nationalize the industries as has been done by many foreign states in the past.”

Sincerely,

Arthur L. Friedman, Professor Nassau Community College


Response to: Who Are the Protectionists Now?

I think your article “Who are the Protectionists Now?” is right on the mark. I believe our politicians and most industrial leaders don’t have any logical and ethical way to otherwise counteract the perceived threat. We seem to have forgotten how to compete with innovation and entrepreneurship. Harry Apkarian

CEO, Transtech Systems, Inc, Schenectady, NY