We have been following the developments surrounding the "Buy American" policy of the United States with some interest. The return of aggressively nationalistic protectionism to U.S. policy is a very serious affair: the U.S. is presently the world's largest economy, and even as it shrinks it still is a disproportionate slice of the pie, if you will. When the number one economy puts up trade barriers, things will not be pretty.
As could be expected, Canada - as the U.S.'s single largest trading partner - would be the most affected, and quickest to notice. Indeed, notice Canada has: the Federation of Canadian Municipalities recently passed a resolution "to bar bids from companies whose countries impose trade restrictions with Canada." The FCM also voted to refrain from action for 120 days, but this is definitely a return salvo in a burgeoning trade war between Canada and the U.S.
It remains our opinion that integration with Canada is the U.S.'s best hope for economic salvation. If instead the U.S. insists on fomenting a trade war, it will likely only insure a very disastrous economic squabble. Although at present Canada needs the U.S. more than the U.S. needs Canada, a trade war will force Canada to rather more quickly cultivate trade with other nations. This will inevitably leave the U.S. bereft of the assets of its closest neighbour, and merely heir to a gutted industrial base (and collapsed banking industry, and a bankrupt Federal Government, and defaulted State Governments, and a grossly devalued currency, et cetera).
Showing posts with label protectionism. Show all posts
Showing posts with label protectionism. Show all posts
Monday, June 8, 2009
Tuesday, April 28, 2009
An Economic Effect of Mexican Swine Flu
We've been hearing quite a bit about the recent outbreak of swine flu in Mexico over the last few days. According to what we've read so far, only 149 people have died in Mexico, with the forty-odd cases in the United States and Canada proving to be non-lethal. The knee-jerk reactionary nature of the Mexican Federal Government's actions (closing schools, pondering cancelling Cinco de Mayo, et cetera) is amusing to us, but we suppose it is not without good reason.
The last great influenza outbreak, in 1918 was quite a nasty episode, with up to a 50% infection rate and 5% mortality. If the Mexican swine flu does indeed prove even half as potent, a lot of people could become very dead very soon. We frankly don't expect this flu to be anything particularly deadly, as it seems to be already following the common path of viruses: a potently deadly burst at the beginning, with a rapid decay in lethality. This is evidenced by the lack of any fatalities from the flu outside of Mexico... and Mexico is not known for its sanitary qualities.
However, let's suppose that we're - gasp - wrong, and the Mexican flu is indeed the next deadly flu; we'll be reasonable, and further suppose that the Mexican swine flu is as potent as the Spanish flu (i.e. 50% infection rate, 5% mortality rate). Once this flu runs its theoretical course, about 162 million people will be dead world-wide.
This level of mortalities would have a very serious effect on an already-seriously-damaged world economy. Perhaps most immediately, the flu would help to foster the nascent protectionism which is seething just below the surface of international policy (but especially in the case of the United States and Russia). It is, of course, understandable for a nation to close its borders during a medical crisis, but if that were to happen in the near future it would be a very serious blow to international trade.
The last great influenza outbreak, in 1918 was quite a nasty episode, with up to a 50% infection rate and 5% mortality. If the Mexican swine flu does indeed prove even half as potent, a lot of people could become very dead very soon. We frankly don't expect this flu to be anything particularly deadly, as it seems to be already following the common path of viruses: a potently deadly burst at the beginning, with a rapid decay in lethality. This is evidenced by the lack of any fatalities from the flu outside of Mexico... and Mexico is not known for its sanitary qualities.
However, let's suppose that we're - gasp - wrong, and the Mexican flu is indeed the next deadly flu; we'll be reasonable, and further suppose that the Mexican swine flu is as potent as the Spanish flu (i.e. 50% infection rate, 5% mortality rate). Once this flu runs its theoretical course, about 162 million people will be dead world-wide.
This level of mortalities would have a very serious effect on an already-seriously-damaged world economy. Perhaps most immediately, the flu would help to foster the nascent protectionism which is seething just below the surface of international policy (but especially in the case of the United States and Russia). It is, of course, understandable for a nation to close its borders during a medical crisis, but if that were to happen in the near future it would be a very serious blow to international trade.
Sunday, April 19, 2009
Is Globalisation at Risk?
One of our local 'dollar stores' sells some amazingly good pickled, roasted peppers from Turkey. Not only are they quite good, they are also quite inexpensive - costing far less than 'fresh' peppers at the grocery store (presumably grown somewhere on this continent). Although growing sweet peppers is possible in our Northerly latitude, it could hardly be construed as inexpensive when time and effort are taken into account.
Globalisation, has made its way to our heart via our stomach. Nothing in this world is ever unequivocally good, of course, but we think that having some access to the World's goods and culture generally enriches our lives and is a positive. We understand that this process has been everywhere disruptive, as well, but on balance it feels like progress.
Can globalisation fail? Is it an artifact of cheap energy? And if energy always gets more expensive from here on in, will globalisation decline? Our opinion is probably not. The advent of the Internet and peer-to-peer networks will provide opportunities for division of labour and broadening markets even as transportation costs become dearer. Some more localised production and distribution will gradually have a greater cost advantage if it is otherwise competitive, but as transportation is rarely a significant portion of costs, this is not likely to impede globalisation all that much.
Will the Depression kill globalisation? It certainly may set it back through trade financing problems, and through protectionist and autarkic public policies. However, as long as global exchange presents true efficiencies and opportunities for profit, those setbacks are likely to be temporary or geographically limited. If anything, the Depression will likely reinforce globalisation as marginal, less-efficient enterprises wind down.
There was an protest saw from a prior era: "Think globally, act locally." It is actually not bad advice under the current circumstances, though very far from the original intent. What are you doing to be globally competitive? What resources that you find in your immediate environment can you marshall to produce something for a globally-minded market? If you cannot come up with something, you may find the World passes you by.
Much of the Industrial era to date has consisted of efforts to make the Industrial way of life as much like the Agricultural as possible: the company or government as patronly employer for life; the financial investment dividend as reliable as land rent; and the bizarre experiment of Marxist Communism. These efforts have all failed, or are still in process of failing. What is emerging from the rubble is a much more dynamic and creative way of making one's way in the world.
Globalisation is really only at risk if humanity rises up to turn back the clock. Reactionary elements are now, as always, ever at work to stymie developments that threaten their turf. However it is certainly not in the best interest of the majority to embrace a reactionary world-view.
There are some ideas out there posing as progressive, voiced by intelligent people, which are actually reactionary: globalism is unequivocally bad; small towns are unequivocally good; all economy should be within mostly self-sufficient communities, etc. We know it often difficult to imagine a better and truly new tomorrow when trends in place have delivered so much disruption, but that imagining must be done if society is to avoid stagnation and decay.
Globalisation, has made its way to our heart via our stomach. Nothing in this world is ever unequivocally good, of course, but we think that having some access to the World's goods and culture generally enriches our lives and is a positive. We understand that this process has been everywhere disruptive, as well, but on balance it feels like progress.
Can globalisation fail? Is it an artifact of cheap energy? And if energy always gets more expensive from here on in, will globalisation decline? Our opinion is probably not. The advent of the Internet and peer-to-peer networks will provide opportunities for division of labour and broadening markets even as transportation costs become dearer. Some more localised production and distribution will gradually have a greater cost advantage if it is otherwise competitive, but as transportation is rarely a significant portion of costs, this is not likely to impede globalisation all that much.
Will the Depression kill globalisation? It certainly may set it back through trade financing problems, and through protectionist and autarkic public policies. However, as long as global exchange presents true efficiencies and opportunities for profit, those setbacks are likely to be temporary or geographically limited. If anything, the Depression will likely reinforce globalisation as marginal, less-efficient enterprises wind down.
There was an protest saw from a prior era: "Think globally, act locally." It is actually not bad advice under the current circumstances, though very far from the original intent. What are you doing to be globally competitive? What resources that you find in your immediate environment can you marshall to produce something for a globally-minded market? If you cannot come up with something, you may find the World passes you by.
Much of the Industrial era to date has consisted of efforts to make the Industrial way of life as much like the Agricultural as possible: the company or government as patronly employer for life; the financial investment dividend as reliable as land rent; and the bizarre experiment of Marxist Communism. These efforts have all failed, or are still in process of failing. What is emerging from the rubble is a much more dynamic and creative way of making one's way in the world.
Globalisation is really only at risk if humanity rises up to turn back the clock. Reactionary elements are now, as always, ever at work to stymie developments that threaten their turf. However it is certainly not in the best interest of the majority to embrace a reactionary world-view.
There are some ideas out there posing as progressive, voiced by intelligent people, which are actually reactionary: globalism is unequivocally bad; small towns are unequivocally good; all economy should be within mostly self-sufficient communities, etc. We know it often difficult to imagine a better and truly new tomorrow when trends in place have delivered so much disruption, but that imagining must be done if society is to avoid stagnation and decay.
Friday, March 27, 2009
Back-Door Protectionism
An article from the Globe and Mail caught out eye: Ms. Janet Napolitano, Secretary of the Department of Homeland Security, has stated that the U.S./Canadian border will be treated like "a real border," as she put it. “I've never actually spent much time on the Canadian border,” admits the Secretary, adding that she had commissioned a study to help educate her on the - dare we say lengthy? - subject.
This move by the Secretary is an ominous one; as the Globe and Mail put it, this is a "tariff-in-all-but-name." It is a bad precedent to set, as it is effectively an aggressive, protectionistic stance against the United State's far-better-off northern neighbour. Canada has a sounder banking system, and a sounder economy as a whole. The Secretary, in isolating the United States from the valuable asset that is Canada, is doing a very terrible disservice to her employer: the Citizens of the United States.
At the same time, though, we are not surprised by this new policy from the Obama Administration. If the Administration is indeed serious about creating jobs for Americans - any jobs will do - at all costs, then the relative soundness and functionality of Canada no longer seems like an asset for an ailing nation. Instead, Canada begins to look more like a threat. As the 2007 Depression continues, we would not be surprised if more anti-Canada policies, like this border-tightening, continue to appear.
In closing, we wish to repeat what the Globe and Mail observed at the end of the article:
This move by the Secretary is an ominous one; as the Globe and Mail put it, this is a "tariff-in-all-but-name." It is a bad precedent to set, as it is effectively an aggressive, protectionistic stance against the United State's far-better-off northern neighbour. Canada has a sounder banking system, and a sounder economy as a whole. The Secretary, in isolating the United States from the valuable asset that is Canada, is doing a very terrible disservice to her employer: the Citizens of the United States.
At the same time, though, we are not surprised by this new policy from the Obama Administration. If the Administration is indeed serious about creating jobs for Americans - any jobs will do - at all costs, then the relative soundness and functionality of Canada no longer seems like an asset for an ailing nation. Instead, Canada begins to look more like a threat. As the 2007 Depression continues, we would not be surprised if more anti-Canada policies, like this border-tightening, continue to appear.
In closing, we wish to repeat what the Globe and Mail observed at the end of the article:
"It seemed to be another lesson learned: when it comes to national security, the Obama administration's policies are often consonant with its Republican predecessor."
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