THE SCOURGE OF PROTECTIONISM.

• Author: Smith, Lockwood
• Position: International trade and investment liberalisation - Statistical Data Included - Critical Essay

Lockwood Smith argues the case for trade and investment liberalisation.

At the beginning of May the Wellington newspaper the Dominion headlined `Mayday Clashes turn Violent in Aussie Cities'. It reported that across Australia thousands of anti-globalisation demonstrators had tried to shut down stock exchanges and big corporations. On that same day, this charming group of protestors denounced free trade and globalisation here in Wellington.

Organised over the Internet under the code `M1', these Mayday protests followed a pattern that possibly started with the N30 and became more violent in S11 and S26. These are the codes the direct action network used tO refer to the `Battle for Seattle', the World Economic Forum meeting in Melbourne and the annual meetings of the World Bank and International Monetary Fund in Prague in September last year. In the case of the World Economic Forum meeting in Melbourne, two of our government supporting members of Parliament, Sue Bradford and Nandor Tanczos, saw fit to join the violent efforts to prevent people from going about their perfectly legal business.

In the case of S26, the Evening Post reported in September last year that `black clad demonstrators hurled cobblestones torn from Prague's historic streets and torched police with Molotoff cocktails' as they battled for their anti-globalist cause. It is not always clear exactly what these people are trying to achieve.

I was at the `Battle for Seattle' and saw one young man being interviewed as he was about to smash in a shop window. When asked whether he knew what the World Trade Organisation did, his somewhat brief reply was `Nah, and I don't give a rat's ass'. He then proceeded to smash in that shop window.

Despite that lack of clarity of thought, there is no question that the issues of globalisation and trade and investment liberalisation are creating anxieties in our communities, exacerbated by the now regular violent protests seen on television. You cannot blame people for feeling more unease when so many people seem to feel so passionate and so violently against something.

So what are the facts about trade and investment liberalisation? What are the fears? And what are the costs if the breaking down of protectionist barriers is stopped?

Protective barriers

Economic management between the two world wars of last century was not a high point in our recent history. Faced with economic difficulties, governments sought to protect their industries and workers by putting in place protective barriers. The result was the Great Depression. Following the Second World War leaders were keen to not make the same mistakes again, as they struggled with the difficulties of getting the world economy back on its feet.

In 1947 the General Agreement on Tariffs and Trade was established. Average tariffs stood at 40 per cent. Seven further negotiating rounds saw that average tariff reduced to just 5 per cent by 1994. As Graph 1 indicates, that unleashed an expansion of world merchandise trade. Over the next 50 years that trade grew sixteen-fold, three times more than the increase in total world output (Graph 2). This meant, according to a recent United Nations human development report, that more people were raised out of poverty in those five decades than had been in the previous five centuries of human existence.

[GRAPHS OMITTED]

It is said that in Asia more people have been raised out of poverty in that period than at any other time or place in human history. In a sad contrast, in some African countries with economic policies less friendly to...