Sunday, September 13, 2009 0 comments ++[ CLICK TO COMMENT ]++

The left wing & protectionism

I'm left-leaning and kind of an extremist in that I only vote for left-wing parties. The only exception is libertarian parties, which are neither left nor right from the conventional definition (I have only voted once for a libertarian party, the Ontario Libertarian Party. I never voted for them again since I don't like their reliance on Ayn-Rand-type policies; I favour more of the classical liberal philosophies.) I don't vote for any parties on the right because they are socially conservative.

The downside to left-leaning parties is that they are almost always a fan of tariffs—protectionism if you will. The reason is ideological. The left wing favours labour and the best way to protect labour in the short run is to enact tariffs on foreign imports. Of course, these fail in the very long run (15+ years) but this, unfortunately, is overlooked by many on the left.

I have favoured Barack Obama and Democrats in general. I still prefer someone left-leaning like him but I mentioned a long time ago that if he was elected, the risk with his administration is that it will be way more protectionist. I was hoping that the protectionism would be kept to a minimum but we are starting to see the first major protectionist policy by Barack Obama.

On Friday, the US government slapped tariffs on imports of Chinese tires. This is an obscure case and quite minor. However, it remains to be seen if this is the start of further actions.

Today, Bloomberg reports that China is investigating American chicken and auto imports. Will this escalate into more trade battles? It is definitely a big risk to world trade.

It's easy to say that USA shouldn't pursue protectionist policies but the trade imbalance has to be balanced one way or another. As long as China artifically keeps its currency low, I think world trade won't be stable.

The biggest loser from major trade wars will be China and other big exporters. During the 1930's, USA likely suffered far more from the trade battles than the European countries did. Right now China and others are playing the role of USA in the 1920's and 1930's. It shouldn't be surprise that exporters will suffer more from trade wars. After all, importers can manage without some imports (the discretionary items) and can develop its own industries for those items it used to import (it will be more costly and undesirable but that's how I see things.)

(As a side note, right wing parties also enact tariffs. In fact, the Bush administration slapped on significant tarrifs on steel. But the difference in my eyes is that the right-leaning parties don't do it due to their ideological underpinnings. Ignoring special cases like war or massive disease outbreak, I view it as highly unlikely for a tariff spiral to develop if a right wing party was in power. In contrast, I can easily see left-leaning parties pursue a battle of tariffs.)


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