2014-08-05

Protectionism Shifts Into High Gear

The trend towards protectionism that began in the prior decade has not slowed in this decade. Socionomics predicts that protectionism will accompany falling social mood and while the stock market may be at new highs, many signals that cannot be adjusted with money printing show social mood remains in a negative transition.

The latest are the US, EU and Russia trading sanctions. Moscow blocks Polish fruit, veg imports, mulls EU ban

More ominous is the increasing futility of the WTO. It is membership in the WTO that keeps nations from enacting overtly protectionist policies such as broad tariffs and quotas. A failure of the WTO would allow all nations to enact protectionist policies without fear of punishment by the WTO. For many nations, especially trade deficit nations such as the United States and Spain, tariffs would be very beneficial to the economy in the short-run almost no matter how they were constructed, while they could also be beneficial in the long-run if constructed with economic growth in mind. Without fear of punishment, all of the nations that can gain through protectionist measures will defect, and the citizens in other nations will scream for retaliation, even in nations that see a large benefit from trade, such as China.

WTO Dying a Slow Death
What was yesterday’s lifesaver to bring about trade between countries and to bring down the barriers is today’s thorn in the side of the world. The WTO is dying a slow and painful death and has neared the end of its life today. As the global agreement collapses amidst the Indian demand to be able to stockpile food for itself and for countries that are developing around the world, the WTO cannot live much longer. It will be dead within a short while.

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