Protectionism Watch: East vs. West

Alex Evans, writing at Global Dashboard, flags the declines in net private capital flows to emerging markets as a form of hidden protectionism:

These are precipitous declines — and the reason that theyconstitute protectionism is because developed country policymakers havebeen putting pressure on their banks to curtail to poorer countries,which are seen as riskier investments.

Meanwhile, Le Monde flags the rising “Buy Chinese” sentiment in China, as domestic firms vie with foreign competitors for economic stimulus contracts:

At the same time that foreign groups counted on the significant infrastructure spending anticipated in the government’s stimulus plan, a dozen state agencies and Chinese ministries published a joint communiqué in early June, calling for preferences for “Chinese products in governmental investment spending, except for technologies, goods and services that can not be obtained under reasonable commercial conditions in China.”

This exhortation to “buy Chinese” responds to “rising protests” on the part of national firms and professional associations “in the face of the numerous, juicy contracts accorded to foreign firms,” according to China Daily, which approved of Beijing’s “favorable response.” (Translated from the French.)

Accroding to Le Monde, China’s WTO negotiations on public sector contracts have not yet been finalized, so they are essentially still “closed,” and legally so.

Meanwhile, my admittedly layman’s take on the global economy is that we’ve essentially treated it the way a team trainer treats a star player: shot it full of cortisone and hustled it back on the field. That’s good for getting through the game at hand, but does nothing to address the fundamental injury.

I understand the dangers of protectionism to the globalized system as it stands. But that system doesn’t strike me as particularly sustainable. So I’d be interested in hearing from folks with more expertise on this subject, in particular, with regard to the following questions:

Since there’s a lot of cash in the hands of governments of emerging economies that has gone to financing Western debt, couldn’t the first instance of “hidden” protectionism cited by Evans create opportunities for more stable and productive long-term investment patterns (i.e. emerging-to-emerging)?

And since a lot of the imbalance in global trade has to do with the lack of domestic consumption in emerging markets, couldn’t protectionism help to re-localize those economies in a way that could prove salutary in the long run?

Registered users can sound off in the Discussion comments. Or else shoot me an e-mail explaining why I should leave economic analysis to the economists.