Protectionism is to stay?

The world is inexorably marching towards the era of integrated world after a glimpse of protectionism. The recent trade deal of China-EU and also, that of EU-UK is a case in point. The pre- COVID era witnessed the higher protectionist measures which still has its remnants in the global world, but the scenario is modifying itself into more integrated world in the midst of the COVID crisis. The post-COVID would make the world more integrated, thereby, bringing back the global economics, in line with the core principle of economics i.e., the principle of comparative advantage by David Ricardo. No country or nation is and will be absolute in every sense, thereby, necessitating the indispensability of every nation for every other nation.

The global world has been working as an ‘economic organism’, where each geographical location stands out as an indispensable part of the organism. In this scenario, the protectionist measures (even if it is politically motivated) will be transient in nature. None of the nation is complete in itself in all, or even most of the inputs for the product in the process of production process. The supply and the demand should never be mismatched in this ‘organism’. In case of any mismanagement in the supply and demand, the economy of the world will bound to collapse, like a pack of cards.

There is huge trade deficit among the different nations. The US goods trade deficit with China stands at $ 345.6 billion whereas, the India- China trade deficit (in fiscal year 2019-20) stands at around $48.64 billion. In both these cases, the China is at the advantage. This is due to the reason that China is the manufacturing hub of the world.

This put the “theory of comparative advantage” lopsided, which, thereby, results in the deleterious impacts of the same. There is no doubt, that that the world is interdependent and working as an “economic organism” entity, but the economic organism is not like the Leonardo’s “Vitruvian man” rather the organism is crippled and deformed. Therefore, the global organisations focus should be upon the pursuing of the “Vitruvian man”.

The protectionist measures will keep surfacing in the future, as the global economy is very much closely intertwined or interconnected with the global geopolitics and the two will never aloof from each other. Therefore, effort should be made to keep the two, at some distance from each other , so that the ideas of David Ricardo unleash themselves.

About the author

vipal

My name is Vipal Bhagat, going to be doctorate in applied economics. My aim is to analyse and interpret the current economic happenings around us, according to the core and basic principles of economics.

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