Tuesday, February 17, 2009

The Dangers of Protectionist Sentiments...

The Associated Press reported:

Measures in a $789 billion U.S. stimulus package that favor American goods are a "poison" that will hurt efforts solve the financial crisis, an editorial by China's official news agency said.

Provisions in the U.S. stimulus bill approved Friday favoring American steel, iron and manufactured goods for government projects are protectionist measures that could trigger trade disputes, said the editorial issued late Saturday by the Xinhua News Agency.

"History and economics have told us, facing a global financial crisis, trade protectionism is not a solution, but a poison to the solution," the editorial said.

Protectionism is a problem that can spiral into outright trade wars. Waves of protectionist policies pervaded the world in the lead-up to World War II. We are not there yet, but protectionism is a popular political subject because of the perceived need to "protect our people" in times of economic hardship. Keep your eyes open on this one...