WEF 2018: On 'Protectionism', PM Modi Strikes Chord With China

New Delhi, Jan 24: Prime Minister Narendra Modi drew support from unlikely quarters as China expressed solidarity with his views on protectionism. On Modi describing "protectionism as dangerous as terrorism", Beijing's Foreign Ministry spokesperson Hua Chunying said his statements reflect the "trend of the times".

The remarks of PM Modi validate China's position on the issue as it has consistently opposed the anti-globalisation forces, Chunying added.

"It serves the interests of all the countries including developing countries to fight against protectionism and promote globalisation," he was reported as saying.

What is 'protectionism' and how it impacts global economy?

Protectionism, also referred to as 'trade protectionism', is the policy of restricting the access to domestic market for multinational manufacturers and service providers.

- The State plays an enhanced role by ensuring strict regulation. Heavy tariffs and duties are imposed, along with a restrictive quota on imports, among other measures.

- The policy is adopted for safeguarding the interest of local businessmen, traders and workers, as foreign companies using specialisation and state-of-the-art technology could damage their prospects.

- However, there is a general consensus among economists that protectionist policies cast a negative impact on the economy, leading to lacklustre growth. The policy is synonymous with the trade barriers adopted by the erstwhile USSR and the handful of nations still practicing socialism.

What Modi said on protectionism

- PM Modi described protectionism as a global menace which is as dangerous as climate change and terrorism.

- "Many countries are becoming inward focused and globalisation is shrinking and such tendencies can’t be considered lesser risk than terrorism or climate change," Modi said at Davos on Tuesday.

- Protectionism is in direct conflict with the principles of globalisation, Modi added, further stating that "years of progress" made through the policies of economic liberalisation will be reversed.

- The result of protectionist tendencies developing in several parts of the world will lead to a spree of "tariff and non-tariff trade barriers", the prime minister had said.

What Xi Jinping had said at Davos last year

- At the WEF 2017, Jinping made anti-protectionism the core theme of his address. His staunch rhetoric against protectionism came in the backdrop of Donald Trump's election as the US President, primarily on the poll plank of "America First".

- In a veiled criticism of Trump's promise to crackdown on imports to the US -- squarely blaming them for the growing unemployment rate in the nation -- Jinping had said that protectionism would only be detrimental towards the interests of global and domestic economy.

- "Pursuing protectionism is like locking oneself in a dark room," Jinping had said, adding that though such a measure would protect one from "winds and rain", it would block "air and sunshine as well".

- The Chinese premiere had further claimed that although a section of world leaders are turning inward, Beijing is ready to keep its "pandora's box" open.

Which countries have adopted protectionism?

Bolivia, Cuba, Venezuela, Cambodia, Vietnam and Laos are among some of the nations which have continued to maintain strict restrictions while providing access to the domestic markets.

The US under President Trump has emerged as most promising practitioner of protectionism, with the populist leader promising to  "drastically slash down the import of foreign workers and goods".

While a handful of communist nations were not perceived as a threat by the global business elite, Trump's populism sent shockwaves as the US is the biggest stakeholder in the world economy.

After coming to power, Trump pulled out of the Trans Pacific Partnership (TPP), a pact signed among 12 leading economies of the world to promote tariff-free bilateral and multilateral trading.

China and India, two of the largest manufacturers of goods and services, have raised apprehensions over Trump's protectionist approach. The economies of both Beijing and New Delhi have banked on exports over the past two decades to register high-growth rates year-after-year.

(The above story first appeared on LatestLY on Jan 24, 2018 07:37 PM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).