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Insights

February 28, 2019

International business – Are we experiencing a new wave of international protectionism?

If the answer to the question posed is ‘yes’, how damaging could it be for trading organisations and ultimately economies? And what should companies be doing about it to future-proof themselves?

We believe that there are examples of protectionism evident around the world at the current time. ‘Born global’ organisations, and those seeking to establish or increase their international business will need to grow and/or develop their international commercial strategies in an innovative and fresh way to meet these challenges and achieve success.

The issues

It is clear we are in challenging political, economic and social times. Trade relations between the major world economies are in the spotlight arguably more than ever before. Key issues include the UK seeking to find a way to have a new trade relationship with EU countries post Brexit, and the US escalating its tariffs on Chinese and other markets goods.

There are, of course, at least two sides to the coin. There are those who will passionately argue the need for an economy based on free trade. And there will be those who favour protectionism, whether to a greater or lesser extent. For the benefit of this Insight, our definition of protectionism is the economic policy of restricting imports from other countries through methods which could include tariffs on imported goods, import quotas, prevention of foreign investment and a range of other government regulations. One could also consider the practice of developed countries imposing labour or environmental standards and restrictive certification procedures on imports as protectionist too.

Supporters of protectionism would likely claim that policies should create an essential buffer for businesses, employees and producers of imports from overseas competition. And that trade liberalisation can result in unequally distributed losses and gains and cause economic dislocation of workers in import-competing sectors.

Those supporting free trade would likely argue that protectionist policies reduce trade and adversely affect consumers, because of the knock-on effect of raising the cost of imported goods. In addition, there is a potentially negative effect for producers and employees in sectors which export, both in the country implementing the protectionist policy and the countries protected against. Many economists have argued that protectionism has a negative effect on economic growth but also, importantly on economic welfare. While free trade, deregulation and the reduction of trade barriers has a proven, and positive effect on growth.

There is broad consensus among many economists that free trade helps workers in developing countries, even though they are not subject to the stringent health and labour standards of developed countries. This may be in part because the growth in manufacturing and the multiple jobs that the new export opportunity creates, have a ripple effect throughout the economy. This, in turn creates competition among producers, lifting wages and living conditions.

Since the end of World War 11, most First World countries have stated policies which eliminate protectionism through free trade policies enforced by international treaties and organisations such as the World Trade Organisation. That said, some policies have been criticised as protectionist (eg: the Common Agricultural Policy in the EU) and the announcement by US President Donald Trump in January 2017 that the U.S. was abandoning the TPP (Trans-Pacific Partnership) deal, saying, “We’re going to stop the ridiculous trade deals that have taken everybody out of our country and taken companies out of our country, and it’s going to be reversed”.

So, what to do?

Whether countries’ economic policies can be defined as ‘protectionist’ or not, it is clear that there are real and perceived barriers, or at the very least, emerging complications to international business.

Against this backdrop, organisations will require expert support and advice to help them think matters through and navigate the issues. Whether it be partnerships, collaborations, trade, investment, or other potential growth opportunities, support for organisations is much needed.

Here at Deyton Bell we have just launched Deyton Bell Global – a international sister organisation to Deyton Bell Limited. The Deyton Bell team have been active on international issues for many years and have a blue chip track record of delivery – and now Deyton Bell Global takes things to the next level. Deyton Bell Global specialise in global commercial and economic development. We pride ourselves on being a trusted partner for our clients, focused on delivering excellence across a range of services used by public, private and not for profit organisations around the world. Our offer covers commercial, economic and partnership services and is tailored to the needs and objectives of our clients, yielding tangible results.

Our commercial services include initiatives on:

  • Catalysing trade; market analysis; market entry; strategy; supply chain; partnerships

Our focus on partnerships includes:

  • Clusters; networks; collaborations; connectivity; bilateral relationships.

Our economic support capabilities include:

  • Foreign direct investment; export stimulation; business support.

Deyton Bell Global have considerable knowledge, skill and experience on relevant issues and can provide advice and practical support to design, develop and manage initiatives. Please contact us to explore how we might be able to help you and your colleagues consider the issues, the risks and the opportunities associated with protectionism and international trade, and of course, how they can be appropriately addressed.

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