The Irony of International Trade

I find the present international trade situation to be quite ironic.

Not too long ago, the US promoted globalization.  I recall reading a book on this subject, written by Thomas Friedman.  Of course, globalization implies world trade, and requires removal of tariff barriers to trade.  In the era of globalization, the US exported products to other countries.  Some people protested against globalization at that time.  Some other countries also opposed it.  They saw it as Americanization, or wanted to protect their local industries.

It’s been quite a turnaround since then.  Now, the US wants to protect its own industries.  It imposes tariffs for that purpose.  Other countries now want removal of the tariffs to promote international trade.  Now they want globalization, whereas the US wants to prevent it.

As often happens, they are both right to some degree.  Globalization does bring some benefits to both sides.  Competition between companies in different countries does introduce efficiency to the industry, and does lead to lower prices.  Of course, some countries only want to export products to other countries.  They can’t do that.  True participation in globalization requires imports too.  In some cases, local industries may be superior to imports from other countries.  The cost of getting the product to market may be lower for local industries, for example, just because of the distance involved.  There may also be cultural or health reasons that governments invoke to prevent imports from other countries.  It is necessary to find the right balance between globalization and local industry for world trade to succeed for the benefit of all.

 

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