Saturday, February 14, 2009

Free trade a fantasy

It's a lovely ideal - one of those grand old stories you tell your grandchildren about in front of the fire, when you sit them down and tell them about the time when we came close to having a free trade deal with America and other nations - when our lamb meat came so close to going into European countries without having costs added on to keep us out.

Aaaah yes...didn't we come so close? Or were we kidding ourselves - high on a fantasy, climbing a peak that crumbles from under our feet and sends us toppling off balance as soon as the first puff of wind comes along?

The recession has world leaders scrambling to protect their constituents in any way they can, hence the resurgence of protectionism. No Government is going to let its people suffer and jeopardise future elections by promising to let more trade in at this critical time.

Time magazine said world leaders have divided loyalties.

"On the one hand they know that international co-ordination is vital if the global economy is to be gotten back on track. On the other hand, they are politically responsible to their domestic constituencies, not international ones. And in tough times, those constituencies do not like their politicians appearing to favour foreigners."

Worryingly, British PM and avid free trade supporter Gordon Brown told the World Economic Forum that financial protectionism was a far more significant problem than trade protectionism at this time - think of all the American money being poured into projects at home with none going out the door to keep the global economy going. It's like an impenetrable fence where no money, and no products can be passed in. They exist by themselves, within themselves and for an isolated country like New Zealand that depends, no survives on outside money that is a serious problem if it spreads, which could make our recession far more painful and ultimately longer than these other countries.

So who is right - us or them?

If you're an American I'm betting you're applauding the decision to shut up shop and move the money domestically rather than globally- and understandably so - but if you are a farmer here in New Zealand it is a far different feeling.

Unfortunately free trade is only ever going to be an ideal we sometimes get a little closer too, but an ideal that falls away as quickly as those scurrilous Wall Street bankers when an economic recession hits.

It is after all in people's natures to protect their own.

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