In a time of recession, as economic growth stalls and unemployment rises, the safety and security of workers becomes preeminent. Indeed a kind of economic nationalism develops quickly as the public demands that all government interventions are targeted to favor domestic workers and businesses.
Hence, the new US government introduced “Buy American” provisions in its fiscal stimulus package, it is reluctant to push forward the free trade agreements with Colombia, Panama and South Korea, it reignited a feud with Mexico about trucking privileges under the NAFTA and now it has suggested the need to put tariffs in place to prevent outsourcing by high carbon using industries if a cap-and-trade environmental plan is put into place.
The demands for protection are high and rising. It will take tremendous political efforts to ward off these temptations. On a positive note I learned last week of Mexico’s efforts to lower protection. Although, the news of last week focused on Mexico’s retaliatory tariffs against new US restrictions on trucking, a less well known story from late last year shows that Mexico announced a gradual lowering of their MFN tariffs over the next few years. Although this action does not affect the US, since trade is mostly free between the countries due to NAFTA, it does represent a positive commitment to continue the push for market opening opportunities in the midst of a very difficult political climate.