Proponents of isolation never become victors
Multilateralism in the political and economic space has always led to frameworks that favor the mighty. WTO was no exception. With agriculture kept out of its purview, it could never become a truly fair and free trading system. China was the only large emerging economy that exploited relative openness in low-cost manufactured goods to take full advantage of the system. Other emerging economies could at best garner minor gains.
Now we see an even more blatant exercise of unilateral authority. The Trump trumpet, anchored on ‘buy American and hire American’ is pretty much equivalent to the declaration of an ‘economic war’. It is uncertain what types of battles the US will initiate, but it is certain that many countries, particularly China and Mexico, will retaliate in a way that will hurt not only the US, but, through collateral damage, others as well—including themselves. History provides several testimonies to show that the initiators of political or economic aggression or even the proponents of political and economic isolation never become victors.
The concurrent impact of technology (machines replacing humans), plateauing of global demand in many industry segments, forced migrations, unrelenting inequality, and tangible vacuum of responsible global leadership—all these factors are contributing to making a bad situation worse, much worse. The persistent problems of global joblessness and continuation of unwarranted corporate incentives and tax havens can only be dealt with, with the help of a united and collective action, not by building walls and fences.
But this is another cyclic wave the world has to live with, till as long as it may take to reverse the process again.
In such a scenario, large emerging economies like India have the good fortune of activating the enormous consumer demand that lies untapped. Industries that can exploit and cater to this massive potential will emerge unscathed.
Equally significant is the new phenomenon of a new ‘bottom of the pyramid’ that is emerging in the developed world—large populations looking for cheaper goods, but not inferior in quality. That provides a large space for Indian companies to apply innovation and productivity, to start exploring this new export market, by replacing Western brands.
This protectionist wave is unlikely to last long— but those who can weather it, will emerge as the new champions in the post-protectionist phase. ■