1. NS3040 Fall Term 2017 The New Protectionism
Federal Reserve Bank of Chicago, Strong Dollar Weak Dollar

2. New Protectionism I
“New Protectionism Will Hit Business,” Oxford Analytica, December 14, 2012
The emergence of global protectionism
With the world economic slow-down:
the loss of jobs and
the rise of new global competitors
More sophisticated forms of protectionism are emerging
New protectionism moves beyond traditional trade protection
Encompasses various forms of international business activity
Foreign direct investment
Offshore sourcing
Even labor movement
Its geographical scope is broader than that of trade protection
Targets are increasingly businesses form large emerging markets

3. New Protectionism II
Global protectionism rarely based simply on objective economic calculation
Rationale underpinning it is predominantly political and strategic
Seeks to allow countries to benefit from globalization while minimizing exposure to its challenges
Retain control over critical resources
Ensure national security
Manage economic prosperity in an increasingly competitive environment
Maintain national identity seen under threat from globalization
Such aims are encouraging economic nationalism – the use of economic policy instruments to increase national power and unity
Governments are increasingly developing new policy interventions to protect what they define as their national interests.

4. New Protectionism III
Global protectionism used to facilitate not just economic adjustment and adaptation but also to support
Economic patriotism
National security
State led industrial policy
Takes many forms
Calls at the EU level to evaluate foreign direct investment on strategic grounds
Brazil reviewed eligibility criteria for investment in agriculture

5. New Protectionism IV Forms (contd.)
China has developed rules covering foreign acquisitions from a national security perspective
Foreign investment review rules have been amended in countries including Russia, Canada, and Australia to embody national interest concerns
Different Stakeholders
Pressure for traditional trade protectionism cam from adversely affected firms and industries
Demand for global protection – a variety of sources
National leaders
Industry groups
Employees and consumers

6. New Protectionism V
In many cases – focus is on a single firm or deal which in turn triggers broader demands
A key characteristic of global protectionism is its selective view of globalization
Accepts globalization’s best features while
Avoiding the worst
Selectivity can lead to incoherent positions lacking a clear rational for intervention
For businesses – understanding and isolating the determinants of global protectionism is difficult
Main consequence -- it increases the uncertainty for businesses, especially market entry
Major difficult of global protectionism is anticipating its likely incidence, source or form.
With increased uncertainty comes lower world investment and growth.