Protectionism vs Globalization

• 15 Dec 2021

For Prelims: Globalization, Protectionism, Atmanirbhar Bharat Initiative

For Mains: Pros and Cons of Globalization, Decline of Globalization, Protectionism in India.

Why in News

The External Affairs Minister of India (EAM), at the recent Global Technology summit, has asserted that the Covid-19 pandemic has brought India’s capabilities and need for more domestic production rather than unchecked globalization.

• He further held that, to foster tech growth, nations must seek more start-ups, supply chains and jobs to be created internally.
• This speech of EAM has sparked a debate between protectionism vs globalization.

Key Points

• Globalization:
  • About: Globalization envisages a borderless world or seeks a world as a global village.
  • Origin of Modern Globalization: What today is referred to as globalization, started with the end of the Cold war and the disintegration of the Soviet Union in 1991.
  • Driving Factors: Globalization was the offshoot of two systems — democracy and capitalism — that emerged victorious at the end of the Cold War.
  • Dimensions of Globalization: It may be attributed to accelerated flow of goods, people, capital, information, and energy across borders, often enabled by technological developments.
  • Manifestation of Globalization: Trade without tariffs, international travel with easy or no visas, capital flows with few impediments, cross-border pipelines and energy grids, and seamless global communication in real-time appeared to be the goals towards which the world was moving.
• Pros of Globalization:
  • Access to Goods and Services: Globalization results in increased trade and standard of living.
    • It heightens competition within the domestic product, capital, and labour markets, as well as among countries adopting different trade and investment strategies.
  • Vehicle of Social Justice: The proponents say globalization represents free trade which promotes global economic growth, creates jobs, makes companies more competitive, and lowers prices for consumers.
  • Increases Cultural Awareness: By reducing cross-border distances, globalization has increased cross-cultural understanding and sharing.
  • Sharing Technology and Values: It also provides poor countries, through infusions of foreign capital and technology, with the chance to develop economically and by spreading prosperity.
• Cons of Globalization:
  • Rise of Global Problems: Globalization has been criticised on account of exacerbating global disparities, spread of international terrorism and cross-border organised crime, and allow for the rapid spread of disease.
  • Backlash of Nationalism: Despite the economic aspect of globalization, it has resulted in National competition, advancement of national ambitions.
  • Moving Towards Cultural Homogeneity: Globalization promotes people's tastes to converge which may lead to more cultural homogeneity.
    • Due to this, there is a danger of losing precious cultural practices and languages.
    • Also, there are threats of cultural invasion of one country over another.

De-Globalisation or Protectionism

• Meaning:
  • Protectionism refers to government policies that restrict international trade to help domestic industries.
  • Tariffs, import quotas, product standards, and subsidies are some of the primary policy tools a government can use in enacting protectionist policies.
• Protectionism in Global Arena:
  • Globalization had already begun to plateau or stagnate since the 2008-09 global financial crisis (GFC).
  • This is reflected in Brexit and US’ America First Policy.
  • Further, trade wars and the halting of WTO talks is another recognition of the retreat of globalization.
  • These trends pave the way for an anti-globalization or protectionism sentiment, which may further amplify due to the spread of the Covid-19 pandemic.
• Protectionism in India:
  • In the past few years, many countries have criticized the Indian economy for becoming protectionist. This can be depicted in the following instances:
    • Not opening up for imports, particularly after the Indian Government failed to agree on terms for a mini trade deal with the US.
    • India walked out of the 15-nation Regional Comprehensive Economic Partnership of Asian countries.
    • The “Aatmanirbhar Bharat (Self-Reliance) initiative”, launched in May 2020, after the beginning of the pandemic, was also perceived internationally as a protectionist move.

Way Forward

• De-bureaucratisation: India needs to put in place such policies that improve its competitiveness, de-bureaucratise some sectors such as agriculture, and make labour laws less complicated.
  • A holistic and easily accessible ecosystem, from the procuring of raw materials to the outlet of finished products, must be made available.
• People-centric policies: The only way to trigger employment is to step-up value addition in the local area. There is a need for such people-centric and sector-specific policies in order to accelerate growth.
• Alternative global alliance: India needs to now move beyond regional alliances and look forward to a cooperative alliance between like-minded countries in terms of trade such as the USA, EU, and Japan, to figure out an alternative to break the hegemony of China in the global supply chain.
• Promote R&D and capacity building: There’s a need to prioritize building capacity and policy framework to become cost-competitive and quality competitive.
• Increasing Production: Enhance domestic Production as well as put thrust to increase exports and promote research to become more independent. India needs to plan now for the next 20 years.

Source: TH