Protectionism vs Globalization | 15 Dec 2021

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