China has introduced an explicit “Buy Chinese” policy as part of its economic stimulus programme in a move that will amplify tensions with trade partners and increase the likelihood of protectionism around the world.

In an edict released jointly by nine government departments, Beijing said government procurement must use only Chinese products or services unless they were not available within the country or could not be bought on reasonable commercial or legal terms.

Most economists agree China’s economy is starting to recover as a result of its aggressive stimulus package but the country is still struggling with unemployment and fears widespread layoffs could lead to serious social unrest.

“The whole world is dying to see China spread its orders around and save their economies,” said Dong Tao, chief China economist for Credit Suisse. “But what this policy reflects is heightened anxiety about these job pressures and the potential for social unrest.”

We do not need more Protectionism in today´s crisis…

No new wave of protectionism yet…  

To be fair, while protectionist sentiment and pressures are rising, there is so far little hard evidence of a new wave of protectionist measures.  In a recent media interview, WTO Director-General Pascal Lamy noted that “nothing dramatic” had happened in terms of an increase in protectionism since the start of the crisis in the autumn.  Still, there have been some cases of increased protectionism that might mark the beginning of a new trend.   

Some recent examples include increased state aid to particular industries, most notably the domestic auto industry in a large number of countries (e.g., the US, Germany, France, China, Canada, Australia, Sweden, Russia), tariffs on steel products in India, higher tariffs on 940 products in Ecuador, and other protectionist measures in Indonesia, Argentina, Korea and the EU. 

Moreover, in several countries, governments are leaning on banks that have received capital injections or guarantees to lend predominantly to domestic households and companies rather than financing projects abroad.  With the recession deepening and broadening, further defensive action is likely to be taken by many governments. 

But let´s remember what happened before :

For sure not to be re done !!!

Protectionism is the economic policy of restraining trade between nations, through methods such as tariffs on imported goods, restrictive quotas, and a variety of other restrictive government regulations designed to discourage imports, and prevent foreign take-over of local markets and companies.

If we are not able to bring some improvements in the Global Meltdown ASAP, that is what we are going to face very soon.

Whether the governments are democracies, like those of the U.S., Western Europe, India, etc., or authoritarian, like that of China, or “in-betweens,” like Russia, the clamor “for saving local jobs and production will likely push them toward moves that will only heighten the downward spiral.”

That conjures up the images of Smoot-Hawley and all the horrors that odious legislation begot…