[Inside Chodong] The Reality of Protectionism

After COVID-19, Protectionism Intensifies
Decades-Long Free Trade Order Disappears

"We are not protectionists. We will not close the market, but we will not use French taxpayers' money to revive industries outside Europe." (Emmanuel Macron, President of France)

"The global leadership of the United States, which established the post-war world free trade order, has cultivated peace and prosperity around the world." (President Yoon Suk-yeol)

Political leaders know. Protectionism is bad and free trade is good. At least instinctively, they feel that free trade must be advocated as a political slogan. Until a few years ago, the words and actions of politicians seemed similar. Including ongoing negotiations, South Korea has about thirty free trade agreements (FTAs). Looking at the recent international trade stage, it is hard to dismiss the suspicion that emphasizing free trade is merely rhetoric. While they verbally advocate free trade, their actions seem closer to protectionism; I am sure I am not the only one who thinks this.

In the process of reorganizing the international order after the major wars of the early to mid-20th century, obstructing free trade was considered a sin. Tariffs were lowered or eliminated, and various non-tariff barriers such as quotas restricting import volumes were treated as things that should disappear or be operated only temporarily out of necessity. The phrase "mutually beneficial" free trade clearly reflects this. In this situation, the government's role is to step back in the process of trade between countries and focus on protecting domestic industries harmed by free trade. It is a kind of defender.

Protectionism, once considered unavoidable, gradually expanded its influence and has now become mainstream. Perhaps because it has continued for decades and become customary, leaders still deny it, but it is unmistakably a movement to protect their own countries. Protectionism, once considered shameful, became a value without shame after COVID-19. Borders were closed due to the pandemic, and supply chains were realized to be vulnerable enough to collapse at any time. They may have quietly rejoiced. They wanted to practice protectionism anyway, and now they have found an excuse from outside.

The situation is as it appears. President Biden’s "Buy American" campaign has led to complaints that the previous Trump administration was better. The newly enacted Inflation Reduction Act (IRA), touted as addressing climate change or targeting China, is essentially blatant domestic selfishness.

The green industry law that the French government will soon introduce will change subsidies to favor European-made electric vehicles and batteries. Macron does not hide the fact that the new law competes with the IRA. China’s protectionism has achieved its intended results. The domestic electric vehicle industry, which was actively nurtured early on after concluding that internal combustion engine vehicles had no future, is an example. Until a few years ago, China’s automobile industry was evaluated as domestic-market-centered, but thanks to the rise of local brands, it is now aiming to become the top exporter. Governments, which had focused on defense under the free trade regime, have ridden the wave of protectionism and taken on the role of attackers.

This year marks the 30th anniversary of the Uruguay Round, which announced the launch of the World Trade Organization. Considering the GATT system, which raised the banner of free trade before that, 80 years have passed. Economic powers like China and India, which benefited from protectionism, as well as leading advanced countries, have raised their fences and strengthened their domestic protection policies. Is this a reflection on past mistakes, or a facet of survival of the fittest? Or was free trade never truly good from the start? It leaves us with challenging questions, especially for those of us who live by trade.

This content was produced with the assistance of AI translation services.