Why protectionism is a threat to integration?

28Dec 2017
The Guardian
Why protectionism is a threat to integration?

ONE of the major topics discussed at the recently-concluded G20 Finance Ministers and Central Bank Governors Meeting, held on 17-18 March 2017, in Baden-Baden, Germany, was the resistance to protectionism in the modern world.

Regional economic integration cannot stop individual countries from adopting protectionist policies

Such meetings are typically organised for Finance Ministers and Central Bank Governors from the 20 leading world powers, dubbed as G20), in which Africa is mostly represented by South Africa. However, it was concluded without agreeing on a common position that would have explicitly renewed their long-standing pledge to free trade due to pushback from the USA. The current USA's position is obviously reflective of President Trump's slogan "America First".

Contrariwise, the rest of delegates underlined and committed to press ahead promoting open trade, an outright rejection of protectionism. In particular, the ministers issued a mildly worded statement, saying that countries "are working to strengthen the contribution of trade to their economies." Arguably, committed to multilateral trade systems, including the World Trade Organisation (WTO).

The so-called protectionism policy, known as an old-fashioned model, is gradually creeping into contemporary aspects of regional integration. For example, just last year, the UK held the Brexit referendum which culminated into its impending exit from the European Union (EU). Amazingly enough, both the Houses of Commons and Lords passed the legislation to let Prime Minister Theresa May, put last year's historic referendum vote into action, by triggering Article 50 of the Lisbon Treaty. But uncertainty remains on how May will negotiate for the UK to continue accessing the EU single market, which requires acceptance of all four freedoms that underlie the EU's internal market, namely "freedom of movement of goods, workers, services and capital". So who knows whether the future might not be regrettable?

Also, in the recent Dutch general elections, the heavyweight leader of Freedom Party (PVV), Geert Wilders, who had vowed to pursue the Netherlands' exit from the EU, lost in the elections. Of course, this would have been another boomerang to the future of the EU. Reading between the lines, one of the manifestos of the Freedom Party's leader [Wilders] was protectionism. However, the momentum for exit from the EU hasn't died out. In fact, in the near future, Europe expects to see similar elections to be held in France and Germany respectively, who are seemingly the heavyweights of EU.

What lesson can EAC learn from protectionism? This policy has inherent downside risks. In fact, protectionism is a vice or a bottleneck to the integration process being practicable at continental level. The protectionism policy is the opposite of a common saying that "no man is an island". Human beings or entities do not thrive when isolated from others. On this point, regional integration is the best approach for development and growth of the country's economy. Once regional integration is bolstered, automatically free trade will thrive and consequently lead to prosperity building blocks. For the landlocked countries, notably Rwanda and Uganda, have a host of ideal reasons to be proud of being in a regional economic grouping as opposed to protectionism. In spite of technological improvement across the EAC bloc, Rwanda, Uganda and South Sudan face structural challenges of accessing world markets. As a result, landlocked countries often lag behind their maritime neighbours in overall development and external trade. While the relatively poor performance can be attributed to distance from or to coast. This creates several aspects of dependence on transit neighbours, namely dependence on neighbours' infrastructure, dependence on sound cross-border political relations, dependence on neigbours' peace and security and dependence on neighbours' administrative practices. However, some of these challenges have been significantly minimised by implementation of EAC Treaty as well as its additional Protocols inter alia Customs Union Protocol and Common Market Protocol, plus other bilateral political alliances. All in all, these regional arrangements demonstrate the vital importance of integration as opposed to protectionism.

In the aforesaid G20 Summit, in the context of enhancing cooperation rather than protectionism, the ministers reaffirmed deepening as well as broadening international economic and financial cooperation with African countries to foster sustainable and inclusive growth in line with the African Union's Agenda 2063. It was equally noted that the ministers committed to launching the initiative dubbed "Compact with Africa" aimed at fostering private investment, especially in infrastructure.

They further noted that; "the initiative is demand-driven and respects country-specific circumstances and priorities. The initiative provides modules of good practices and instruments that could be applied in tailor-made investment compacts being implemented through the commitment of multiple stakeholders, such as individual African countries, International Financial Institutions (IFIs) and bilateral partners." The approach to encourage private sector investment has been underscored by World Bank president Jim Yong Kim on his last week's visit to Rwanda. It is quite important to acknowledge that regional integration contributes to enabling environment for the private sector to take advantage of the investment opportunities across the region. At the G20 Summit, Rwanda, Ivory Coast, Morocco, Senegal and Tunisia, among others, were lauded for expressing interest in joining the said "Investment Compacts", that require the partners to develop strong investment climates.

The writer is an international law expert.