Trading places

Superpowers reclassify trade from end to means

Globalisation lost some of its lustre with the financial crisis. Before the 2008 banking debacle, leaders from Washington to Beijing mostly believed more trade meant greater overall prosperity, even if some people lost out. That made trade liberalisation a goal in itself. But the enthusiasm has faded, and governments are increasingly treating trade as a political lever.

The latest examples are the sanctions against and by Russia. In response to the events in Ukraine, the United States and European Union limited exports to the country. Now Russian President Vladimir Putin has banned some imports. Such retaliatory restrictions are for sure far less dangerous than warfare. But even if these work in this case, this sort of tit-for-tat can soon become a noxious habit.

The crisis created grave doubts about the benefits of free movement in one commodity, namely money, and gave ammunition to anyone already wary of pure market forces. Chinese officials even gloated along those lines.

Now Beijing seems to be taking trade nationalism to a new level, with attacks on the Chinese businesses of Western companies including the likes of IBM and Oracle, and perhaps even well established joint-venturers like Audi. Whether the goal is to boost domestic companies, to increase political control or to keep foreigners out, the protectionist effect is similar.

Meanwhile, India helped scupper an already tottering World Trade Organization deal at the end of July, underlining how little momentum the free-trade bandwagon has these days.

There are even signs of a different kind of frustration from the erstwhile champions of most kinds of cross-border openness in Washington, DC. The noise lately relates to where companies are domiciled and pay taxes, but it's another instance in which throwing up barriers at national borders turns out to make a difference - this time to government revenue.

Hot money flows during the crisis undermined the case for unfettered capital transfers. With immigration again hotly debated in Europe, the United States and elsewhere, there's little appetite for the free movement of labour, either.

The economic case for encouraging the exchange of goods and services is still strong. For now, though, the world's superpowers seem to have reclassified trade from an end to a means.