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Ukrainian context of economic protectionism

Author : Tymur Chmeruk

Source : 112 Ukraine

The principle of free trade without the use of special duties and restrictions is an ideal but unattainable model of the global trading system in the face of fierce global competition
23:07, 14 January 2020

Open source

The principle of free trade without the use of special duties and restrictions is an ideal but unattainable model of the global trading system in the face of fierce global competition. Theoretically, free trade provides all countries with equal competitive conditions for the sale on the world market of raw materials and goods at market prices.

In fact, most developed countries have widely used cheap natural or labor resources from their colonies for economic growth and gaining competitive market advantages. With the aim of further economic growth, they expanded their colonial possessions, as a result of which contradictions and conflicts between different countries arose – trade, economic, political and armed, which to one degree or another was present in the 21st century.

Despite special international organization for regulating trade relations, the World Trade Organization (WTO), was created, most countries actively use economic lobbyism.

Thus, governments protect domestic producers and create additional jobs in the labor market. The welfare and prosperity of the state and its citizens largely depends on this.

Related: New trade war: Why Trump introduces duties against France, Brazil and Argentina?

In the modern world, the upholding of national economic interests is an important component of international relations. Weak states in the economic sense are in fact colonial raw material territories for highly developed countries that produce competitive products with a high level of added value.

A striking example of the acute contradictions of the global market is the trade war between the United States and China, the two world largest economies. Since the U.S. trade deficit with China amounted to $ 419.2 billion in 2018, the U.S. government imposed trade duties on imports of Chinese goods.

Despite this, last year, imports of goods from China to the United States grew by another $ 53.3 billion. Chinese manufacturers achieved such results due to the high level of competitiveness of their products in the US market.

Ukraine is a small open economy. This confirms the index of the economic competitiveness of our state. According to the methodology of the World Economic Forum (WEF), last year Ukraine ranked 83rd among 140 countries. This means that 82 countries in the global market have obvious competitive advantages over our economy.

Most countries use economic protectionism to protect their own producers, stimulate the export of their products and create barriers to imports. But not everyone is officially reporting this. Very often, such a policy is carried out in a non-public way. Positive results in various periods were achieved by Japan, South Korea, Turkey, and Canada.

The state of the Ukrainian economy, which is gradually descending to the level of the raw materials appendage for the developed countries, was described by Viktor Halasyuk, president of the Ukrainian Association for the Club of Rome.

Related: Trump promises to end the trade war with China in mid-January

Mr. Halasyuk notes that “trade wars are competition in the global economic arena for improving the “profession of the country.” This is a struggle to change the status quo of a country in the world market ... Each country has its own “profession” or economic specialization. Today the EU is a producer. Ukraine is a raw material donor.

Indeed, 82% of European exports are industrial products, and more than half of Ukrainian exports are raw materials... An Atlas of Economic Complexity was created at Harvard University. It clearly demonstrates that the Ukrainian export basket is 70% filled with agricultural, mineral and industrial raw materials and products with a low level of processing. ”

The expert also outlined the essence of modern global economic processes: “In the case of Ukraine, economic policy is not just about welfare. Not about the income level of Ukrainians, but about the role of Ukraine in the world. A raw material colony, an IMF debtor and an exporter of people, or a manufacturer, innovator, and leader? Economic policy is programming the future!”

A clear understanding of the current political and economic situation in a global context should become the cornerstone of important decisions for the authorities. We should not rely on the fact that the market itself will resolve all contradictions in the face of fierce price competition at the global level, an uncompromising struggle for the markets for raw materials and goods, and systematic trade wars between the world's strongest economies.

Related: China won't hike grain import quotas for U.S. trade deal

Ukraine needs real sovereignty in decision-making and sound economic protectionism. This is the best way for the development of the state in the modern world economic environment.

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