Talk of trade tariffs is threatening the prospects of global growth. Businesses need to speak up about the benefits of removing barriers, says Ian Guider
This article was first published in the September 2019 Ireland edition of Accounting and Business magazine.
It’s sometimes hard to imagine that in 2019 we’re discussing the impact of global trade wars; this was something last relevant 100 years ago, so we thought. Beyond technology, what has spurred the global economy over the last three decades has been the lowering of trade barriers and the acceptance that free trade lifts all.
We continue to see the barriers being broken down – such as the agreement between the European Union and Mercosur, South America’s largest trade bloc comprising Argentina, Brazil, Paraguay and Uruguay. Yet we also face risks from the US imposing further tariffs against Europe. You know it’s serious when the Americans threaten parma ham, champagne and Scotch!
One Dublin-based senior tax adviser told me recently of a surge over the past 18 months of clients seeking assistance not only with Brexit but with the threat posed by potential trade wars. Those tomes about customs duties and tariffs are being dusted off.
Where do businesses stand? Earlier this year, the US threatened to impose tariffs on Mexico. Around the same time, I talked to the CFO of a major Irish dairy exporter who had businesses in the US that sell around the world. If the US went ahead with the sanctions, it would have hit sales to Mexico hard.
So why do companies keep quiet? The answer came back that they felt they had little power on their own. It’s remarkable that senior executives of multi-billion euro companies feel compelled to not voice their concerns.
I used one of these columns last year to say how the 2008 global financial crisis still lingers in the memory far too much. At a political level, some believe that globalisation exacerbated its effects: that somehow breaking down barriers has led to the West suffering more than it should. They believe that the terms on which trade is conducted need to shift back in favour of the larger countries.
Perhaps we’re not doing the best we can to sell the benefits of global free trade. Back to the Mercosur agreement as an example. When the agreement was announced, it faced plenty of criticism domestically from Irish beef farmers. Forgotten in all of that was the potential for Irish companies to sell services to the huge and largely untapped South American economy. South America, through Mercosur, represents a new opportunity that should be welcome, particularly in light of other dangers on the doorstep.
What is needed is a greater collective effort by businesses to explain the dangers of attempting to undo the gains of opening up the world to free trade – not just the economic advantages, but the benefits of lifting living standards and easing political tensions.
We need to step up the effort to reinforce that view now more than ever. Protectionism is anachronistic to all of us. Throughout the 1980s and 90s there were a great many economists who forecast the benefits that would come from freeing up global trade. Who will take their place now when it has never been more important?
Ian Guider is markets editor of The Sunday Business Post.
"What is needed is a greater collective effort to explain the dangers of attempting to undo the gains of free trade"