Article by Stephanos Kotzamanis*
The imposition of tariff restrictions on international trade with China, Turkey, but also with Europe, the United States. Donald Trump ‘s was actually started long before the corona appeared. It was not only the imposition of tariffs, but also a number of other moves (eg exterminating fines on European companies) that showed the annoyance of the United States. for the large imports of foreign products and for the side effects they had caused to the world’s largest economy.
It is true that the countries of Europe also watched with difficulty the transfer of their own production from the Old Continent to countries in the Middle and Far East, but also to Turkey.
Common in the United States and Europe was that the gradual “concession” of processing abroad and the focus on services resulted in the loss of very important incomes for the citizens of the West, the emergence of unemployment, the lowest real wages, the manifestation of political costs for each governments, the frequent escalation of populism and more generally the questioning (often erroneously) of the benefits that the process of free international trade brings to economies and societies.
In this environment, the arrival of the corona may lead to further developments, accelerating the realization of goals that had been achieved in advance. Economic circles even claim that behind the intense political controversy that has erupted between the USA. and China lately regarding the origin and treatment of the covid-19 pandemic are clearly hidden economic expediencies.
But even in more “mild” Europe, discussions have begun over whether it should eventually produce at least certain categories of products within the continent (eg masks and other health products) in order not to depend on China, or even It also produces some of the products so that its supply chain is not in danger of being interrupted, whenever a pandemic or other emergency occurs in Asia.
A second parallel front that could negatively affect and limit the import penetration of Asian products into Europe is the ecological issue. It is true that scientists around the world are sounding the alarm, warning that if in the next decade – starting today – there are no drastic changes in the production process through the introduction of a “green economy”, then the consequences for humanity will be destructive and irreparable.
Europe has already begun to move sharply in this direction with policies to reduce the production footprint, change the fuel mix, etc., while neither China nor others seem to have moved in the same direction. Asian countries (not excluding Turkey). Thus, a tariff on imported products from countries that do not incorporate “green” techniques and procedures into their production could therefore be “put on the table” , so in countries that have reduced production costs because they act on the environment.
In any case, everything shows that after the normalization of the situation by the current pandemic of covid-19, a series of discussions and reflections on the issue of imposing more restrictions on world trade will begin.
On the other hand, Europeans and Americans should be aware that in the long run, some restrictions on international trade will be detrimental if they fail to significantly increase their productivity. Already e.g. In the United States, some imports have become more expensive after the introduction of import duties, without a significant increase in domestic production, with the result that American society is more likely to be harmed than to benefit from the imposition of tariffs.
Especially now for Greece, everyone recognizes the need to increase the participation of manufacturing in the Gross Domestic Product. However, this can not only be based on the introduction of import barriers, but also on the removal of some key incentives that still prevent the attraction of productive investment: high energy costs, high employer contributions, bureaucratic hurdles, delays in the administration of justice, etc. Also, the support of European production cannot buy all the products, but only specific categories and in addition any import barriers should be of a limited extent, of a temporary character, as a rule, “reasonable” and “fair”.
If, on the other hand, the effort to support European (and therefore Greek) production acquires a general character and is based mainly on tariffs, then it is very likely that the losses will outweigh any temporary benefits. In such a case, the Chinese will react with similar measures, with all that this could mean for the currently limited Greek exports to this country.
In addition, the reduction of China-Europe trade will reduce Greece’s benefits from transit trade (see PPA, rail transport, logistics services ). Finally, the deterioration of relations with China could reduce the flow of Chinese tourists, their investment in housing through the “golden visa”, but also very important Chinese investment in Greece in a number of other sectors of the economy.
In other words, it is legitimate for a country (and a continent like Europe in general) to want to increase GDP. to reduce its dependence on its supply chain from Asia, but this should be based mainly on terms of productivity rather than government grants and the introduction of tariff and other import restrictions. Because otherwise, not only will the level of the European economy deteriorate further, but in addition, growth opportunities will be lost through China’s contribution to tourism, transit trade and investment.