Global economic integration has enabled enterprises to flourish on scales unimaginable just a generation ago. The re-imposition of barriers would be a huge mistake and should be eschewed. Instead, trade and investment policy should be brought up to speed with 21st century commercial reality. To nurture the promise of our highly integrated global economy, governments should commit to policies that reduce frictions in the flow of goods, services, investment, and human capital. Such policies would make sense under normal circumstances but are even more important during the tough times we face.

That is why “Buy American” and the many other “protectionist” measures introduced in the wake of the financial crisis are counterproductive. As with similar measures introduced in previous recessions, they will deepen and prolong the current crisis. Governments that indulge in such protectionism, restricting the flow of trade, investment, and human capital will find their economies – and opportunities for their citizens – falling behind those countries where policies are more amenable to the realities and opportunities of today’s globalised world economy.

The removal of political and technological barriers to trade over the past two decades has had huge ramifications. In the new globalised economy, a product might be designed by teams in the USA and India, have components produced in Thailand, Poland and Mexico, while final assembly takes place in China, from where it is distributed to millions of consumers around the world. The benefits, equally widespread, include: better, less expensive products, more rewarding and higher paying jobs, and economic growth.
But anti-trade activists (wearing shoes designed in Seattle and made in the Philippines) use cell phones (designed in Finland and made in Taiwan) to upload press releases to the Internet, calling for restrictions on trade. Unions meanwhile call for “British jobs for British workers.” If politicians heed these calls, they not only raise the cost of doing business in their economy, they undermine the whole global production process, driving up the cost of goods and services, depriving us of innovations, and generally undermining the process of development through voluntary exchange.

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