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Add Brazil to the unhappy trading nations. It attributes the woes of its manufacturing sector to cheap Chinese imports and dumping by developed countries. "We are not going to just sit by while other countries devalue their currencies to give them a competitive advantage"¦. We don't want to lose our manufacturing sector," announced Brazil's finance minister Guido Mantega. So taxes on foreign cars have been raised, and state-owned Petrobas will direct about 75 percent of its $225 billion capital programme, the world's largest for any corporation, to local suppliers, a buy-local move also being considered by the EU. More important, Brazil is re-introducing currency controls to prevent the value of its real from rising. These are not "protectionist measures," claims Mr. Mantega, they are "defensive measures" in response to "non-competitive mechanisms."
Another developing nation has joined the flight from globalization. "India is not a no-tax country, "¦ not a tax haven, zero-tax or low-tax country," announced finance minister Pranab Mukherjee. His new budget proposes a tax on some international mergers, retroactive to 1962. Of the foreign companies that have bought assets in India, Vodaphone is the most at risk, liable for $2.2 billion in taxes on its purchase of Indian wireless operations. Mr. Mukherjee denies this will have an adverse effect on much-needed direct foreign investment.
Then there is the problem of China's restrictions on the export of minerals, including rare earths essential to the manufacture of high-tech goods such as hybrid cars, iPads, and missiles. The EU and Japan have joined our complaint to the World Trade Organisation; China claims its export restrictions are aimed at protecting the environment rather than distorting trade.
Whether all of this represents a fraying around the edges of the trading regime that has accompanied globalization, or the beginning of a return to autarky is difficult to say. But we can say that the constituency for free trade, always dispersed and less noisy than advocates of protectionist measures, is in retreat.
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