Russia’s war in Ukraine has lent a new dimension to protectionism as governments in both countries and further afield desperately try to secure food and other commodities for their citizens in the midst of shortages and ballooning prices and put in place new barriers to stop exports. Though the measures are often well-intended, the current wave of protectionism will arguably compound the problems that the governments are trying to mitigate. While Ukraine has limited the export of sunflower oil, wheat, oats and cattle in an effort to protect its war-torn economy, Russia has banned the sale of fertilizer, sugar and grain to other countries. Indonesia has halted the shipment of palm oil.
More drastic has been Turkey’s decision to stop the export of butter, beef, lamb, goats, meat and vegetables. Export controls have rendered grain, oils, meat and fertilizer ~ already at record prices ~ more expensive and still more hard to find. On the net, the world’s poor are spending an ever-larger share of their income on food.
This has exacerbated the risk of social unrest in poorer countries ~ Yemen is but one example ~ struggling with food insecurity. The process, which has been referred to as the “cascade of new trade barriers”, comes as the war in Ukraine and the sanctions imposed by the West on Russia have exerted a strain on supply chains that were already in disarray because of the pandemic. Russia is the world’s biggest exporter of wheat, pig iron, nickel and natural gas, and a major supplier of coal, crude oil and fertilizer. On another remove, Ukraine is the world’s largest exporter of sunflower, and a major exporter of wheat, pig iron, maize and barley.
With several countries facing severe threats to supplies of basic goods, some governments have abjured the language of open markets, and are advocating a more protective approach. The recommendations envisage the creation of supply chains for certain commodities in friendly countries.
The other suggestion is to block exports and attempt what they call the “reshoring” of foreign factories, and bringing operations back to their home countries. According to the US Treasury Secretary, Janet L. Yellen, the pandemic and the war had revealed that American supply chains, however efficient, were neither secure nor resilient. But she has cautioned against a “fully protectionist direction”; she has instead suggested that the United States should reorient its trade relationships towards a large group of “trusted partners”, even if it meant somewhat higher costs for businesses and consumers.
The Director-General of the World Trade Organisation, Ngozi Okonjo-Iweala, said the war had “justifiably added to questions about economic interdependence.” But she urged countries not to draw the wrong conclusions about the global trading system; the system had helped global growth and provided countries with important goods even during the pandemic. Perhaps in the midst of the turmoil, a balance needs to be effected.