Wed, 24 Jun 2009
Indonesia's industry minister proposed earlier this year that the country's civil servants - all 4m of them - should buy and wear only locally made shoes.

In the end this policy - a response to the global economic crisis - was opposed by others in the government. The trade minister said it would be a blatant violation of World Trade Organisation regulations and lead to protectionist retaliation from partners.

Similar tussles are playing out within governments across the region as they grapple with their protectionist instincts amid a pronounced slump in trade.

China and the Australian state of New South Wales have introduced "buy local" government procurement policies, while India and China have raised tax rebates for exporters.

India has restricted imports of Chinese toys, Indonesia has limited the points of entry for certain imports and Malaysia has banned the hiring of foreign workers in factories, stores and restaurants to protect its citizens from unemployment.

The South Korean government said yesterday it planned to roughly double import tariffs on raw materials including wheat, flour and liquefied natural gas from next month, despite having recently advocated to the Group of 20 a "name and shame list" for countries instituting new tariffs.

According to the World Bank, there has been a clear disconnect between the words and actions of countries throughout the region - and the world - since the G20 leaders signed a pledge last November to avoid protectionism.

But despite the growing list of measures being introduced, most analysts agree the region has remained relatively open to trade, even as exports for big Asian economies have plummeted 20-40 per cent in the first five months of the year against the 2008 period.

Most Asian governments, like those in the west, believe the key lesson from the Great Depression of the 1930s is that raising trade barriers will prompt retaliatory measures and exacerbate the recession.

Protectionist impulses are also being curbed by powerful export lobbies as well as by the fact that complicated global supply chains mean many imports are components needed to produce goods for export.

On balance, since the economic crisis began the most overtly protectionist Asian governments have, for obvious reasons, been those in the least export-reliant leading economies - primarily India and Indonesia.

New Delhi is particularly concerned about surging imports from China, at a time when Indian companies such as Suzlon feel they have been unfairly cut out of government procurement projects related to China's $585bn (420bn, 360bn) infrastructure-heavy economic stimulus package.

Since the start of the year, India has instituted a number of anti-dumping investigations against Chinese goods and introduced various safety standard requirements that slow the flow of cheap Chinese imports.

There have been almost no new restrictions on trade from Taiwan or Japan, where in the 1980s the government almost gave in to Japanese ski manufacturers who wanted a ban imposed on imports of European ski equipment because of the "uniqueness" of Japanese snow.

But virtually every government in the region has raised concerns about protectionism in western countries, particularly the US, where the proposal of the "Buy American" policy has done more to boost protectionist Asian voices than anything else.

Additional reporting by Amy Kazmin in New Delhi, Christian Oliver and Jung-a Song in Seoul, Elizabeth Fry in Sydney, John Aglionby in Jakarta, Mure Dickie in Tokyo and Serena Tarling in London




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