Jeremy Warner: Do as we say, not as we do when it comes to protectionism

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The Independent Online

Outlook: So much in public policy right now is virgin territory that it is reasonable to forgive the politicians the odd mixed message. Even so, it is impossible to ignore thecontradictions at the heart of the Government's lecturing on thedangers of protectionism.

On the one hand, ministers warn of the threat to trade and capital flows posed by the present rush towards what the Prime Minister Gordon Brown calls "deglobalisation", where nations retreat in on themselves. On the other hand, they seem unashamedly to be practising it in their own backyard.

In a week when there were strikes in protest against the use of foreign workers, ministers have been valiantly holding the free trade, open-borders banner aloft here in Davos. It would be the worst possible outcome, warned Peter Mandelson, the Business Secretary, if the economic crisis ended in creeping trade and financial protectionism, especially for Britain, which relies for its prosperity on its international dimension and appeal.

Yet he already sensed a "creeping" protectionism of import controls, bungs and subsidy, and a potential unravelling of everything that had been achieved in the European single market. The "buy American" aspects of the Obama fiscal stimulus, which threatens to exclude foreign firms from infrastructure spending, is "un-welcome, undesirable, and unnecessary". I think we can all agree.

Perhaps inevitably, the practice is a little bit different. British banks are being encouraged to engage in the same "deglobalisation" that Messrs Brown and Mandelson complain of; with credit in short supply the world over, British banks that are now nationally controlled are being forced to reserve whatever lending capacity they have for British borrowers at the expense of foreign ones.

What else do you call a 30 per cent devaluation of sterling, deliberately encouraged by the British authorities as a way of making British business more competitive, other thananother form of beggar-thy-neighbour grab for market share?

If this had happened between France and Germany, there would already be border controls in place. It is only because for the time being it badly affects only a comparatively tiny part of the eurozone economy – Ireland – that we haven't heard more complaint about it. But we certainly will as the recession bites everharder and the battle for shrunken markets grows ever more intense.

Lord Mandelson is right. It would be a disaster for Europe and the world if the crisis caused the hard-won gains of free trade and global capital flows to unravel. Yet the message needs to more consistent. Sadly, it is in the way of economic disaster that in the struggle for survival, self interest takes precedent.

Even Lord Mandelson, apragmatist whose return to government is being warmly welcomed by British business leaders here, is bound to be caught up by it. It surely can't be long before he's launching his own "buy British" campaign. Where will open borders be then?

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