'Economic nationalism not bad but tariffs not the answer': Panellists at WEF

Economic nationalism has its roots in policy makers ignoring citizens’ quest for stability, and it has even helped countries such as South Korea and China build their economies though resorting to tariffs by the Trump administration to address those issues may be a mistake, panellists at the World Economic Forum (WEF) debating ‘Rise of Economic Nationalism’ said.

The four member panel consisting of the Prime Minister of Netherlands Dick Schoof, German issuer and asset manager Allianz’s CEO Oliver Bate, United Nations (UN) Secretary General for Trade and Development Rebeca Grynspan and Harvard Kennedy School of Government professor Dani Rodrik said that economic nationalism has risen due to some failures of the free trade which cannot be wished away, but trade restrictions are not the solution.

“Economic nationalism has come because we did not recognise the problems like stability and loss of employment or inflation. But the risk is that we are looking at the wrong solution to the right problem. We should not throw the baby with the dirty water,” said Grynspan from the UN. Trade is a big part of the development of small countries and will impact them more than the big countries, she said.


But Rodrik, a professor at Harvard Kennedy School said economic nationalism should not always be construed in a negative way. “For 60 to 70 years South Korea pursued economic nationalism, restricting foreign investment and protecting local businesses. More recently China has benefitted by pursuing economic nationalism. In both these cases, the world profited immensely. Would the world be better off if China was half as rich?” Rodrik said.

Netherlands PM Schoof, a former head of the Dutch intelligence agency and counterterrorism office who leads coalition government led by the anti-immigration party of Geert Wilders said the Dutch have prospered over decades due to their open trade policies but countries now need to be careful to the security threats and need to protect themselves.

“The tariff issues with these two big blocs (US and EU) could lead us way down. We have to work on competitiveness but it is not going to work if there are a lot of tariffs because it is not a sensible thing to do. A big consumer base can mean more competition but in the end it's not going to help,” Schoof said.

Allianz CEO Bate said economic nationalism cannot mean only in terms of trade because it leads to other protectionist measures which have always harmed the global economy.

“For hundreds of years we have repeatedly seen that economic nationalism and beggar thy neighbour approach has never worked. Nationalism is often called a strong emotional reaction but there is an economic cost to it like we in Germany have seen many times in history,” Bate said.