Sunday, 30 October 2011

Piracy Protectionism and Tariff Barriers!

Piracy, Protectionism and Tariff barriers are to Global Trade what credit crunches are to the banking system – both represent critical blows to economic stability and a threat to the UK’s growth prospects.   So the Prime Minister is totally right in relaxing regulations to allow our trading vessels to carry armed protection – as a deterrent and also as justifiable self defence for those on board.    With an increase in piracy our global shipping lanes must be further secured and this is a measure that sends a message to pirates – stay clear of UK flagged ships. 
But piracy is not just isolated to Somalia.  The successful Somali pirates are merely early exponents and others in West Africa and the South East China Sea are seeing unprotected shipping as an opportunity for criminal behaviour.  While armed guards are important we also need a new international agreement on prosecution and detention. 
The British Chamber of Shipping has already assessed that piracy is putting 15% increase in costs of global transport and with a very high % of transport required to travel through “piracy pinch points” and the increase in commodity and energy prices, cost of security is likely to rise even further.  
However it is not just those dastardly pirates that will threaten the global trading system on which we are so dependent.   Protectionism had become very unfashionable until the 2008 food price crisis resulted in several countries placing food export bans in place.  Since then, as we have seen in Russia with an export ban on their grain and recently in Tanzania, countries are cushioning the costs for their domestic consumer at the expense of the liberalised global market.   This is a particular threat to the UK as we import close to 50% of our food, we are dependent on international trade for components for our industries and a liberalised free trade system is essential to the UK’s future growth prospects. 
Liberalised trade is not some distant theoretical concept - every time there is an export ban, any restriction on global trade, any ship hijacked by pirates - we will see food prices in the supermarket rise. 
The Prime Minister has been given the role by the G20 to propose measures for greater global governance in relation to trade and food security.  To build on his announcement on combating piracy we need to develop economic security measures to reduce protectionism and further promote free trade.  Emphasis must be given to the interdependence of global trading, and export bans need to be replaced by regional support programmes such as food storage that will smooth out commodity price shocks.  Within the global trading settlement we need now to accommodate the additional risks of natural disasters as we are seeing with the floods in Thailand and Cambodia that is destroying a whole year’s rice crop. 
Cameron’s task is not easy but as one of the only European countries that does not have to go cap in hand to sovereign funds for a financial favour, he is very well placed to put global trade at the heart of his agenda.  He could not serve this country’s fortunes better than by taking a strong lead in an increasingly fragile global trading environment.

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