Multinational Firms and New Protectionisms

Claudia Buch and Joern Kleinert ()

No 33, IAW Discussion Papers from Institut für Angewandte Wirtschaftsforschung (IAW)

Abstract: Recent initiatives to hold back cross-border mergers and acquisitions for ‘strategic’ reasons have made headline news. We discuss whether the initiatives may mark the start of a new protectionist era. We argue that standard globalization indicators show no such signs. However, an increasing divergence of incomes and increased insecurity might raise resistance against the globalization process. We discuss the benefits of globalization benefits in terms of lower prices for consumers, a greater variety of available products, lower risks, and higher economic growth. But we also outline the risks in terms of greater inequalities and greater need for flexibility. Protectionism is a double-edged sword. Many historic episodes show that the return to protectionism did significantly more harm in terms of reduced growth than generating benefits in terms of greater stability and smaller income differentials.

Pages: 31 pages
Date: 2007-07
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