Wednesday, October 17, 2012

GLOBAL TRADE: PROTECTIONIST POLICIES

Protectionist policies will save your companies, but only for so long as they don't beg for euthanasia!

Let''s begin with the Chinese state-owned Aluminium Corporation of China''s (Chinalco) attempt to acquire Rio Tinto. Recently, Chinalco announced that it would invest $19.5 billion to acquire an 18% stake in the debt-ridden Tinto. This is clearly with a ''protectionist'' motive to insulate its domestic industry from falling prey to global forces. The deal will also allow Chinalco to enter the UK market, which is largely controlled by Rio Tinto. “The transaction will forge a pioneering strategic partnership through the creation of JV in aluminium, copper, and iron ore,” states a Rio Tinto release. Then there is the Coca-Cola case. The government has flatly disapproved the American''s $2.4 billion bid to acquire Chinese juice company, Huiyuan, as that would grant it a 46% grapple-hold of the Chinese juice market. Hope Lee, Senior Analyst, Euromonitor avers, “Full acquisition means Coca-Cola will penetrate the Chinese juice supply chain deep...”

While ego-satisfaction can justify China''s protectionist policy, it also leads to many disadvantages like stagnation of funds, as Matthew Phillips, Transaction Leader, China states in a PwC Bulletin, “Chinese companies still have money and government support to invest abroad...” Today, we have two; tomorrow there will be more, giving shivers to cross-border advocates... But isn''t the ''American turn'', the only ''right'' turn? We''re confused, but God isn''t! God save America!


Source : IIPM Editorial, 2012.

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