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November 15, 2008

PPP: Possible Protectionist Policies?

The recent economic and financial crisis points to the demise and downfall of two of America's longest and most profitable companies: GM and Ford (Reuters-GM and Ford Losses). In normal market conditions, these companies would fail and the share of the market would be taken by a more competitive and more efficiently run company. Yet seeing recent developments in the Congress-fueled bail-out, we may see Ford and GM survive this recession (but barely).

It seems awfully ironic that the United States government is backing a bill that is clearly in line with protectionist policies, something which they have rallied against since the post-Great Depression era. Implementing this bail-out to support financial firms, insurance companies and possibly car companies is entirely contradictory to the pure capitalist mentality that the US is known for. It would have been unimaginable merely two years ago that the government would intervene so drastically in the financial and subsidiary markets to somehow revive our failing economy. And although many Americans feel that this is necessary, others (mainly around the world) are distressed and outraged that America could somehow ignore or throw away its own free trade beliefs in the face of a short-term recession.

More specifically, European automakers are decrying the US Congress' plan to inject $25 Billion of liquid cash into GM and Ford. (Autoblog - EU Government displeased at US's planned bailout of GM and Ford) Seeing as GM and Ford both operate in Europe, the EU Government has threatened to report the US to the World Trade Organization (WTO) if it finds the bailout goes against their free trade agreement. They feel that such a bailout would subsidize the US automakers against other European car companies in the European automotive market.

EU Commission President: Jose Manuel Barroso speaking against the bailout.

Posted by curag at November 15, 2008 07:05 PM


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