Why local?

Protectionism comes in many guises,but all of them are dangerous. And most dangerous at times such as we live through today: when the pain of a recession appears never-ending,stretching ahead into the dim horizon; when the borders of the average workers mental world shrink because of fear for her family,of worry for her career,and thus she cannot help but feel that someone,somewhere is doing this to her; and when weak-willed political leadership is tempted by the prospect of what appears to be the easy target for populist policy: foreigners,whether foreign workers or foreign companies.

The Obama administrations ideas for a new corporate tax code,unfortunately,fell squarely within that tradition of policy short-sightedness. As an attempt to fulfil his campaign rhetoric about protecting the average job from a non-existent threat from Bangalore,one change was that multinationals based in America will stop being allowed to defer taxes on income earned elsewhere if that income is re-invested in their own overseas subsidiaries. This would,of course,stifle their competitiveness,and wind up hurting precisely those it was meant to protect American workers. A new report from a grouping of high-tech companies in the US came to precisely that conclusion by their numbers,a somewhat more stringent version of the US plan would lead to 2.2 million job losses. That is the cost of populism,inevitably borne by those least able to avoid it.

Then there are the draconian provisions attached to various bailout bills,including in the US,that,when taken with a generally protectionist atmosphere,retard the growth of foreign companies. As this newspaper reported on Wednesday,Indian companies are being forced to respond by hiring more locals from the countries where they do business. But this is no victory. For every local you force a foreign multinational to hire,one of your citizens might well be squeezed out of a job in another jurisdiction; and all it does is raise the costs of doing business. In a day and age in which businesses need every incentive to expand,this is seriously wrongheaded and will hurt employees the most.