The C-suite is turning its back on free trade. That's a problem

U.S. trade moves could spark Chinese retaliation
U.S. trade moves could spark Chinese retaliation

Karan Bhatia is the president of government affairs & policy at General Electric and was the Deputy U.S. Trade Representative from 2005 to 2007, overseeing U.S. international trade policy involving Asia and Africa. The opinions in this article are his own.

The recent news that the United States may impose tariffs on steel and aluminum imports is just the latest manifestation of the anti-trade sentiment we have seen from Main Street and from governments around the world. Now, there is evidence that this sentiment is spreading to the C-suite -- historically, the last bastion of free trade.

According to a new GE survey of 2,090 executives across more than 20 countries, 55% of corporate leaders think that restricting imports from other countries would boost their businesses at home. Executives in countries as distinctly different as India, Sweden and the U.S. embraced those views.

Related: Why steel and aluminum tariffs matter to the U.S. economy

The general shift toward protectionist thinking and policies is not shocking. We've seen governments around the world steadily add more trade restrictions since the 2008 global financial crisis, and GE and other companies feel the impacts of this trend every day.

What is new -- and disturbing -- is to see these ideas embraced by so many in the business community.

The siren song of protectionism risks undermining the enormous economic and political progress that the world has witnessed over the last 70 years, as well as the innovation that we all seek to spur growth in the decades ahead.

But there are a number of reasons why executives appear to be tempted by restrictive trade policies. First and foremost is sheer self-interest; nearly all of the executives who identified as pro-protectionist say that adopting these policies "would give domestic businesses a competitive edge."

Others share the view that globalization has left some behind, with almost 75 percent of respondents saying that policies which limit global trade "would be positive for the local workforce." And some of the C-suite sentiment may simply reflect the political rhetoric of the day.

Looking deeper at the data, however, suggests a more complex narrative. We seem to have a situation where many executives support protectionist policies but distrust their governments -- the very institutions that would be charged with creating and implementing these policies.

Related: Steel CEO on tariffs: Thank you, Mr. President

68% of global executives believe that government can't keep up with the pace of innovation, while 69% claim that government regulation is an inhibitor for business.

How does one reconcile the surprisingly high pro-protectionist sentiment with this widespread distrust of government? It may be that executives are frustrated by the fact that some governments have been unable to create an environment that actually allows businesses to compete globally.

Faced with outdated infrastructure, poorly-skilled labor forces, and weak or non-existent export finance, executives may feel that they just can't win abroad -- and so they focus on protecting their home market.

Alternatively, executives may feel that government has failed to deliver a fair and modern international trading system -- one that addresses contemporary commerce, technology and trade distortions. The decades-old system has so many loopholes that executives may feel they are left with no alternative than to opt for protectionism as a defensive mechanism.

Whatever the explanation, this is a wake-up call.

Those in the trade and business community need to take these findings seriously and squarely face into this reality. We must redouble our efforts and demonstrate the economic and political risks that protectionism poses to the world.

Business community, heal thyself!

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