Economic crisis brings public works programs, which are often slated as protectionist. A public works program (albeit not a “shovel-ready” one) that might seem to be exempt from this criticism is the proposed low-altitude (i.e., all-weather) rail link between Argentina and Chile, subject of a recent a memorandum of understanding between the two governments (h/t Tyler Bridges, McClatchy). And it is certainly true that such a link would facilitate Chilean trade across the Atlantic and Argentinian trade across the Pacific. The more important consequence, however, would be to facilitate regional integration within South America. In keeping with the Pacific-facing orientation imposed by the Andes, Chile is an associate (i.e., peripheral) member of Mercosur; Argentina is a full member, along with Brazil, Paraguay, and Uruguay. The new rail link would bring Chile closer to the fold.
Those worrying about protectionist responses to the crisis most often invoke the example of rising tariffs in the early 1930s. A better parallel would be the end the tariff barriers that went up around the world in the 1870s and 1880s. Those new barriers ended what had been a sort of golden age of free trade, especially within Europe. And yet, the states that built new fences after 1870 were far different from those that had torn them down ca. 1850. Continue reading