April 3, 2006	Monday	Rabi-ul-Awwal 4, 1427

HARVARD historian Niall Ferguson has, in a recent column, made an unusual observation. Globalization, he says, currently faces two kinds of threats: the natural and the man-made.

The most obvious natural threat is a pandemic of avian flu. Its virus is already spreading rapidly from East Asia to Western Europe. A small genetic mutation could greatly facilitate its transmission from birds to humans and among humans.

One may recall that the Spanish influenza pandemic of 1918-19, which killed about 40 million people worldwide, had brought to an end the first wave of globalization, although the outbreak of World War I in 1914 had already caused an immediate breakdown in international trade.

A pandemic of similar magnitude will kill the current wave of globalization. But it is a threat to mankind itself and the possibility of its becoming real is considered quite remote.

The second kind of threat comes from the industrialised West for it might wreck globalization itself. And the possibility of its becoming real is not remote. Symptoms of such a development taking shape are already there.

The West has started creating barriers in the way of advanced Third World countries which intend to equally benefit from the process of globalisation by investing in their part of the world.

But it hurts West’s sense of superiority and aggravates its newly-developed sense of insecurity. The latest display of such a mindset, as also pointed out by Niall Ferguson, is US Congress’s effective move to prevent a UAE company from acquiring facilities in six American ports on the ground that its employees might help Islamist terrorists and that two of the 9/11 hijackers came from this country.

That it was an open insult to a foreign investor of an Arab state, which is a close ally of the US, was conveniently ignored by both Republican and Democrat Senators. That it was an equally serious embarrassment for President Bush, for he had personally supported the contract, was also overlooked by American lawmakers. And his embarrassment turned into a shame when the Dubai Port World decided to pack up and go home rather than contest its case.

The Wall Street Journal noted that Congressmen were too arrogant in their attitude and didn’t care about the fact that the Middle East oil exporting countries hold $121.1 billion in US securities (2004) which gives them a considerable leverage to react in a similar fashion against a US policy that discriminates against investors from the Arab world.

Last year, China was given a similar humiliating treatment when its state-owned oil company tried to buy American oil firm Unocal, the pretext again being security concerns.

And a couple of months back, when Mittal Steel, owned by an Indian, tried to buy Arcelor, a European steel firm, it faced the same disdain that Europe has always shown towards its former colonies.

Now an American Senator, who played an effective role in blocking the UAE port deal, has rushed to Beijing to warn Chinese leaders of what Congress plans to do. Senator Schumer, a sensible Democrat but now a hawkish protectionist, is actually pushing a legislation along with other anti-China legislators, mostly Democrats, that would slap a 27.5 per cent tariff on Chinese imports to the US unless China re-values its currency.

The bill will be easily adopted. But such a display of contempt for China and a resort to protectionism can be a diplomatic disaster for the US. For, even if its currency is re-valued, Chinese goods will still remain cheaper.

Noted writer James Surowiecki recalls, in a recent op-ed piece in The Guardian, that in the late 1980s, nine American congressmen held a press conference on Capitol Hill during which one of them picked up a sledgehammer and smashed a Toshiba radio into tiny pieces. The apparent reason for his anger was Toshiba’s supposed violation of national security rules. But that was not the case.

They were furious over the seemingly inexorable encroachment of the US economy by the Japanese firms. And they were not the only ones. At that time, most Americans were angry over the so- called economic invasion of the US by Japan. The Japanese companies were not only outperforming US firms around the world, they were also buying American assets at a rapid pace, one such landmark being Columbia Pictures.

The US House of Representatives passed the Foreign Ownership Disclosure Act under which foreign investors were required to register with the government. It was an attempt to limit their investments.

The hysteria later subsided when there appeared some cracks in Japanese economy. But, according to Surowiecki, hostility towards foreign investors never disappeared from politics in America and it returned with a vengeance last year.

The blocking of Chinese oil company CNOOC’s acquisition of Unocal in 2005 and DP World’s recent bid to manage US port terminals in Congress is not merely an expression of deep concerns about security as it is made to appear. It, in fact, reflects a growing anxiety about the direction the process of globalisation is taking because American and European entrepreneurs no more find it moving entirely to their benefit. They always took globalisation as a means of unobstructed exploitation of poor countries’ resources and a higher rate of profit which was becoming impossible in their home countries. Now they find Third World countries such as China, India, Malaysia and South Korea growing up fast and sharing the benefits of globalization and much eager to penetrate the economies of the developed world.

What makes the West more uneasy about is the ownership of their companies or facilities by non-West foreigners. Europe is more sensitive to such foreign capital than the US.

What is ironic about the West’s current contempt towards foreign ownership is that not long ago it has been a fervent advocate of globalization and been pushing developing countries hard to open up their markets and has also met with reasonable success in its efforts.

For instance, it has successfully prevailed upon China to remove many of its restrictions on foreign ownership. As a result, western companies have begun acquiring and merging with Chinese firms on a regular basis. The US has also pressured Russia to open up its energy sector to foreign investments.

The problem is that what the West has been proudly preaching to the rest of the world to adopt is becoming too difficult for it to follow at home. That free markets abroad are good for the West, not for the Third World is difficult to say openly, hence the bogey of security concerns. The world is moving towards a direction where the West will no longer be able to call the tune as it once did.

China and India are about to become major global players alongside the US, Europe and Japan and for the first time in recent history the West will no more be the only dominant power. Europe, in particular, is on its way to become much diminished entity.

For globalisation to succeed, the West has no option but to reconcile with the new realities and open its economies to the Third World investors. By refusing to do so, it will simply kill the current wave of globalization.