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Increasing Global Competition Could Lead To More Protectionism

by Ulrika Lomas,, Brussels

11 May 2007

The latest set of competitive rankings by the Swiss-based IMD Business School has revealed a shake-up in comparative economic and business power as emerging nations close the competitiveness gap on their more establish economic rivals.

Professor Stéphane Garelli, Director of IMD’s World Competitiveness Center, says that new companies and new brands are appearing all over the world and they now contest the long-standing competitive supremacy of industrialized nations.

“This could lead to an increase in protectionist measures in Europe and the US," Professor Garelli observed.

Of the 55 countries ranked by IMD, the US still ranks No. 1 in 2007, closely followed by Singapore and Hong Kong. However, 40 economies are now increasing or maintaining their competitiveness compared to the US, while only 15 are losing ground. For the first time, the ranking indicates not only the competitive position of nations in 2007 but also their ability to catch up with the US. These trends are based on past competitive performance, drawn from the world’s most comprehensive database on world competitiveness built up over two decades by IMD.

China, Russia, India, the Slovak Republic, Estonia, Sweden, Austria, Australia, Denmark, Switzerland and Hong Kong have displayed a strong improvement in their competitiveness performance in recent years. Professor Garelli comments: "This does not imply that all of these nations are already at the top of the competitiveness league. However, they are catching up quickly. Such strong performances will obviously impact future rankings."

"On the other hand, Indonesia, Italy, Argentina, Brazil, Mexico, Turkey, the Philippines and France have tended to lose ground compared to the top league. Despite some real and specific competitive advantages, these nations will, sooner or later, lose their standing in world competitiveness if they do not improve their overall performance.

"Economic and business power is shifting to new countries: China, Russia and India have together stacked up more than $1,700bn in foreign currency reserves. Local companies from South-East Asia, India, China, Russia and the Gulf countries are buying industrial assets the world over."

Professor Garelli predicts that industrialized nations will find it hard to tolerate such a power shift and will not accept the loss of some of their “business jewels” to newcomers without a fight. He forecasts a year of rising protectionist measures leading to an increase in the number of complaints filed at the WTO for unfair practices.

"But the new faces of protectionism will be subtler than in the past: corporate governance, environmental protection, intellectual property or social rights are the new key words," he said.

"In 2007 and beyond, economic relations will be more tense than ever as emerging markets turn into emerging powers and challenge the established order for competitiveness," warns Professor Garelli.

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