Protectionism – one-way ticket leading nowhere. Expert speaks about the integration of Uzbekistan into the world trade

Let’s say I do not read modern sociology, economics, and political science, and I hardly imagine what globalization is like. How could you explain it to me briefly?

Globalization is a process that makes the world a single market. But it is not an open market. We exchange goods, services and so on, but still it is not completely free.

What does stop it from being free? Because we are taught that the market is controlled by the laws that are inherent to it, and these laws allow it to be open and free.

Thousands, hundreds of years ago, there were several key civilizations (countries), each with its own interests, and quite often these interests contradicted. However, now the situation has changed dramatically – countries have common interests. And this leads to individual countries forming alliances, blocs, for example, NAFTA (the North American Free Trade Agreement). They do not want to be confined to a single zone and start to see the whole world as their goal. So there is competition for global influence, blocks create barriers to each other so that none of them will dominate the world. So we cannot say that globalization is open process of exchange, like capital, for example. We seem to be able to fly anywhere and talk to anyone anytime, which makes it seem like we are united, but we are not. Our world is global, but not united.

Moving to a more local level, we have a lot of debate about how to deal with our market right now. Close borders to protect local producers, or radically open up the market and integrate into the global system and withstand a shock to move forward? What would you recommend to our country based on knowledge of common laws and experiences of other countries?

First, Uzbekistan’s market, like the country itself, is quite small. So compared to giants like Russia, China and India, Uzbekistan has an important nuance: it is hard to produce something on large scales. The second point, from the perspective of technological development, it is dangerous to be closed. Because there are no domestic advantages that can make products competitive. Take a couple of examples: Canada and the United States, Austria and Germany. Over 30 million people live in Canada, in the US – more than 300 million, the difference between Austria and Germany is also large. In both cases, the smaller countries realized that it is better for them to open up to a larger neighbor, which, by the way, does not mean they lose any of their identity or political independence with that kind of openness. Thirdly, it is necessary to consider whether a country has access to the sea or not. If not, it automatically puts it in a situation where, at a minimum, it has to be open to its neighbors, because without them, it is impossible to gain access to the sea, which enables export and import operations.

Again, only large players with strong domestic markets can develop on their own, using protectionist policies. If this is not the case, protectionism is a dead end. And for countries like Uzbekistan, the best strategy is to establish trade cooperation with large neighbors. In the beginning, you can supply them with natural resources. It is the easiest way. And then you can export not only resources, but also some of your manufacturers’ products. This can be a very successful strategy because your country has the advantage that labor costs less than in many other countries, which also makes products cheaper. But there is an important nuance – the quality of the labor force. This is not just about factory workers, etc. Do you have enough educated people to create some really complex and innovative products?

I do not think so. Our problem is not even the development of technology but a terrible lack of educated specialists and who can train them, and we are often lagging behind not only America and Europe, but also our neighbors. It means that the fears that our largely weak and monopolized market and its players will not withstand the arrival of strong companies are real. What is the recipe for humane integration?

When embedded in the global economic system, there are two things: first, everything must be gradual, the integration period usually takes 5-10 years, during which local giants must somehow adapt to the fact that new players are constantly emerging. The second point is that if a country opens up, it is very important to differentiate industries, to understand which are the most powerful and which can benefit from the entry of outside companies. Then when you make international agreements, you will have a stronger position, and your partners will have fewer opportunities to use you. And your partnership will not be limited to the supply of manpower and raw materials from your side, but will create cooperation. And those industries that are too far behind the world trends will be lost. It may sound sad, but for some areas to succeed, others must be sacrificed. If these two rules are followed, the country has the opportunity to adapt in a comfortable way.

But the political element must not be forgotten: certain industries may be very competitive and may well form relatively equal alliances with Western partners, bringing a lot of benefits to the economy, but that is not the case – everyone is satisfied with the status quo.

That is how it often happens... Moving on to politics, how important is the role of the state and, in general, of politics in the market success of a company, whether within or outside the home country?

Their role is still immense. And when it comes to entering the global market, it only increases – it is the government that determines which strategy the country adopts on a global scale. There are three key factors in the work of the country’s leadership:

1. It has to guarantee stability. Because it is very important for businesses that the decisions made by the country’s leaders are predictable.

2. Among the many options for cooperation modalities, it should carefully choose the most appropriate arrangements for a country’s development with other nations or companies entering the domestic market. That is, to support your manufacturer, to know its strengths and weaknesses.

3. It is essential to give very high priority and encourage a high level of education in order to avoid a negative scenario in which a country is used as a source of cheap labor and raw materials. Example – Estonia: it has a small market, a small population and almost no raw materials, and its inhabitants are highly educated and therefore Estonia is highly competitive globally. First of all, with regard to IT services, because there are a lot of highly qualified programmers who reached that level thanks to the high level of education.

Obviously, all of these things take a long time and no one’s saying you have to jump from one level to the other. Some countries can start like Spain or Dominica. They realized that they had a wonderful climate and that they were investing in tourism. And then they started to invest in education, etc.

That’s why the state has to identify the key sectors where you are most competitive and to support these sectors, including monopolies, to provide subsidies so that they can enter the world market and do not fear competition at home. This was the case, for example, in South Korea and Japan, when they opened up to the global market, choosing the strongest companies – Honda, Toyota, Hyundai - and actively supporting them.

To sum up, the only way for a small country in the great game of globalization is a holistic approach at the level of the government, involving the search for its uniqueness and advantages, the study of world trends and market demands, the education of the population and gradual integration. Paradoxically at first glance, globalization increases dependency, but this dependency increases the chances of outstanding success. If in the past many states could survive and somehow develop locally, maintaining the necessary minimum of contacts with neighbors, now is a different time – it is necessary to keep in shape, willingly participate in the world race. And if we do that successfully, we can make a leap and achieve unimaginable results, like those of Finland and Singapore.

You are right. Today, the key issue is how to choose partners for this global game. Through integration, even small countries without special resources have the chance to be very successful and to take it to a whole new level. In this sense, Uzbekistan faces a difficult choice. Because there is historical memory, a link to the post-Soviet bloc, Russia, and the older generation probably wants to move in that direction more. And there’s a powerful China that’s coming into the region. And perhaps the new generation will want to be closer to China than to Russia.