Liberalisation and opening up are seen as key ingredients of economic reforms. Through increased competition, they help stimulate productivity, and, thereby, enhance national prosperity. Indeed, experience has shown that without international trade and foreign direct investment (FDI), no economy, however big it may be, can flourish. Look at the two Koreas. The north is the most dramatic example of what happens to people when a country closes itself off from the outside world. On the other hand, South Korea, which has no significant domestic natural resources, has risen within a generation from a developing economy to become a member of the Organisation for Economic Cooperation and Development (OECD), the exclusive club of mature economies. China’s rapid rise to become the second biggest economy of the world is the result of far-reaching reforms initiated by Deng Xiaoping in the late 1970s. The inflow of huge amounts of FDI and the buildup of the world’s leading export industry were key elements of Deng’s reforms.

On the other hand, the opening up of an economy causes dislocations and creates not only winners but also losers. Cosy relationships in supply chains are disrupted by outsiders, prices may come under pressure and customers become more demanding. Under these circumstances, it can come as no surprise that those who see their steady income and easy profits threatened are trying to defend their territory.

Since nobody will be persuaded by entirely selfish motives, lobbyists for protectionism tend to refer to national interest. “Scheming foreigners”, all-powerful multinationals will undermine national sovereignty. Homegrown businesses will be threatened by homeless capitalists who have no other loyalty other than that to maximise profits. It appeals to mercantilist thinking that increase in foreign trade and global capital flows endanger the wealth of a nation by draining its capital.

Fears about the impact of liberalisation are by no means limited to small, vulnerable and poorer nations. The debate about the impact of trade on the domestic job market is a constant political issue in the United States. Protectionists blame “the Chinese for stealing our jobs”. It is ominous that in the run-up to the electoral battle for the French presidency, candidates are already rallying to the call of “buy French!”

A simplistic view of the global economy sees it as a cake of a given size. If one nation and one company get more, others must necessarily get less. It is very difficult to make people realise that since times immemorial, trade in itself has created wealth and that through the division of labour, the cake that can be distributed has grown larger, to the benefit of all participating actors.

In spite of globalisation, life for most people has remained a profoundly local affair. There may be more foreign goods available in the shopping malls and supermarkets than ever before, however, daily life is still shaped by highly valued local customs and traditions. If these are disrupted, many people get upset. Until one has gotten used to them, foreign influences are seen as disturbing or even threatening. Quite clearly, globalisation can lead to uniformity and to an overdependence on a few potent brands. Suddenly, the local café disappears and is replaced by a global chain with immense financial muscle. In no time, cafés from New York to Mumbai, from Beijing to Hanoi look the same.

Food security is of particular concern, a fact that is duly used by agricultural lobbies all over the globe. Farmers in Switzerland and Japan push the state with huge demands for subsidies and burden customers with excessive prices. Although, farmers form only a small part of the electorate, they manage to have a stranglehold on policies even in highly industrialised countries. Somehow, the fear that one may become overly dependent on food imports and that in times of crisis, there might be disruptions in the supply of basic foodstuffs, scares even reformist politicians away from applying market principles when it comes to domestic agriculture.

The financial crisis of 2008 and today’s troubles with the euro zone have put severe dampers on globalisation as it was perceived at the turn of the century. People have become more cautious and the enthusiasm that the removal of all barriers is the panacea for all economic problems has disappeared. This is a positive development, which hopefully leads to a more balanced approach to what liberalisation and opening up of an economy can achieve.

There can be no doubt that China’s export drive has distorted the world economy. There can also be no doubt that currency policies and pricing mechanisms in the People’s Republic of China are not free of manipulation, giving Chinese exporters unfair advantages. In the light of this, it is important to combine market access for foreign investors, foreign companies and foreign goods and services with a level playing field for domestic industries.

Bearing in mind India’s present troubles with allowing FDI in the retail sector, it might be useful to look at Japan. The opening up of the Japanese economy has been a cautious process. Government policies support the natural inclination of the Japanese to buy “made in Japan”. While profiting from the opportunities provided by global markets, Japan has ensured that its domestic service sector and industries remain viable and competitive.

(The writer is the Far East correspondent of Swiss daily Neue Zurcher Zeitung)