Trade protectionism bogey fails to materialise

While trade was a major casualty of the financial crisis, contracting sharply from the last quarter of 2008, and in 2009 falling by an unprecedented 12%, trade protectionism played a limited part in this contraction last year. That’s according to World Trade Organisation directorgeneral Pascal Lamy, who told G20 business leaders in Toronto last week that protectionism was probably the only crisis dog that had not barked so far. “Careful monitoring of trade restrictions by the WTO shows some slippage by G20 countries, but overall the impact of new restrictions has been limited,” he said. “No more than 1% of world trade flows has been affected since 2008. “The traditional barometer of protectionist pressure is increased demand from the private sector for trade remedies, yet this has not materialised: anti-dumping, countervailing and safeguard action remain within pre-crisis ranges.” Meanwhile, many WTO members have implemented measures to open up their economies over the past eighteen months. An example, he cited, was Canada which this year eliminated a substantial number of import tariffs on manufacturing inputs, machinery and equipment, with the promise of more to come. He believes the multilateral trade rules have helped governments resist protectionist pressures and kept markets open throughout the crisis, playing the role they were designed for by preventing backsliding on the gains from more open and competitive world markets. “For business, this adds up to a valuable insurance policy that reduces commercial risk and increases the long-term profitability of investment. For developing countries, this is a major achievement given their higher dependency on international trade.” But we are not out of the woods yet, he warns. Continued vigilance against protectionism is called for as long as unemployment levels remain unacceptably high. And even if the incidence of new trade restrictions has been limited so far, their accumulation constitutes an obstacle to the recovery. The longer trade restricting and distorting measures are left in place, the more entrenched the special economic interests depending on them will become, and the more difficult it will be to remove them.”