Leaders of the G-20 nations are expected to reaffirm their pledges to promote Free Trade at the upcoming Pittsburgh summit, as protectionism has proven to be an obstacle to world economic recovery.
“The temperature is rising, creeping protectionism is reaching a dangerous zone,” World Bank President Robert Zoellick said last week. “Actions and announcements of new barriers not only block trade and could impede a fragile recovery, but they risk frightening skittish financial markets,” he continued. At the G-20 summit in London last April, leaders pledged to “refrain from raising new barriers to investment to trade in good sand services, imposing new export restrictions. … We extend this pledge to the end of 2010.” But G-20 members have passed more than 100 “blatantly discriminatory measures,” according to a recent report by Global Trade Alert. GTA is a team of trade analysts backed by the World Bank and the UK government. The report found that governments around the world had implemented 280 protectionist measures since the first crisis-related G-20 summit in Washington in November 2008. These protectionist measures include state aid funds, higher tariffs, immigration restrictions and export subsidies. More than 90% of goods traded in the World have been affected by some sort of protectionist measure. In the United States, the Obama Administration announced earlier this month that, starting Sept. 26, it would impose duties of between 25 percent to 35% on tire imports from China for the next 3 years. This protectionist move would essentially price out of the market 17% of all tires sold in the United States, and force up the market price for consumers. Meanwhile, the European Union has launched two anti-dumping proceedings in the first half of this year, both targeted at China, and Japan is rewriting sanitation policies in a way that will restrict food imports. The rich countries are not alone in adopting protectionist policies since the financial crisis started. Russia has planned across-the-board tariff increases. South Africa is changing government purchasing rules to favor domestic firms owned by nonwhites, and in the second half of last year, India launched 42 anti-dumping investigations. According to GTA research, governments are applying protectionist measures at the rate of 70 per quarter this year. China is the country targeted by the most governments for protectionist measures. More than 50 countries have passed measures that hurt Chinese exports. A report by Chad P. Bown, a Brandeis University economics professor, also found that new requests for protection from imports in the first half of Y 2009 are up 18.5% over the first half of 2008 globally. That increase follows a 44% increase in new investigations in 2008. The core problem of this widespread protectionism is the clash of International and Domestic interests. “Even though G-20 policymakers are well aware of the danger and have reaffirmed their commitment to open, multilateral trade and the completion of the Doha round, it is already clear that there are domestic pressures for protectionist measures,” said Peter Sutherland, chairman of BP and former director-general of the WTO.
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