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September 23, 09

NEWS / While Rising, Trade Barriers Not Different from Previous Slumps

But risk of creeping protectionism undermining recovery remains

Washington — Despite “slippage” by Group of 20 countries in keeping their vows to abstain from protectionism, the World Trade Organization has found no indication of “high intensity” protectionist measures taking hold around the world.

Since the G20 summit held in London in April, the World Trade Organization (WTO) says in its September report, some G20 members have raised tariffs and introduced agricultural-export subsidies and other nontariff barriers to protect domestic production of steel, motor vehicles and other goods. Also, the fiscal and financial packages designed to ease the recession, which generally supported trade growth, contained policies that favor domestic goods and services over imports, the report says.

G20 investment policy changes, however, have tended toward greater openness and clarity.

Global Trade Alert, a research group supported by the World Bank, said in its own report that China is the country targeted by the most protectionist measures and the United States and Japan are also primary targets.

The WTO report says that, overall, the prevalence of trade and investment measures taken in response to the economic crisis are similar to the scale and type of policies pursued during previous economic downturns.

Today’s protectionist policies are more varied than the mostly tariff-based measures of the 1930s, measures that led to a trade war that turned a recession into the Great Depression, according to economists.

However, the WTO warns against creeping protectionism, particularly if unemployment continues to rise. Protectionism could worsen the contraction of trade and investment and undermine the fledgling recovery. The report projects the volume of global trade in goods to fall by 10 percent in 2009 and foreign direct investment to drop by 30 percent to 40 percent in the same year.

According to Global Trade Alert’s report, governments around the world are considering 130 new protectionist measures that have not been implemented yet, including state help for industries, procurement policies that favor domestic goods and food safety regulations that restrict imports.




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