The world economic crisis and protection

G-20 leaders meet in Washington this weekend to address the global economic crisis.  The Center for Economic Policy Research has prepared a booklet with 17 short essays of good advice: What G20 leaders must do to stabilize our economy and fix the financial system.

Three of the authors, Dani Rodrik, Wendy Dobson, and Ernesto Zedillo all recommend commitments to avoid protectionism.  Rodrik and Dobson have other recommendations, Zedillo focuses on protection.  Dobson and Zedillo explicitly recommend concluding the Doha Round. 

Rodrik, of Harvard, imagines the content of the meeting's communique:

The weeks and months ahead will be trying times for economic policymakers everywhere, as they try to contain the fallout for output and employment. Raising trade barriers against imports will be a temptation, especially when currencies fluctuate so much. But the experience with the Great Depression teaches us that this is the surest way to magnify the costs of the crisis, and to spread it to other countries. Hence the most serious challenge for the global trading regime at the present is to ensure that the financial and economic crisis does not lead to a vicious cycle of protectionism, greatly exacerbating the economic downturn.

So we jointly commit ourselves in public to not raising protectionist barriers in response to perceived threats to employment from imports. We further ask the secretariat of the World Trade Organisation to monitor and report unilateral changes in trade policy, with the purpose of "naming and shaming" G20 members that depart from this commitment.

Dobson, Director of the Institute for International Business at the University of Toronto:

Third, G20 leaders should accord a high priority to the real economy. External imbalances still need to be reduced by governments adopting national policies that are good domestic policy as well. A worrisome development is the growing perception that globalisation is bad for the middle class.

A strong pledge by leaders to eschew protectionism is essential. The best signal of such commitment is to complete the Doha Round by year’s end. The lessons from the 1930s demonstrate the disastrous consequences of trade protectionism and lack of mutual trust and cooperation among governments. Nationalism and protectionism trumped the global public interest and the crisis deepened. This must not be allowed to happen again.

Zedillo, a professor at Yale, and a former President of Mexico, devotes his whole essay to protection, and the importance of the Doha Round.

The G20 Summit is the right place to exorcise the demons of protectionism.  Already, there are proposals for leaders to make on November 15th a trade pledge – to avoid protectionism as an answer to the recession.

Frankly such a pledge will not suffice. Leaders will have to be bolder if they really mean to pre-empt the threat of trade wars.

The November 15th gathering would truly become a historical and successful one if leaders were to clinch right then and there the political agreements that are needed at the highest level to conclude the Doha Round.

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[andrea]

Check this video out for insight on our economic crisis. http://www.thetruthabout.com/public/297.cfm?affID=and16