WASHINGTON — The world’s major powers are repeatedly breaking their pledges not to erect trade barriers, and there is no sign the “protectionist juggernaut” will ease as countries recover from the global downturn, an influential monitoring organization said Friday.
Since first taking a no-protectionism vow at a summit meeting last November, the world’s 20 major economies have been responsible for as many as 121 “blatantly protectionist” measures, with 134 more in the pipeline, said Global Trade Alert, a monitoring service overseen by the London-based Centre for Economic Policy Research and supported by the World Bank among others.
The findings follow a report earlier in the week by the Geneva-based World Trade Organization that cited “continued slippage toward more trade restricting and distorting policies” by the U.S. and its major trading partners.
“The real economy may now be shrinking at a slower rate, and a recovery may be in view, but unemployment will continue to rise for some time to come. Pressures to protect jobs at home will grow and governments will find these pressures difficult to resist,” said the new report.
“The protectionist juggernaut shows no sign of slowing down,” it said.
At a meeting last November in Washington to chart a joint strategy for combatting the worst global economic downturn in decades, leaders of the 20 largest industrial and developing economies pledged to refrain from erecting new barriers to trade and investment or imposing new export restrictions. They renewed the pledge in April in London.
A U.S.-China dispute that erupted last weekend over Chinese tires and American chicken exports is just the latest example of how hard it has been for leaders to live up to that pledge.
Trade warfare is widely blamed for prolonging and expanding the Great Depression. And while the trade-distorting protectionist measures in the current downturn haven’t risen to the level of those of the 1930s, they have caused “pain across large sections of the world economy” and could thwart recovery if allowed to continue, said the Global Trade Alert report.
The G20 leaders at their Pittsburgh meeting should “drain the protectionist pipeline — and don’t refill it,” said Simon Evenett, an economics professor at the University of St. Gallen in Switzerland and the principal author of the report.
Although the major powers have promised to work collectively to confront the downturn, some analysts suggest the fact that things appear to be getting better may be easing the pressure to work together on solutions as national self-interest reasserts itself. That includes a desire to protect battered home industries from overseas competition as governments look toward the day when they can dial back stimulus measures such as extra government spending and low interest rates.
President Barack Obama has pledged to avoid “self-defeating protectionism” in continuing the effort to get the U.S. and other major world economies back on their feet.
Mike Froman, a White House adviser on international economics, said there’s no doubt that since the London meeting in April “the situation has changed dramatically” in terms of the global economic outlook. “Then people thought we were perhaps on the edge of depression. And now I think we’re debating the pace of recovery,” he said.
Steps taken by the United States widely seen by other nations as protectionist include “Buy American” provisions in the Obama administration’s $787 billion stimulus package, restrictions keeping Mexican trucks off most U.S. roads and provisions of auto bailouts requiring vehicles benefiting from the program to be built in the United States.
China has funneled its extensive stimulus spending to Chinese-only companies and enterprises. Russia plans sweeping tariff increases. Japan is taking steps that will further restrict food imports. And South Africa is changing its purchasing rules to favour domestic producers.
The U.S. continues to press its claim that European countries subsidize Airbus, winning a preliminary ruling from a WTO panel earlier this month. European countries have counterclaimed that the Pentagon and NASA are effectively subsidizing rival aircraft manufacturer Boeing, with a ruling expected early next year.
Steven Schrage, who has held senior economic positions in the Bush administration, said the biggest challenge facing the leaders in Pittsburgh may be to avoid “the mistakes of other downturns.”
In the 1930s, world powers including Britain and the United States “walked away from global responsibilities, and ultimately the situation got much worse,” said Schrage, an international business analyst with the Center for Strategic and International Studies.
The G20 includes Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, Britain and the United States. The European Union, represented by its rotating presidency, which is Sweden, and the European Central Bank, is the 20th member.