G20 keeping protectionism at bay?

G20 rich and emerging countries have been quite successful in holding protectionist pressures in check in recent months.

Will G20 leaders continue to be successful in keeping trade protectionism at a minimum?

However, some G20 countries, in contradiction to pledges at their London and Pittsburgh summits last year, have actually implemented new measures to restrict trade. Luckily however their scope has been limited and the group has continued to avoid an escalation of protectionism.

The Financial Times noted that the new import-restricting measures imposed over the past six months by G20 countries had affected at most 0.7 percent of G20 goods imports. Or to put it in another way – or 0.4 percent of world imports about half the increase in the previous six months.

G20 must remain vigilant however since when a global recession is easing off the temptation to resort to protectionism is huge. And we don’t want the world to go down that road, do we? In today’s global market it is of vital importance to facilitate trade and not to restrict it, so let’s hope G20 continues to battle protectionism.

(photo:downingstreet – flickr)

4 thoughts on “G20 keeping protectionism at bay?

  1. I think the impetus for protectionism will ease as things pick up: the desire to protect one's home markets/industries is strongest when economic conditions are slowest.

    The expansion of the G7/8 to the G20 definitely eased the protectionist tendencies, too, as the emerging countries that were added to the group were at pains to ensure ready access to the largest global markets (read: G7/8 countries), so could not really impose selective protectionism.

    I think we're moving to an era where protectionism will be at a historic low in terms of total world trade.

  2. Protectionism has had its pitfalls, and has been accused of leading us into global economic turmoil, i.e. the Great Depression. However, comparative advantage is necessary for free trade to be beneficial for all. Discriminating trade can be found more on a regional level where trade barriers are reduced for a small group of cooperating nations. They create barriers and defy the principles of non-discriminatory organizations such as the WTO. They find their advantage through special pacts and trade arrangements, and often have no interest in globalized organizations. As a result, they can gain a greater competitive advantage as opposed succumbing to the global infliction of barriers imposed by organizations like the WTO. For developing countries that are wanting to grow into a global market, then can use discriminatory trade as a “stepping stone” and eventually enter into a global market with an advantageous approach. An example of regional liberalization on a discriminatory basis would be Canada’s membership into NAFTA. They realized that by joining with the United States and Mexico, that they could avoid costs that might be incurred by not participating. Canada found it in its best interest to join this pact as it could capitalize on free trade opportunity through regionalization. The generalized system of preferences is aimed at reducing and/or eliminating tariffs to developing nations on exports below that of imports, creating an economic surplus. This allows for the promotion of foreign trade. Still, the effectiveness of this system is questionable as domestic products of the poor country are subject to barriers such as lobbyist, non-tariff measures, and products that are already tariff-free or reduced. Hence, “beauty is in the eye of the beholder” applies as a country’s economic perspectives vary.

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