General Conclusions from the Global Trade Alert (GTA) 10th Report on G20 Protectionism since the Great

Financial Crisis

The GTA 10th Report concludes protectionism is increasing globally. Some may claim the G20 pledge to avoid protectionism was successful because Great Depression level protectionism has been avoided and no countries violated their WTO tariff bindings. Yes, severe protectionism has been avoided, but the results are not entirely laudable. G20 members have not completely adhered to their standstill commitment as trade barriers are still on the rise. While G20 members may not directly be disobeying WTO rules, they are violating the spirit of international trade (Hufbauer 2010). This is economically significant because the majority of protectionist measures are implemented by the G20, the largest trading nations, meaning they affect a wide range of world trade (Evenett GTA 2011b). Unlike the Great Depression, countries are not simply pursuing retaliatory or emulative protectionist measures. There is a great deal of diversity in current protectionist measures. Todays protectionist measures are much more difficult to identify, harder to document and are only lightly regulated by the WTO. Nonetheless, these forms of murky protectionism still erode established free trade norms (Baldwin 2010). Up to the Uruguay Round in the WTO, at the border measures such as import quotas, taxes and restrictions on imports or exports were considered the main impediments to international trade (Love 2009). While border measures are still discussed, measures that take affect behind the border like product standards and conformity assessments are considerably important to trade today. Various G20 countries immediately broke the G20 pledge not to implement new trade barriers as the financial crisis unfolded, including Russia, India, Argentina and Venezuela. This report demonstrates that as the effects of the global financial crisis spread protectionist measures progressed through three different periods (see Figure 1). In 2009, countries developed fiscal stimulus packages using bailouts and state aid, such as buy American provisions, to address trade imbalances by shifting demand to domestic over foreign suppliers. Each G20 member has its own arsenal of protectionist measures that tread the line around WTO regulations. In 2010, increases in trade defense cases were observed. This is demonstrated in Figure 1 by the steep increase observed from the November 2010 to October 2011 period. This is because in 2010 as trade rebounded and imports increased again, domestic businesses were able to demonstrate

injury by foreign firms, making winning a trade defense case easier (Evenett 2011a). New discriminatory measures continued to be introduced even while some economic recovery occurred in 2010. The final wave is occurring as 2011 experienced slow economic growth and economic outlooks for 2012 are negative. In 2011, there was an increase in all ten discriminatory measures as Figure 6 shows. Trade defense measures, bailouts, tariff increases and non-tariff barriers have all experienced the largest increases in usage. Figure 1: Ten most used state measures to discriminate against foreign commercial interests, by year.

Source: Based on GTA Data and Discussion Paper Table 5 by Simon J Evenett (2011a) *Note: this data includes all countries, not just the G20.

Various aspects of the current global trading system are particularly noteworthy. Firstly, competiveness is becoming more complicated and hostile as countries are supporting domestic industries through trade restricting measures to increase their likelihood of success in foreign markets (Tussie 2010). The amount of discriminatory measures by developing G20 countries, particularly Argentina, is also disturbing. These countries are not experiencing slow growth like developed economies so their use of these measures appears to be strictly to further industrial policy. There is also an increasing amount of trade distorting measures covering raw materials, food supply and government procurement (European Commission 2011). Eliminating the multilateral system of these barriers and most discriminatory measures used by the G20 is

difficult because they are not addressed by the GATT, the General Agreement on Trade in Services (GATS) or any other WTO legally binding regulations. Overall, there is currently a rather schizophrenic trade relationship between G20 countries and in the multilateral system. While G20 countries praise the principles of free trade, they are increasingly implementing measures to protect domestic industries from foreign competition (Sappideen 2010). Many are quick to claim the recent financial crisis avoided protectionism because there was no Smoot Hawley-type tariff increases. However, it is clear protectionism has just taken new forms that circumvent todays multilateral trade rules (Evenett 2011; GTA 2011). Further, the fact that the GTA report highlights initial findings on the amount of protectionism in Q3 of 2011 are about as high as those for Q1 2009 is concerning for the future of trade. While Great Depression levels of protectionism have not been prevalent following the recent global financial crisis, the G20 is nonetheless creating new discriminatory measures that are harmful to foreign commercial interests and the multilateral trading system. With a pessimistic outlook for economic growth in 2012, it is necessary that the G20 take action to combat further protectionism.

Works Cited Baldwin, Richard and Simon Evenett (2009). Richard Baldwin and Simon J. Evenett (eds). The collapse of global trade, murky protectionism, and the crisis: Recommendations for the G20. VoxEU.org. Available at http://www.voxeu.org/index.php?q=node/3199 Baldwin, Richard and Simon Evenett (2008) What world leaders must do to halt the spread of protectionism. Available at www.voxeu.org/reports/protectionism.pdf European Commission Trade (2011). Trade and Investment Barriers Report 2011 Engaging our Strategic Economic Partners on Improved Market Access: Priorities for Action on Breaking Down Barriers to Trade. Evenett, Simon J (2011a). Did WTO Rules Restrain Protectionism During the Recent Systemic Crisis? Centre for Economic Policy Research. Available at www.cepr.org/pubs/dps/DP8687.asp Evenett, Simon J. (2011b). "Did Tariff Regimes on Manufactured Goods Change during the Recent Global Economic Crisis?" Chapter 4 of Simon J. Evenett Evenett (ed). Trade Tensions Mount: The 10th GTA Report. Pages 27-43. Evenett, Simon J. (21 June 2009) Global Trade Alert: Motivation and Launch. Centre for Economic Policy Research. http://www.globaltradealert.org/sites/default/files/Global%20Trade%20Alert%20%2021%20June.pdf Evenett, Simon J. (2011c). "Indicators of the harm done by discriminatory measures: Many indicators, one message" Chapter 4 of Simon J. Evenett (ed). Resolve Falters As Global Prospects Worsen: The 9th GTA Report. Available at http://globaltradealert.org/sites/default/files/Chapter4.pdf Hufbauer, Gary; Jacob Kirkegaard and Woan Foong Wong. (September 2010) G-20 Protection in the Wake of the Great Recession. Peterson Institute for International Economics. Washington DC. Hufbauer, Gary Clyde, Jeffrey Schott, and Woan Foong Wong. (2010) Figuring Out the Doha Round. Washington: Peterson Institute for International Economics. Hufbaurer, Gary; Jacob Kirkegaard and Woan Foong Wong. (September 2010) G20 Protection in the Wake of the Great Recession. Washington: Peterson Institute for International Economics. Love, Patrick and Ralph Lattimore. (2009) International Trade: Free, Fair and Open? OECD Insights: OECD. Tussie, Diana. (02 September 2010) The G20 and the multilateral trade impasse. Policy brief project G20s role in the post-crisis world. FRIDE: A European Think Tank for Global Action. http://www.fride.org/publication/802/the-g20-and-the-multilateral-trade-impasse