Leaders of the Group of 20 nations are expected to reaffirm their pledges to promote free trade at the upcoming Pittsburgh summit, as protectionism has proven to be an obstacle to world economic recovery. 

Protectionist measures on the rise

"The temperature is rising, creeping protectionism is reaching a dangerous zone," World Bank President Robert Zoellick said last week.

"Actions and announcements of new barriers not only block trade and could impede a fragile recovery, but they risk frightening skittish financial markets," he continued.

At the G20 summit in London this April, leaders pledged to "refrain from raising new barriers to investment to trade in good sand services, imposing new export restrictions. ... We extend this pledge to the end of 2010."

But G20 members have passed more than 100 "blatantly discriminatory measures," according to a recent report by Global Trade Alert (GTA). GTA is a team of trade analysts backed by the World Bank and the UK government.

These protectionist measures include state aid funds, higher tariffs, immigration restrictions and export subsidies.

More than 90 percent of goods traded in the world have been affected by some sort of protectionist measure.

In the United States, the Obama administration announced earlier this month that, starting September 26, it would impose duties of between 25 percent to 35 percent on tire imports from China for the next three years.

This protectionist move would essentially price out of the market 17 percent of all tires sold in the United States, and force up the market price for consumers.

Meanwhile, the European Union has launched two anti-dumping proceedings in the first half of this year, both targeted at China, and Japan is rewriting sanitation policies in a way that will restrict food imports.

The rich countries are not alone in adopting protectionist policies since the financial crisis started.

Russia has planned across-the-board tariff increases. South Africa is changing government purchasing rules to favor domestic firms owned by nonwhites, and in the second half of last year, India launched 42 anti-dumping investigations.

According to GTA research, governments are applying protectionist measures at the rate of 70 per quarter this year.

China is the country targeted by the most governments for protectionist measures. More than 50 countries have passed measures that hurt Chinese exports.

A dangerous juncture

A report by Chad P. Bown, a Brandeis University economics professor, also found that new requests for protection from imports in the first half of 2009 are up 18.5 percent over the first half of 2008 globally.

That increase follows a 44 percent increase in new investigations in 2008.

The core problem of this widespread protectionism is the clash of international and domestic interests.

"Even though G20 policymakers are well aware of the danger and have reaffirmed their commitment to open, multilateral trade and the completion of the Doha round, it is already clear that there are domestic pressures for protectionist measures," said Peter Sutherland, chairman of BP and former director-general of the WTO.

"We are now at a dangerous juncture in securing global economic recovery," William Rhodes, senior vice chairman of Citigroup, recently observed. "The choice is between making a determined effort fully to implement the pledges made in the last two summits of the G20, or to pursue the beggar-thy-neighbor path so disastrously taken in the 1930s."

The developed countries should move from rhetoric to action to protect the global trading and investment system, he warned.

The United States, the largest developed country, should take the main blame for the failure of its "Buy American" provision in the stimulus package. This provision has triggered a new wave of protectionism.

"In the US, we need to send the right signals to our friends abroad by ratifying the bilateral trade agreements ... and by actively pursuing a free trade agenda," Rhodes added.

"Countries should shift to offense from defense, negotiate to open markets, not close them," said World Bank President Zoellick.

Political analysts also jumped on the bandwagon.

"Obama's actions and no actions are telling the world that the US is abandoning the global leadership on trade that Presidents of both parties have worked to maintain since the 1930s," said an article published in last week's The Wall Street Journal. It even gave Obama the epithet of "a protectionist president."

"Mr. Obama may not intend to start a trade war," the article conceded, referring to the tire dispute between the United States and China. "But trade passions once unleashed can be impossible to control."

(Xinhua News Agency September 23, 2009)