- The Washington Times - Tuesday, March 9, 2010

It’s the trade war that wasn’t.

Fears that the deep global recession would fuel protectionist measures have not been borne out, a major survey found.

Commissioned by the Group of 20 leading industrial powers, the study found that the United States and its major trading partners have cut back sharply on trade-killing restrictions since September, despite strong political pressures at home.

“Most G-20 members continue to manage successfully the political process of keeping domestic protectionist pressures under control, despite a difficult environment for some of them where employment levels and new job opportunities are shrinking,” the report said. The restrictions that were embraced tended to be “concentrated in sectors that are already relatively highly protected, such as minerals, textiles and metal products.”

As the global recession deepened in 2008 and 2009, many economists feared a modern trade war similar to the tit-for-tat tariff increases and import quotas that characterized the Great Depression of the 1930s, when measures such as the Smoot-Hawley Tariff Act in the United States sent world commerce plummeting by more than 50 percent.

This time, nations operated with far more restraint. The inclination toward protectionism subsided during the past six months as the economies of most nations began growing again after the longest, deepest, most widespread global recession since the Great Depression.

The survey could mean good news for a global economy that is gathering new steam, with fewer new trade barriers and tariffs to dismantle as the major trading powers struggle to complete the stalled Doha trade round — a global negotiation now in its ninth year.

The report was released Monday by the World Trade Organization (WTO), which coordinated with analysts from the Organization of Economic Cooperation and Development and the United Nations.

“Since September 2009, recourse to new trade restrictions by G-20 members has been less pronounced” than in the previous 12 months, according to the report. The G-20 includes the leading Western industrial democracies and major emerging-market and developing nations, such as Brazil, Russia, China, India and South Korea.

The WTO calculated that restrictive measures introduced since Sept. 1 covered 0.7 percent of G-20 imports, or 0.4 percent of total world imports. By comparison, trade restrictions adopted during the previous period affected twice that level of commerce — 1.3 percent of G-20 imports or 0.8 percent of total world imports.

The Obama administration and the Democrat-led Congress have been criticized for a lack of enthusiasm for free-trade deals and for a greater willingness to curb imports in comparison with the policies of the George W. Bush administration. Free-trade pacts with South Korea, Colombia and Panama have stalled in Congress since Mr. Obama took office last year.

“This delay in implementation hurts U.S. credibility around the world, not just economically, but geopolitically as well,” Sen. Charles E. Grassley, Iowa Republican, told U.S. Trade Representative Ron Kirk at a hearing last week.

“On top of that, it creates some confusion with respect to the administration’s own trade initiatives,” Mr. Grassley said.

Some congressional Democrats, far more skeptical of previous free-trade pacts, recently called for an end to the North American Free Trade Agreement with Canada and Mexico.

The WTO report cited the United States for restricting tires and coated paper imported from China, conducting anti-dumping investigations involving steel fasteners and steel oil-drilling pipes imported from China, complicating Canadian participation in government-procurement contracts and prolonging assistance to financial institutions through the $700 billion Wall Street bailout program.

But WTO analysts said no new major trade-reducing measures were adopted during the past six months in services, although countries continued to intervene in the transportation and financial industries, both of which received ongoing government support.

Global Trade Alert, an independent monitoring organization, issued a much more pessimistic review of protectionism last month.

“Stabilization certainly hasn’t ended protectionism,” said Simon Evenett, a trade economist who serves as coordinator for the group. “Since the beginning of the fourth quarter of 2009, a substantial number (63) of beggar-thy-neighbor policies have been implemented.”

“If anything, G-20 governments have been responsible for a higher share of protectionist measures since [economic] stabilization began,” he said.

However, Mr. Evenett was not predicting a trade war.

While the degree of protectionism remains a subject of debate, the trend in world trade is not.

World trade volume surged by 4.8 percent in December, after an increase of 1.1 percent in November, according to a widely watched report by the CPB Netherlands Bureau for Economic Policy Analysis. December’s jump was the biggest gain since monthly record-keeping began in 1991.

In 2009, trade plunged by 13.2 percent, the Dutch bureau reported. After December’s gain, world trade was still 8 percent below its April 2008 peak but 15 percent above its May 2009 low point.

Mr. Obama will travel to Asia later this month to promote his most important trade initiative to date, the Trans-Pacific Strategic Economic Partnership Agreement.

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