- The Washington Times - Friday, January 8, 2010

Two leading trade experts disagreed Thursday about how much damage a spate of protectionist measures had done to the world economy in the past year, but they agreed the global trading system had avoided - and would likely continue to avoid - an aggressive trade war such as erupted during the Great Depression.

Simon Evenett, a British economist who coordinates research for Global Trade Alert, decried “an uptick in protectionism” during the past year, but both he and Edward Gresser, a trade expert at the centrist Democratic Leadership Council, took heart in figures from the Group of 20 showing that the increase was not catastrophic.

Under the circumstances, Mr. Gresser said, most of the protectionist measures catalogued by GTA were “quite benign,” including the U.S. government’s recent decision to increase its bailout of auto lender GMAC.

The two men also pointed to GTA research that has tracked protectionist measures implemented around the globe since a November 2008 G-20 summit in Washington. At that meeting at the height of the global financial panic, the G-20 nations committed themselves within the next 12 months to “refrain from raising new barriers to investment or to trade in goods and services.”

GTA identified a total 332 protectionist measures implemented since November 2008, roughly two-thirds of them by the G-20. Nearly all of the world’s leading trading nations implemented protectionist measures at a rate above the long-run annual trend, which the GTA estimated to be about 4 percent a year.

But, Mr. Evenett reported, the protectionist mix has changed. Nations have been emphasizing bailouts and subsidies far more frequently (136 times) than the 46 times countries raised tariffs, the traditional beggar-thy-neighbor policy of taxing imports. Even anti-dumping penalties (64), which are applied against nations whose firms price their exports below cost, have exceeded tariff hikes during the past year.

Of equal concern is the fact that “the protectionist juggernaut shows no sign of slowing down,” Mr. Evenett warned, emphasizing that “the G-20 should work on principles to unwind these measures.”

But while the two men said they oppose the measures, they agreed that the world economy had avoided a slide into catastrophe.

Last year’s collapse of world trade, which plunged from $16 trillion to $12 trillion, was a “once in a lifetime event,” Mr. Gresser said. And at that rate, it still did not begin to approach the destruction of world commerce that occurred during the 1930s, when monthly trade flows fell from $62 billion to about $16 billion.

Besides, Mr. Gresser said, world trade was already rebounding significantly, demonstrating that the trend would not be a repeat of the 1930s.

Mr. Evenett agreed that the worst of the Great Depression’s trade practices had been avoided. If the last year were a repeat of the 1930s, he said, the rate of increase in the implementation of new protectionist measures would have approached 100 percent for nearly all nations, 25 times the normal long-term average of 4 percent a year.

The recent uptick in protectionism was “above recent trends,” Mr. Gresser acknowledged, “but it is consistent with previous recessions.”

Both analysts said that governments learned important lessons from the Great Depression. Governments have clearly avoided the massive protectionist outbreaks of the 1930s, they agreed. And, unlike the 1930s, governments succeeded in rescuing the banks.

While Mr. Gresser was essentially unconcerned about the protectionist trends of the past year, he did issue a warning about the medium-term future.

“In the United States,” he said, “we do not know how the public will respond to prolonged unemployment if there is no rebound in one or two years.”

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