Monday, 14 December 2009

The unrelenting pressure of protectionism

At Simon J Evenett has a column on The Unrelenting Pressure of Protectionism: The Global Trade Alert's Third Report. The full report is available here.
The third report of the Global Trade Alert is published today. It contains:

1. The latest assessment of protectionist dynamics at work in the world economy, with a focus on the second half of 2009 to see whether the welcome news of economic recoveries in many countries has feed through into less protectionist pressure.
2. A focus on the Asia-Pacific region: a separate assessment of who is imposing what forms of protectionism in that region and which nations are getting hurt by crisis-era protectionism.
3. An analysis showing the differential impact of crisis-era beggar-thy-neighbour policies on the exports of the leading sectors of the Japanese economy.
4. A comparison between the products and trading partners targeted by antidumping investigations before and during the crisis.
5. Accounts of the impact of the crisis on the trade policy priorities of China, India, and Russia.
Evenett notes that,
Many economies may have turned the corner in the second half of the year, but protectionist pressures have not relented. If anything, recent evidence suggests that the protectionist dynamics were worst in the first three quarters of 2009 than the Global Trade Alert reported in September 2009. For sure, protectionism hasn't yet reached the scale of the 1930s--but water doesn't have to boil to scald.
Concerning governments' resort to protectionism, the main findings are:

1. Since the first G20 crisis-related summit in November 2008, the governments of world have together implemented 297 beggar-thy-neighbour policy measures; that is, more than one for every working day of the year. Add another 56 implemented measures that are likely to have harmed some foreign commercial interests, the total reaches 353.
2. Since the GTA's last report was published in September 2009, the number of beggar-thy-neighbour measures discovered (105) was more than eight times the number of benign or liberalising measures (12). Looking back on all of the measures implemented since November 2008, the ratio of blatantly discriminatory measures to liberalising measures stands at nearly six to one.
3. When examining quarter-by-quarter changes in protectionism, experience has taught us that many beggar-thy-neighbour acts only come to light with delay. This fact alone has had an important impact on the number of discriminatory measures reported in the GTA database in the last quarter of 2008 and first two quarters of 2009. In the GTA's second report it was estimated that in the first half of this year approximately 70 measures that likely harmed foreign commercial interests were imposed by governments. This estimate is now revised upwards by 20-25 percent; conservatively estimated, governments imposed 85 protectionist measures per quarter during the first half of 2009.
4. In the light of this finding, the reported number (78) of discriminatory measures implemented in the third quarter of 2009 is not far short of this quarterly average, especially when one bears in mind that this figure will almost certainly be revised upwards as more information about protectionist acts comes to light.
5. 5. Particular caution is needed in interpreting the reported figure of 38 harmful measures imposed in the fourth quarter of 2009. First of all, this figure only refers to measures announced or implemented in October and November 2009, two out of the three months of the quarter. Moreover, prior experience suggests that information about many recent protectionist measures taken by governments is not yet in the public domain. For these reasons, the very recent fall off in the number of discriminatory measures is more apparent than real.
Other key findings about contemporary protectionist dynamics found in this Report are:
1. During the past three months the number of state measures announced which--if implemented would likely harm foreign commercial interests--has expanded from 134 to 188. The protectionism in the pipeline keeps growing--there is no respite here. This protectionist overhang could limit the contribution of exports to economic recovery.
2. Since the last G20 Report was published in September 2009, every one of the top 10 most targeted countries has been hit a minimum of 20 more beggar-thy-neighbour state measures. China has been hit by 47 more measures (the most), followed by the USA (32 more measures) and Germany (21 extra hits.) Many nations retain a strong interest in monitoring and discouraging foreign protectionism, even as economic recovery takes told.
3. On the GTA's four indicators of harm done by a nation's commercial policy, the Russian Federation is always in the top 5 worst offending nations. Meanwhile, China and Indonesia are always in the top 10 worst offenders. If the measures taken by each EU member state were aggregated, then the European Union would always appear in the list of top 10 worst offenders.
4. Since the last GTA report was published, bailouts and trade defence measures account for the overwhelming majority of new discriminatory state measures. Recently, the action is in these two policy instruments, with tariff increases running a distant third.
5. Tariff increases account for only one in seven of the total number of discriminatory state measures imposed in the current global economic downturn. This calls into question how representative of contemporary protectionism, the much-studied, easy-to-measure, and typically-transparent tariff increase is.
6. Looking ahead, the basic metals and basic chemical sectors could be affected by over 30 pending measures. Should these announced--but not yet implemented measures--actually come into force over the next year or so, both sectors will eclipse the financial sector as the principal sector most affected by crisis-era protectionism.
All of which is bad news.

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