London – G8 leaders in Italy this week condemn protectionism and call for reviving the moribund Doha Round at the World Trade Organisation - yet many of them are guilty of provoking a trade war that threatens to deepen the recession. The good news is that any country can remove trade barriers without waiting for the G8 or the WTO.
“The immediate response to Buy American has been inevitable, from Do not Buy American in Canada to Buy Aussie and Buy Chinese. Retaliation shows that protectionism is self-harm," said. Alec van Gelder, coordinator of Freedom to Trade, a campaign uniting organisations in 48 countries.
The G8 leaders are right to highlight the impact of the Smoot-Hawley Tariff Act of 1930 that stifled trade, turned trade partners against each other and fanned the flames of nationalism that contributed to World War II. At the same time they are imposing protectionist rules that slow down trade, investment and job-creation.
From the Buy American clause in President Obama’s stimulus package or the vehicle subsidies in many G8 countries to the local-lending rules for bailed-out banks, protectionism is rising. Green protectionism in the pending American Cap and Trade Bill threatens a new round of retaliation.
"Politicians think subsidies and tariffs will protect their producers but it will only make the situation worse. 'National' producers are now more dependent on the free-flow of goods, capital and labour than ever,” Barun Mitra of India's Liberty Institute said.
“Instead of calling for a Doha deal after eight years of failure, they should repeal the new tariffs, subsidies and bureaucratic barriers that have deepened the current crisis: they can do this collectively or even unilaterally for immediate benefits. Without action, the G8 is just a photo-op,” he added.
A 2004 World Bank study of 75 countries found that if “below average” performers on trade openness could reach the “halfway to the average” score, world trade would increase by US$377 billion, or about 9% a year. But the World Bank’s most optimistic estimate for Doha was US$277 billion per year. The world’s poorest countries have the most to gain from opening up, irrespective of what the rich do.
Cutting trade barriers was necessary before but the global economic crisis now makes reducing the cost of trade imperative.
Click here for “While Doha Sleeps: Securing Economic Growth Through Trade Facilitation,” by Daniel Ikenson
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The Freedom to Trade Campaign is a coalition of 73 civil society organisations in 48 countries, which supports free trade and opposes protectionism in all its guises.