Broken Promises
There has been some press play given to a report published a week ago about the vast number of protectionist measures that countries have implemented during the recession and, especially, since the G-20 promised not to do such things nearly a year ago. The report, Broken Promises: a G20 Summit Report by Global Trade Alert, was produced by the Centre for Economic Policy Research in London and is an eye-opener. In the United States, depending on which news sources one follows, we either paint ourselves as the most put-upon of nations or as the worst offender, loving to enact protectionist measures. Actually, we come out somewhere in between. It’s just that when we do go off the reservation with protectionist actions, our economy and clout is so great that we impact an awful lot of people all over the world.
Broken Promises: G20
Broken Promises is intended to look at the performance of the world’s nations on protectionist actions during the recession, and particularly at the actions of G-20 members following the G-20 pledge not to do such things in November 2008. The pledge was lofty – and the performance is dismal. Since the pledge, the authors count 192 new discriminatory actions, nearly five times the number of liberalizing actions worldwide. Of these, 63% or 121 of the discriminatory actions have been implemented by the G-20 nations themselves, the very nations that made the pledge not to be naughty during the recession. That means the G-20 countries broke their pledge on the average of once every three days. So much for promises.
We have changed how we go about being protectionist. The big fear was that, during the recession, countries would resort to massive tariff discrimination such as happened in the 1930s, e.g., the infamous Smoot-Hawley Tariff. But we have become more subtle over the years. Broken Promises reveals that the favored methods of discrimination now include bailouts and other state aids or subsidies that favor national companies, export taxes and restrictions, export subsidies, buy national policies and other non-tariff measures. Customs duties are still used, of course, but they are so last century.
China has been the most frequent target for discrimination, not surprising given China’s startling emergence on the world business stage. The next most likely targets for trade actions are the United States (yes, we are a victim, too, not just a perpetrator), Germany, France and Japan. So who is leading the assault against China? Despite all the headlines given to the recent U.S. safeguard action against Chinese tires (for which I am not in a mood to forgive the Obama Administration), the most consistent anti-China actors are, in order, Russia, Indonesia, India, Germany and Spain. But they aren’t alone; 56 countries have established new restrictions that may adversely impact Chinese companies.
So who are the worst offenders overall? The report makes it clear that there are many ways in which to measure this, but all their measures seem to point squarely at countries such as Indonesia, China (it works both ways), Russia, Germany, India, Ukraine and Algeria. Notice the absence of the United States? We appear in some of the lists of wrongdoers, but not at the top. Our importance is that any time the United States uses protectionism, we are so important to world trade that we impact almost every country.
Broken Promises is but one report on a new website, Global Trade Alert, which first saw the light of day in June. I recommend the site and have added it to my website list on the right. Use the site to explore the world of trade restrictions and to report new restrictions and actions that you pick up in your travels. The mainstream media is not particularly good about this, but experienced business people know a protectionist measure when they see one. Get the word out!
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