The Responsibility to Protect
Protectionism Continues to Climb Chad P. Brown Brookings Institute July 23, 2009 WTO Reform: The time to start is now Uri Dadush The Carnegie Endowment for International Peace September 2009
The Responsibility to Protect
International Financial Institutions in Washington have founded much of their policy on the conviction that trade liberalization is imperative for growth. This maxim, it is argued, is especially important when the world is facing a particularly strong economic downturn. However, liberalization efforts are increasingly threatened during economic crises as local markets seek to reduce competition as much as possible. In two recent reports by the Carnegie Endowment for International Peace and the Brookings Institute, the question of liberalization and the mechanisms in place to facilitate this practice are assessed. The two think tanks highlight the underlying problem in liberalization efforts – the state of the economy. Yet the focus of their reports differs, with the Carnegie foundation detailing the reforms necessary for the WTO to balance trends in the way of liberalization, and the Brooking Institute focusing on the trends of protectionism themselves.
It is perhaps most appropriate, therefore, to begin the situation assessed in the reports by examining the work of the Brookings Institute, as it most clearly lays out the causes behind the rising trend in protectionism. Their report explains that despite the commitment of the G20 to refrain from imposing protectionist measures, virtually all of them have in fact implemented protectionist policies. The G20 states, it notes, have largely turned to trade remedy policy instruments such as antidumping, safeguards and anti-subsidy policies. As is echoed by the Carnegie report, the majority of these new policies have been put into place in response to domestic industry demands for protection from import competition, evidenced by the sharp increase in this trend that coincided with the spread of the global financial crisis.
The study additionally demonstrates that protectionist investigations were mainly targeting Chinese exports, being named in over 80 percent of the new country-level investigations. However, the Brookings Institute also noted a new trend in protectionism, particularly the use of global safeguard policy to reduce international competition. “ While use of the antidumping policy in 2009 has levelled off after initial escalation, safeguards use has spiked only more recently… compared to the same period in 2007 the first half of 2009 saw a 40.5 % increase in the imposition of new import restricting measures.” Unfortunately, according to the report, these trends are expected to continue.
Interestingly, the report by the Carnegie Endowment complements the assessments of the Brookings Institute, as its focus on the possibility of reforming the WTO is presented as a means to reduce the trend in protectionism. Uri Dadush explains that the World Trade Organization is an essential plank of globalization that provides a degree of predictability and stability to trade relations. “In a world of sluggish growth and burgeoning protectionist pressures, the importance of rules and increases and the need to strengthen them becomes more urgent.” The WTO’s purpose is to promote trade liberalization by having countries commit to anti-protectionist measures on a global scale, that is, in contrast to regional economic agreements that provide countries within that agreement exclusively with a preferential trading status.
Yet, as the Carnegie Endowment highlights the WTO is living off the gains of its predecessor the GATT system. “In a crucial aspect of its traditional mission to reduce tariffs, the WTO has become increasingly ineffectual. In newer areas, such as cutting agricultural subsidies and opening up markets for services trade if has also failed to deliver.” Instead, the WTO’s inefficient negotiation system has been overtaken by the regional and unilateral agreements that liberalize trade selectively – a process which economists argue is insufficient to allow trade to promote growth on a global scale. Sluggish WTO negotiations have been overtaken by unilateral liberalization (autonomous) processes. In addition, it notes that in the most important areas for the international community, like food security and financial regulation, the WTO is largely absent.
The financial crisis, the report argues, has exposed the inadequacy of the WTO disciplines ranging from antidumping practices to industrial tariffs in developing countries. “The ease with which tariffs were raised in the EU on Chinese steel products, and in India on various products, illustrated the weakness of antidumping disciplines and the large gap that sill exists between bound and actual tariffs in most developing countries.” For the WTO to promote liberalization to the degree it has in the past, serious reform is necessary.
Reforms should, according to Dadush, include a reassessment of the function of the organization, as well as assisting members in enacting trade reforms, and reducing reliance on consensus rule, among other changes. While these are undoubtedly important measures that should be considered for the improvement of the organization, neither the Carnegie nor the Brooking’s report address one major obstacle for liberalization: how to undermine domestic demand for protectionism.
Albeit their informative insight on the dynamics of protectionism, and the relation these trends have with the current financial crisis, neither report offers concrete suggestions for governments that would prefer to liberalize but are force to protect in order to please their constituencies. That is, the reports underestimate the importance of local politics in international liberalization efforts, despite their recognition that these are behind recent trends in protectionism. This weakness may be accounted for by the recognition that politicians are by definition political and naturally bend to the will of voters. Yet, the normative values behind this discussion imply that such excuses are insufficient reasons to allow trends in protectionism to continue to rise.
For the complete reports please refer to the following sites:
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