In a Reuters article this morning Jonathan Lynn writes about policymakers' concerns at the World Economic Forum in Switzerland. The article lays out more information and detail to follow-up on my post from yesterday. Here's the article:
Policymakers Sound Slarm Over Protectionism
DAVOS, Switzerland (Reuters) – Policymakers sounded the alarm about the growing threat of protectionism on Thursday as new data showed a sharp fall in air freight traffic that signaled a broader slowdown in world trade.
India's trade minister, Kamal Nath, warned at the World Economic Forum that the global economic crisis could fuel protectionism to safeguard national industries and jobs.
He told Reuters that India saw growing signs of protectionism and would respond with its own measures if its exporters were threatened.
"We do fear this because one must recognize that at the heart of globalization lies global competitiveness, and if governments are going to protect their non-competitive production facilities it's not going to be fair trade," he said.
"If there are protectionist measures India will be compelled to also take commensurate measures against those countries which will be good for no one."
Nath cited Dutch authorities' seizure last week of a Brazil-bound shipment of a generic high blood pressure drug made in India. He said India had taken up the issue with the Dutch authorities and the European Union, and hoped to resolve it.
India itself has raised tariffs on steel to protect local producers, a measure trade experts say was aimed at China, which India does not regard as a market economy.
The deepening economic crisis, and the failure to complete the World Trade Organization's long-running Doha round on freeing up global commerce, have raised fears that countries will block their partners' exports to protect jobs at home.
Such protectionism, if it led to tit-for-tat retaliation, would intensify the crisis, as happened in the 1930s during the Great Depression.
SLUMP IN AIR CARGO
In more bad news for the global economy, the International Air Transport Association said international air freight traffic fell 22.6 percent in December compared to a year earlier.
IATA called it an "unprecedented and shocking" drop and said: "There is no clearer description of the slowdown in world trade."
On Wednesday the U.S. House of Representatives approved a controversial "Buy America" provision requiring public works projects funded by an $825 billion stimulus package to use only U.S.-made iron and steel.
European steelmakers have already challenged the move.
The U.S. Chamber of Commerce, which opposed the provision, believes it will be of only limited impact.
"An expansion of the current "Buy American" rules would be a dumb idea, it would be a bad idea because the natural reaction would be for our trade partners to react in kind," Thomas Donohue, president and chief executive of the federation of 3 million U.S. businesses, told Reuters.
"The more difficult it gets the more we have to keep saying 'no isolationism, no protectionism'. We need to keep markets open, we need to keep our ability to sell stuff working and to do that we have to keep our own markets open," Donohue said.
Egyptian Trade Minister Rachid Mohamed Rachid expressed concern on Wednesday at the way countries were rolling out stimulus and bailout packages to defend local industries and called for a more coordinated approach.
Nath said it was important for trading powers to continue efforts to complete the Doha round, launched in late 2001.
"I think that at this point the multilateral trading system more than ever before needs strengthening," he said.
(Reporting by Jonathan Lynn; Editing by Timothy Heritage)
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