OECD Chief Warns Against Rising Protectionism

by Ulrika Lomas, Tax-News.com, Brussels

10 March 2009

Echoing recent comments by Pascal Lamy, the head of the World Trade Organization, and world leaders such as UK Prime Minister Gordon Brown, Angel Gurría, OECD Secretary-General has urged national governments to resist 'beggar-thy-neighbour' trade polices and to retain their faith in open markets and the benefits they can bring.

Gurría told the International Chamber of Commerce in a speech in Paris on March 5 that, faced with the scale of the unfolding global crisis, governments are under "intense pressure to respond quickly and massively" without consideration of the long-term consequences of their actions. Such remedies, he noted, could quickly transform into a political consensus and turn a global crisis into "a crisis of globalisation."

"History reminds us not to be complacent," he warned. "The beggar-thy-neighbour policies of the early 1930s may not have triggered the Great Depression, but they clearly made a bad situation much worse."

However, Gurría believes that history has less of a chance of repeating itself this time around thanks to the commitment by G20 leaders in Washington, D.C. last year to refrain from raising new barriers to trade and investment. There also exists now a stronger legal framework to prevent governments from unilaterally throwing up tariffs and other trade barriers so that a repeat of the tariff wars of the 1930s is only "a remote possibility" according to the OECD Secretary General. But, despite this more solid global foundation, he noted that there has been a slight increase in anti-dumping cases following a long downtrend. He also observed that many nations, particularly in the developing world, have set their tariff levels below their WTO commitments, meaning that many have the ability to quickly double or triple tariff rates.

Gurría also expressed concern that stimulus packages are leading a rise in protectionism by often shutting out foreign investors. "They also open themselves up to tit-for-tat measures in other countries, thus making any potential beneficial effect even less likely," he warned.

Government bailouts of key industries also need to be monitored, he said, to ensure that they don’t inhibit necessary restructuring or "degenerate into subsidies wars."

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