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OECD Warns Nations To Resist Protectionism

by Ulrika Lomas, Tax-News.com, Brussels

26 May 2009

With world trade volumes likely to shrink by as much as 13% in 2009 from 2008 levels, the Organization of Economic Cooperation and Development (OECD) is urging governments to avoid protectionist measures and keep markets open in order to allow economies to benefit from the recovery when it comes.

Speaking at a meeting in Brussels to present a new OECD publication on trade policy, OECD Director for Trade and Agriculture Ken Ash warned that government actions to discriminate against foreign goods, services, firms or workers “could have a devastating effect in terms of prolonging and deepening the recession.”

European Trade Commissioner Catherine Ashton, speaking at the same event, stressed the need to help citizens better understand the role of trade in contributing to economic growth and job creation.

A World Bank study released in March showed that, since G20 leaders signed a pledge in November 2008 to avoid protectionist measures, numerous countries, including 17 of the G20, had implemented a total of 47 measures that restrict trade at the expense of other countries.

Since the beginning of the financial crisis, officials had proposed and/or implemented roughly 78 trade measures, according to the World Bank’s monitoring list of trade and trade-related measures. Of these, 66 involved trade restrictions, and 47 trade-restricting measures eventually took effect. While the effects of these measures are likely minor relative to the size of unaffected markets, the World Bank cautioned that they have a significant negative effect on particular exporters shut out of markets.

“Leaders must not heed the siren-song of protectionist fixes, whether for trade, stimulus packages, or bailouts,” said World Bank Group President Robert B. Zoellick at the time of the report's publication. “Economic isolationism can lead to a negative spiral of events such as those we saw in the 1930s, which made a bad situation much, much worse.”

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