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Protectionism Could Prevent Trade Rebound

by Ulrika Lomas,, Brussels

30 March 2010

Director-General of the World Trade Organization (WTO) Pascal Lamy, has warned that estimates of a rebound in world trade of 9.5% during 2010, following the sharpest decline in 70 years, could be jeopardized should world economies return to protectionist trade policies in the immediate aftermath of the crisis.

According to statistics from WTO economists, exports from developed economies are expected to increase by 7.5% in volume over the course of the year while shipments from the rest of the world (including developing economies and the Commonwealth of Independent States) should rise by around 11% as the world emerges from recession.

This strong expansion will help recover some, but by no means all, of the ground lost in 2009 when the global economic crisis sparked a 12.2% contraction in the volume of global trade — the largest such decline since World War II. Should trade continue to expand at its current pace, the economists predict, it will take until 2011 for trade volumes to surpass the peak level of 2008.

One positive development in 2009 was the absence of any major increase in trade barriers imposed by WTO members in response to the crisis. The number of trade-restricting measures applied by governments has actually declined in recent months. However, significant slack remains in the global economy, and unemployment is likely to remain high throughout 2010 in many countries. The WTO has observed that persistent unemployment has the potential to intensify protectionist pressures.

Commenting, Lamy stated:

“During these difficult times, the multilateral trading system has once again proven its value. WTO rules and principles have assisted governments in keeping markets open and they now provide a platform from which trade can grow as the global economy improves. We see the light at the end of the tunnel and trade promises to be an important part of the recovery; we must avoid derailing any economic revival through protectionism.”

TAGS: economics | export duty | fiscal policy | tariffs | World Trade Organisation (WTO) | import duty | trade

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