The global economic downturn has manifested itself in a sharp contraction of consumer demand and employment, and it has severely undermined business and consumer confidence. In effect, global GDP is expected to decrease in 2009 for the first time since World War II while global trade will register its largest drop in the last 80 years.
With many economies witnessing the sharpest falls in their exports in decades, and with unemployment rising to levels not seen since the early 1980s, fears are growing that governments may be tempted to take protectionist measures that would eventually turn global recession into a depression. Even though the world has not seen a return to the across-the-board tariff increases of the early 1930s, today governments have resorted to massive stimulus packages, bailouts, and subsidies, many of which include nationalistic provisions that effectively harm trading partners' exporters, investors, and workers.
At their meeting in London on April 2, 2009, the G20 leaders pledged: "We will not repeat the historic mistakes of protectionism of previous eras." Subsequently, U.S. President, Barack Obama and his political counterparts called upon the World Trade Organization (WTO) to expose new state-sponsored protectionist measures in a global surveillance report on a quarterly basis. Yet, the WTO is a strictly impartial body, and its mandate and resources for monitoring protectionist trends on the global trade landscape are severely limited. To fill the gap the WTO and other institutions cannot fill, the Centre for Economic Policy Research launched the Global Trade Alert (GTA) project (www.globaltradealert.org) in London on June 8, 2009.
Global Trade Alert: Launching a Worldwide Instrument to Monitor and Analyze Protectionism
A GMF policy lunch event on June 22 was moderated by Bruce Stokes, a well-known international economics columnist at the National Journal and a Transatlantic Fellow with GMF, and brought together distinguished trade specialists located in Washington DC. During the event Simon Evenett described Global Trade Alert by highlighting its four major characteristics:
Drawing upon the expertise of independent research institutes in seven regions worldwide, the GTA website provides extensive information on state measures that are likely to affect the flow of international commerce. Global Trade Alert complements and goes beyond the WTO and World Bank's monitoring initiatives by identifying those trading partners likely to be harmed by state measures. GTA will not confine itself to the measures that are covered by the WTO agreements but will provide high quality information on all state measures that likely discriminate against foreign commercial interests including the barriers to foreign direct investment and restrictions on labor mobility.
Verified , easy-to-access information
Anyone will be able to report news articles and other evidence of enacted or pending protectionist policies, all of which is scrutinized by CEPR and partner institutions. In addition, representatives of national governments will possess the opportunity to respond to postings concerning the protectionist nature of alleged anti-trade measures in their native countries. CEPR's primary objective is to sustain transparency and provide users with up-to-date information concerning international trade activity, so as to help ensure confidence in the global trading system, deter beggar-thy-neighbor acts and potentially preserve the contribution that exports could play in the future recovery of the world economy.
Funders of GTA include The UK Government (Department of Business Innovation and Skills (BIS); Department for International Development (DFID)); The Centre for International Governance Innovation (CIGI), Canada; the International Development Research Centre (IDRC), Canada; the World Bank; and the German Marshall Fund of the United States. Yet GTA is a global independent initiative drawing upon economic expertise from research institutes in seven regions of the world economy and stands apart from any government or international organization. To ensure independence a group of eminent persons including Gary Horlick and Ernesto Zedillo will provide advice on the implementation of Global Trade Alert (See http://www.globaltradealert.org/people).
With its easy-to-use website GTA will allow policymakers, government officials, exporters, the media, and analysts to report discriminatory measures, but also will provide data for all stakeholders on the posted government measures by implementing country, by trading partners harmed, and by sector. The openness feature of GTA makes it a unique, world-wide instrument that goes beyond the WTO and World Bank's monitoring initiatives.
Professor Evenett's presentation was followed by a discussion by Gary Horlick an attorney-at-law in Washington DC and a well-known expert on international trade. In light of the current financial crisis, Horlick noted that the decline in international trade and increased prevalence of economic nationalism mirrors the same disturbing trends that intensified the global economic depression throughout the 1930s. The Smoot-Hawley Tariff Act of 1930 incited rounds of retaliatory measures abroad and led to a devastating collapse in international trade and an exacerbated economic depression that lasted for a decade. Horlick stressed that tariffs were main weapons of choice in the 1930s, yet modern-day protectionism is much more subtle and varied. In particular, world's major economies are implementing massive stimulus packages, bailouts and subsidies, many of which include nationalistic provisions that significantly harm exporters, investors and workers both in the U.S. and abroad. Horlick referred to the "Buy America" provisions included in stimulus package of January 2009, which barred the use of foreign steel and iron in numerous infrastructure projects. Domestic opponents of the measure, including some of the most prominent names in the American industrial sector, call it "a declaration of war on free trade"; one that could spark retaliation overseas against U.S. companies and exacerbate the financial crisis. Mr. Horlick affirmed that such disturbing trends in the U.S. and overseas make CEPR's Global Trade Alert website more necessary than ever.
Further Information on Global Trade Alert
A podcast interview, conducted by Sean Mulvaney with Simon Evenett and Jim Kolbe, about the Global Trade Alert is available for download below:
Related GMF Publications
Kati Suominen, A New Age of Protectionism? The economic crisis and transatlantic trade policy, Brussels Forum Paper Series, March 11, 2009