Picture of Trade Protectionism Worth a Thousand Words
November 17, 2008
The weekend summit of the G-20 committed to a spirit of cooperation among developing and advanced economies alike. Lip service was given yet again to finishing the Doha Round of multilateral trade negotiations. These talks began seven years ago this month and have died many deaths. The role of international trade as a world economic growth multiplier since the second world war cannot be understated. Alternatively, when governments erect barriers to imports to protect domestic producers, however well-meaning the reasons, the result is weaker growth across a broad cross-section of the global economy including those who imposed barriers, as their restraints on trade beget retaliatory barriers by other governments.
Protectionism often takes hold in poor economic times, but a groundswell of sympathy in the United States actually predates the financial crisis under the guise of “fair trade, not free trade.” My greatest reservation about the incoming administration involves its slippery stand on trade, not its readiness to handle the 3:00 am geopolitical crisis.
As governments raised tariffs in round-robin fashion, international trade flows imploded relentlessly during the Great Depression. The result is depicted in perhaps the most famous economic chart from that era. The spider web-like collapse of world trade can be viewed by clicking on chart 8..
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