By Michael Casey
Of DOW JONES NEWSWIRES
As the Group of 20 leaders nations assemble for this weekend's Washington summit, plenty of appeals for fiscal stimulus, greater financial sector regulation and international coordination have already been made.
The calls in near unanimous fashion invoke the specter of the Great Depression to express the urgency with which the current global markets crisis must be tackled. A few use the same historical lesson, however, to warn against interventionist instincts to restrict free trade.
"It was a wave of protectionist trade measures, triggered by the infamous Smoot-Hawley tariff in the United States and quickly emulated by most Europeans, that converted the depression of the early 1930s into the Great Depression," Fred Bergsten, the Director of the Peterson Institute for International Economics, wrote in The Washington Post this week.
Yet it's not all that clear that a cycle of tit-for-tat protectionism is in the offing.
In part that's because, unlike the U.S.-concentrated economic expansion before the 1929 crash, the entire world shared in the unprecedented growth that preceded the current crisis in a period recognized for its trade liberalization and global integration.
To be sure, few economists see world trade getting freer in a hurry, notwithstanding Brazilian President Luiz Inacio Lula da Silva's call for the summit to revive the Doha round of World Trade Organization negotiations. Those trade talks stalled in July on, among other things, U.S. and European resistance to Brazil's and other agricultural commodity producers' demands for more open world trade in food.
But the good news for free trade advocates is that many don't see the world going backwards, either.
"With the global economy possibly contracting next year there is a temptation across the globe to blame foreigners," said Dan Ikenson, Associate Director of the Cato Institute's Center for Trade Policy Studies. "But in reality I think businesses and nations are coming to the realization that trade is actually a good thing, that the world is not actually characterized as us-versus-them any more. That we all part of a global supply chain."
He argued that the business integration of the globalization era should make trade-restrictive measures less appealing to domestic industries.
Despite his libertarian think tank's criticism of Democratic President-elect Barack Obama's call for an auto sector bailout and of his party's loyalty to some instinctively protectionist unions, Ikenson is confident the anti-free trade rhetoric of the presidential campaign won't translate into action, even with the Democrats' stronger hold on Congress.
Ikenson noted that more than 30 "anti-trade" bills targeted at China were presented into the current Congress, also Democrat-led, but that none were passed. This was a mark, he said, of the general acceptance in the U.S. and elsewhere of the WTO's authority.
Even so, with Wall Street's credit crunch now translating into a recession in rich countries, and with job losses and bankruptcies rising, governments will be tempted to protect failing local industries at the expense of foreign competitors.
Fears of this prompted business chambers in eleven G-20 member countries to issue a statement Friday calling on leaders to use the G-20 summit to "arrest any drift towards protectionism by agreeing to a freeze on the imposition of any new trade and investment barriers for goods and services" and to "intensify efforts to conclude successfully the WTO Doha round of multilateral trade negotiations."
For his part, U.S. President George W. Bush, the host of the summit, used a speech in New York Thursday to make a strong defense of free markets, an issue that is seen as important to his legacy.
In a press briefing a day earlier, Bush's assistant for international economic affairs, Daniel Price, said "the President will...use this opportunity to urge his fellow leaders not to turn inward or stifle markets.
"Protectionist rhetoric about walling off markets or companies does not help stabilize markets, but in fact leads to greater uncertainty," Price said.
Governments everywhere of late have supported calls for fiscal stimulus efforts to restore growth - there was near-unanimous support for China's announcement of a $586 billion spending package during the pre-summit G-20 finance ministers meeting in Brazil last weekend. But some economists worry these measures will cross the line into unfair protection for local industries.
Stimulus spending "will need to be carefully designed so as not to run afoul of WTO and other restrictions," said Krishna Kumar of the Rand Corporation in Santa Monica. He warned that Obama's $25 billion proposal for a Big Three auto sector bailout could raise concerns similar to those behind Boeing Corp. (BA) long-running dispute at the World Trade Organization with Europe's Airbus (ABI.YY)
"Emerging economies will complain as developed economy industries are given special provisions," Kumar said.
But Colin Bradford of the Brookings Institution said that in the auto sector's case this "would not be a politically reasonable charge. It's not as if the Japanese government would not do the same for Toyota."
Like Cato's Ikenson, Bradford believes the past 13 years of the WTO system and the fruits of growth that accompanied them have entrenched worldwide support for free trade.
But unlike Ikenson he sees no need to open markets even more right now. At a moment when public confidence is critical for the health of the global economy, it is unwise, he said, for governments to take a doctrinaire position that ignores voters' fears over free trade, whether or not these are justified in technical economic terms.
"There is nothing wrong with a pause," Bradford said. Although the benefits of free trade have been made "abundantly clear" in recent years, it's important for governments to recognize that "most societies think that trade liberalization has gone far enough for now," he said.
-By Michael Casey, Dow Jones Newswires; michael.j.casey@dowjones.com; 54-11-4590 2428
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(END) Dow Jones Newswires
November 14, 2008 16:54 ET (21:54 GMT)

Publié le 14 novembre 2008 Copyright © 2008 Dowjones