CAMBRIDGE – There was a dog that didn’t bark during the financial crisis: protectionism. Despite much hue and cry about it, governments have in fact imposed remarkably few trade barriers on imports. Indeed, the world economy remains as open as it was before the crisis struck.
Protectionism normally thrives in times of economic peril. Confronted by economic decline and rising unemployment, governments are much more likely to pay attention to domestic pressure groups than to upholding their international obligations.
As John Maynard Keynes recognized, trade restrictions can protect or generate employment during economic recessions. But what may be desirable under extreme conditions for a single country can be highly detrimental to the world economy. When everyone raises trade barriers, the volume of trade collapses. No one wins. That is why the disastrous free-for-all in trade policy during the 1930’s greatly aggravated the Great Depression.
Many complain that something similar, if less grand in scope, is taking place today. An outfit called the Global Trade Alert (GTA) has been at the forefront, raising alarm bells about what it calls “a protectionist juggernaut.” The GTA’s latest report identifies no fewer than 192 separate protectionist actions since November 2008, with China as the most common target. This number has been widely quoted in the financial press. Taken at face value, it seems to suggest that governments have all but abandoned their commitments to the World Trade Organization and the multilateral trade regime.