Downturn sees protectionist probes rise

[Peikko 1,575]

Downturn sees protectionist probes rise

By Sarah O'Connor in Washington

Published: July 22 2009 19:40 | Last updated: July 22 2009 19:40

Countries are increasingly opening trade investigations against China and other nations as the global recession drags on, according to a report to be released on Thursday.

The trend suggested there might be a surge in protectionist measures next year, it said.

The second quarter of this year saw a 12 per cent rise in investigations against the same period in 2008, according to research by Chad Bown, an economics professor at Brandeis University and fellow at the Brookings Institution. Such investigations are opened at the request of domestic industries calling for new import restrictions to protect their businesses.

Many economists have warned that the global economic crisis may prompt countries to resort to protectionism as domestic industries cry out for help, as in the Great Depression of the 1930s. However, the sharp rise in investigations and actual impositions of import restrictions since 2007 remain below historical levels of the past 20 to 30 years.

"This time – so far – we have been more fortunate, thanks to improved macro-economic management, the solidity of WTO rules and disciplines built since the end of the 1940s, and the self-restraint of governments," Pascal Lamy, head of the World Trade Organisation, said yesterday.

"But . . . we have seen an increase in restrictive trade measures since the onset of the crisis. So there is no room for complacency . . . we need to remain vigilant."

Mr Bown's data, organised into the Global Antidumping Database, suggests the worst could yet be to come. Investigations tend to precede restrictions by 12 to 14 months, meaning the surge in investigations this year – almost double the number in the first half of 2007 – could prefigure a wave of protectionism in 2010.

"I'm really worried about protectionism [in the US] in a very weak economic environment with high unemployment," said Joseph LaVorgna, chief US economist at Deutsche Bank. "That to me is a wild card for 2010, especially as you move toward the mid-term elections."

The US opened the second biggest number of investigations in the second quarter. India was the most active, accounting for a third of the total of 35 opened by WTO members.

Imports from China were the target of 80 per cent of all investigations.

One new trend was the increasing use of so-called "safeguard investigations", which are not aimed at particular countries and are sometimes described as the least damaging form of protectionism. If continued through the second half at the same rate as the first half, 2009 would be the second most prolific year for safeguards use since the WTO's inception in 1995.

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Edited July 22, 2009 by Madame Cleo

[mawilson 2,133]

A healthy dose of protectionism against predatory economies that don't play by the rules (such as China) could be a good thing.

"If we don’t fight them over there, they will fight us over here."

[alienlovechild 75]

"I'm really worried about protectionism [in the US] in a very weak economic environment with high unemployment," said Joseph LaVorgna, chief US economist at Deutsche Bank. "That to me is a wild card for 2010, especially as you move toward the mid-term elections."

That's Matt's cue to somehow blame the GOP for protectionism during Obama's reign.

Imports from China were the target of 80 per cent of all investigations.

The Chinese never get punished because they know the game. They'll claim to abide by some agreement then ignore it.

I don't see a trade war coming.