“Western countries should close their markets to sales of Chinese trains. In line with our expectations, the market is gradually shutting down to let the Chinese companies prosper.” Made in the first week of January 2009, this comment by the chief executive of Paris-based Alstom Transport, Philippe Mellier, amounted to a declaration of commercial war and reflected rising protectionist sentiment on the global level, especially amongst those countries most affected by the economy downturn. In the last two years many countries have increased their tariffs and imposed trade barriers on imported products in order to safeguard their domestic industries and keep jobs at home. According to Pascal Lamy, Director of the World Trade Organization (WTO), the international free trade watchdog, the temptation to revert to protectionism becomes stronger in times of economic crisis.
In December 2008 Indonesia increased customs duties on a total of five hundred products. It also made import procedures more stringent. In November of the same year Russia, which is still not a member of the WTO, increased customs duties on imported cars by just over a third (35 percent) and extended financial support to local pork and poultry producers in an effort to reduce dependence on outside sources of these products. Russia’s imports of these products totaled $740 million last year, the United States being an important supplier.
Along with the U.S., Canada, and China, Russia also began injecting substantial financial support into other key economic sectors, such as the auto, textiles and steel industries and the financial sector. These subsidies will directly benefit domestic companies at the expense of foreign competition.
Since 2009 the trade war between China and the United States and the European Union (EU) has intensified against the backdrop of a string of protectionist measures put into force by various sides. In December 2008 Beijing filed complaints to WTO over anti-dumping duties and countervailing measures imposed by the U.S. on four Chinese exports. Washington continues to justify these penalties by saying that they offset Chinese export subsidies. In September 2011 China justified its own anti-dumping and countervailing measures on imports of U.S. poultry products by claiming that these policies are legal and in line with WTO rules and regulations. However, in spite of this standoff, since January 2009 the two countries have been holding regular talks on trade issues in Geneva.
A 2009 Chinese report stated that technical barriers to trade resulted in approximately $49 billion in losses throughout 2007, up from $13,5 billion in 2006. WTO data for the same period shows that the number of investigations conducted by the WTO into the practice of dumping increased 39 percent between January and June 2008.
Especially worrying are the protectionist reactions occurring in the big markets of APEC member countries. This could transform what is still considered by most economists a global economic recession into a long term global depression. Since September 2008 the U.S. economy has shown distressing signs of a major and prolonged slowdown. World leaders must learn from the lessons of the Great Depression of the 1930s, when in highly developed and integrated economies protectionism and economic isolationism were a recipe for disaster. Such were the policies of the past, but to repeat the same mistakes today would seriously harm world trade, not only now but in the future, especially if a majority of states continue imposing such counterproductive policies.
In the U.S. and Europe, prosperity has for two centuries been derived from trade liberalization. Moreover, in the last three decades, trade has proven a critical force for world development. It has spurred innovation and fostered interdependence between countries and economic synergies. Trade, not charity, has enabled APEC members like China, South Korea, Hong Kong, Malaysia, and Singapore to raise the standards of living of hundreds of millions of people.
Tariffs, or taxes levied on products passing through a customs border or usually imposed on imports, have been significantly reduced since World War II, following the establishment of the General Agreement on Tariffs and Trade (GATT). For example, tariffs as a share of global import value decreased from 26 percent in 1986 to about 8 percent in 2007. The share of developing countries in global exports increased from 29 percent in 1996 to 37 percent in 2007. APEC has contributed to increasing world trade. It was specifically established in 1989 to advance regional economic integration and prosperity. Since then this organization, which does not produce trade agreements, has worked to reduce tariffs and other trade barriers to facilitate business interactions between member nations.
The global financial crisis, combined with a wave of protectionist policies, could kill the momentum in international trade. Many signs already point in that direction. For the first time since 1982 trade, the engine of the global economy, has begun to diminish, by approximately 2 percent in both 2009 and 2010, according to World Bank data.
The prevailing global economic slowdown could be further fueled by the rise of protectionism in both developed and emerging economies within APEC. Economists remember the disastrous Smoot-Hawley Tariff Act of June 18, 1930, which imposed customs duties on 900 products in the U.S., raising tariffs from 38 percent to 50 percent on average. This sought to protect the American economy in a difficult period, but trade partners almost universally responded by imposing retaliatory tariffs, precipitating the descent into the Great Depression which lasted until the beginning of the Second World War. The Smoot-Hawley Act and other tariff measures actually had the opposite effect from that President Herbert Hoover intended. The same thing could happen again if APEC states carry out their threats to impose protectionist measures to support their domestic industries.
Dr. Richard Rousseau is Associate Professor and Chairman of the Department of Political Science and International Relations at Khazar University in Baku, Azerbaijan and a contributor to Global Brief, World Affairs in the 21st Century (www.globalbrief.ca) and The Jamestown Foundation.
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Trade Protectionism in Vogue among APEC Members
November 8, 2011
“Western countries should close their markets to sales of Chinese trains. In line with our expectations, the market is gradually shutting down to let the Chinese companies prosper.” Made in the first week of January 2009, this comment by the chief executive of Paris-based Alstom Transport, Philippe Mellier, amounted to a declaration of commercial war and reflected rising protectionist sentiment on the global level, especially amongst those countries most affected by the economy downturn. In the last two years many countries have increased their tariffs and imposed trade barriers on imported products in order to safeguard their domestic industries and keep jobs at home. According to Pascal Lamy, Director of the World Trade Organization (WTO), the international free trade watchdog, the temptation to revert to protectionism becomes stronger in times of economic crisis.
In December 2008 Indonesia increased customs duties on a total of five hundred products. It also made import procedures more stringent. In November of the same year Russia, which is still not a member of the WTO, increased customs duties on imported cars by just over a third (35 percent) and extended financial support to local pork and poultry producers in an effort to reduce dependence on outside sources of these products. Russia’s imports of these products totaled $740 million last year, the United States being an important supplier.
Along with the U.S., Canada, and China, Russia also began injecting substantial financial support into other key economic sectors, such as the auto, textiles and steel industries and the financial sector. These subsidies will directly benefit domestic companies at the expense of foreign competition.
Since 2009 the trade war between China and the United States and the European Union (EU) has intensified against the backdrop of a string of protectionist measures put into force by various sides. In December 2008 Beijing filed complaints to WTO over anti-dumping duties and countervailing measures imposed by the U.S. on four Chinese exports. Washington continues to justify these penalties by saying that they offset Chinese export subsidies. In September 2011 China justified its own anti-dumping and countervailing measures on imports of U.S. poultry products by claiming that these policies are legal and in line with WTO rules and regulations. However, in spite of this standoff, since January 2009 the two countries have been holding regular talks on trade issues in Geneva.
A 2009 Chinese report stated that technical barriers to trade resulted in approximately $49 billion in losses throughout 2007, up from $13,5 billion in 2006. WTO data for the same period shows that the number of investigations conducted by the WTO into the practice of dumping increased 39 percent between January and June 2008.
Especially worrying are the protectionist reactions occurring in the big markets of APEC member countries. This could transform what is still considered by most economists a global economic recession into a long term global depression. Since September 2008 the U.S. economy has shown distressing signs of a major and prolonged slowdown. World leaders must learn from the lessons of the Great Depression of the 1930s, when in highly developed and integrated economies protectionism and economic isolationism were a recipe for disaster. Such were the policies of the past, but to repeat the same mistakes today would seriously harm world trade, not only now but in the future, especially if a majority of states continue imposing such counterproductive policies.
In the U.S. and Europe, prosperity has for two centuries been derived from trade liberalization. Moreover, in the last three decades, trade has proven a critical force for world development. It has spurred innovation and fostered interdependence between countries and economic synergies. Trade, not charity, has enabled APEC members like China, South Korea, Hong Kong, Malaysia, and Singapore to raise the standards of living of hundreds of millions of people.
Tariffs, or taxes levied on products passing through a customs border or usually imposed on imports, have been significantly reduced since World War II, following the establishment of the General Agreement on Tariffs and Trade (GATT). For example, tariffs as a share of global import value decreased from 26 percent in 1986 to about 8 percent in 2007. The share of developing countries in global exports increased from 29 percent in 1996 to 37 percent in 2007. APEC has contributed to increasing world trade. It was specifically established in 1989 to advance regional economic integration and prosperity. Since then this organization, which does not produce trade agreements, has worked to reduce tariffs and other trade barriers to facilitate business interactions between member nations.
The global financial crisis, combined with a wave of protectionist policies, could kill the momentum in international trade. Many signs already point in that direction. For the first time since 1982 trade, the engine of the global economy, has begun to diminish, by approximately 2 percent in both 2009 and 2010, according to World Bank data.
The prevailing global economic slowdown could be further fueled by the rise of protectionism in both developed and emerging economies within APEC. Economists remember the disastrous Smoot-Hawley Tariff Act of June 18, 1930, which imposed customs duties on 900 products in the U.S., raising tariffs from 38 percent to 50 percent on average. This sought to protect the American economy in a difficult period, but trade partners almost universally responded by imposing retaliatory tariffs, precipitating the descent into the Great Depression which lasted until the beginning of the Second World War. The Smoot-Hawley Act and other tariff measures actually had the opposite effect from that President Herbert Hoover intended. The same thing could happen again if APEC states carry out their threats to impose protectionist measures to support their domestic industries.
Dr. Richard Rousseau is Associate Professor and Chairman of the Department of Political Science and International Relations at Khazar University in Baku, Azerbaijan and a contributor to Global Brief, World Affairs in the 21st Century (www.globalbrief.ca) and The Jamestown Foundation.
