How could trade be restricted? Let me count the ways....

Posted By Daniel W. Drezner Thursday, April 2, 2009 - 4:15 PM Share

The final G-20 communique -- get it while it's hot! -- contains the following strong statement: "We will not repeat the historic mistakes of protectionism of previous eras."

This is likely true, though one should never underestimate the ability of governments to devise new and unforseen ways to commit new mistakes about protectionism in the current era.*

How could that happen? Check out my latest column in The National Interest online to see how a world of considerably less trade is possible, even within the confines of the World Trade Organization.

The essay is a thought experiment -- I'd put my money on it not happening. But I can't completely dismiss this scenario out of hand.

* Indeed, The FT's Alan Beattie and Jean Eaglesham have the best single sentence on this point of the G-20 statement: "The commitments on protectionism in the G20 communiqué, although longer than their equivalents after November’s Group of 20 meeting, are, if anything, shorter on concrete promises."

EXPLORE:GLOBALIZATION, DEPRESSION ANALOGIES, GLOBAL GOVERNANCE, GLOBALIZATION, INTERNATIONAL POLITICAL ECONOMY, PROTECTIONISM

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BRETT

7:54 PM ET

April 2, 2009

My money is on NTBs, seeing

My money is on NTBs, seeing as how they have tended to go up while tariffs have been going down. How about if the world took the US's "percentage of items must be made in the US" and ran with it?

BLUE13326

6:08 AM ET

April 3, 2009

Interesting article. I think

Interesting article. I think the most likely is the currency game, as you've pointed out here. However, if we do pass a carbon tax, I can easily see domestic pressure rising rapidly for protectionist measures, as such a tax could cripple our manufacturing sector at a time when it is already under significant disadvantages from overseas manufacturers. In fact, Chu was correct in his testimony that the one logically follows the other; you can't significantly raise costs on our manufacturing sector while allowing non-carbon tax manufacturers overseas to sell into our markets at much lower costs without destroying what's left of our manufacturing base.

The main issue, unfortunately, seems not to have been addressed at the G20: That the surplus/exporting countries that are going to be hit hardest are not doing enough stimulus. The idea that the US should take on more and more debt to stimulate demand for these countries while they continue to build surpluses is not sustainable.

DON S

11:53 PM ET

April 4, 2009

"The main issue,

"The main issue, unfortunately, seems not to have been addressed at the G20: That the surplus/exporting countries that are going to be hit hardest are not doing enough stimulus."

Precisely so. EU continues to hide their heads in the sand about the collapse of trade, and the US is going to be sorely tempted to form a 'coalition of the willing' to ring-fence stimulation spending from benefitting those who do not do their part. Not just yet, but if things turn downward again Congress is going to get the bit between it's teeth - possibly as soon as spring, 2010.

As for Daniel's argument that WTO may temper but not stop 'begger thy neighbor' trade policies, this unfortunately is not a theoretical policy but current fact.

The Financial Times article Daniel linked to mentioned the lag between bringing a WTO case and the final decision, using the case of the steel tariffs the Bush Administration imposed in 2002 and wasn't forced to lift until 18 months had passed.

But the US indeed did follow the WTo ruling in the end. The FT also mentioned a far graver case, the fact that the EU has failed to lift the ban on hormonal beef from the US for many years now after the EU lost the WTO. The EU is a scofflaw, and the Obama administration could use the precedent to impose tariffs far more punitive than current policy upon EU exports to the US. Thus far the US has chosen not to do so. But that does not convert the EU into a law-abiding body - only following the rule of law would do that....