Protectionism barely affected trade - World Bank economist

GENEVA Mon Jul 19, 2010 6:09pm BST

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GENEVA (Reuters) - Protectionist measures taken by different countries during the financial crisis had little overall impact on trade, a World Bank economist said on Monday.

Hiau Looi Kee said research she and her colleagues have undertaken shows that protectionist measures such as tariff increases or anti-dumping duties accounted for less than two percent of the contraction in world trade in the crisis.

The economic downturn resulting from the financial crisis that broke in 2008 prompted fears that countries would defend themselves with protectionism, leading to a rerun of the 1930s Great Depression when governments reacted to the 1929 Wall Street Crash with a series of beggar-thy-neighbour trade moves.

And while G20 leaders immediately promised to keep markets open, in practice many did implement protectionist policies.

Such measures have been documented by Global Trade Alert (GTA) (www.globaltradealert.org), a project by independent economists, whose latest report last month showed protectionist policies were continuing to mount.

But Kee said that analysis of the same data used by GTA gave a different picture, when examined for its impact on trade flows, the share of affected goods in overall trade, and the responsiveness of trade in those products to the measures.

"It's quite sensational to read about all the countries raising tariffs and anti-dumping duties, but if you actually do the math it doesn't look like a great deal of effect," she told Reuters by telephone from Washington.

DECLINING PROTECTIONIST PRESSURE

Kee said that at the very most, protectionist policies had resulted in a decline of $43 billion (28.2 billion pounds) in trade between July 2008 and September 2009, the latest period for which detailed tariff data are available.

The World Trade Organisation estimates that trade contracted by 23 percent in value terms in 2009 to $12.5 trillion.

She said the research had looked only at quantifiable protectionist measures such as tariff increases or duties, not at "murky protectionism" such as stimulus packages or Buy National policies whose economic effect was hard to assess.

Many economists have argued that the reason for the biggest contraction in trade since World War Two was the collapse in demand prompted by the crisis, with its accompanying loss of business and consumer confidence.

Rich economies like the United States and European Union had little scope to raise tariffs under WTO rules, and most of their measures took the form of anti-dumping duties -- taxes imposed on imports sold allegedly for less than they cost to produce and a frequent source of trade disputes.

Developing countries on the other hand were able to use both anti-dumping and tariff increases.

"Given that trade is recovering well, the urgency to use protectionist policy is less than one year ago so I do not foresee trade policy will have a lot of action ... from now on," Kee said.

But she said stubbornly high unemployment in rich countries could lead governments to adopt some protectionist policies.

Kee's analysis is in line with that of the WTO, which has concluded that the global trading system has withstood the crisis and protectionist pressures well.

The World Bank is one of several institutions that funds Global Trade Alert.

(Editing by Jon Hemming)

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