## Trade Winds—Has the Spectre of Protectionism Blown Away? _IMF Blog, January 5, 2012_ ## Source details **Canonical URL:** [Trade Winds—Has the Spectre of Protectionism Blown Away?](https://www.imf.org/en/blogs/articles/2012/01/05/trade-winds) ## Other formats - [Markdown version](/en/blogs/articles/2012/01/05/trade-winds/index.md) - [Structured JSON version](/en/blogs/articles/2012/01/05/trade-winds/index.json) - [Bundle manifest](/en/blogs/articles/2012/01/05/trade-winds/bundle-manifest.json) ## Bibliographic details - Authors: Tamim Bayoumi - Published: January 5, 2012 --- ### Overview and context - Author: Tamim Bayoumi - Date: January 5, 2012 - Central thesis: While fears of a widespread resurgence of 1930’s-style trade protectionism after the 2008 financial crisis proved unfounded, rising unemployment and prolonged crisis conditions create renewed pressure for protectionist measures; now is the time to resist protectionist pressures and re-energize trade integration. ### Rising pressures and evidence - Protectionist actions cited: - Brazil: actions at the World Trade Organization (WTO) aiming to use trade remedies to offset currency misalignments. - China: imposed duties on cars made in the United States. - United States: pending legislation to use trade measures to defend against “undervalued” currencies such as the renminbi. - Empirical pattern observed: - Advanced economies experiencing the largest increases in unemployment were also those most inclined to impose trade restrictions, as suggested by the number of cases of anti-dumping and countervailing duties initiated against China. - There was a big uptick in these measures in recent years (chart referenced in source). ### Macroeconomic importance and IMF engagement - Rationale: The IMF takes interest in trade due to its macroeconomic importance; trade integration can be an engine of growth and trade wars can put millions of jobs in jeopardy (quote from David Lipton). - Joint action: The IMF, together with the World Bank and WTO, held a trade conference in December 2011—the first such event—focused on prospects for the global recovery and risks to the multilateral trading system. - Fund staff papers presented at the conference: - "Changing Patterns of Global Trade" - Examines the growing role of vertical integration through global supply chains. - Highlights the importance of value-added analysis (as opposed to gross exports) for examining trade inter-linkages and implications for the response of trade flows to exchange rate changes. - "Protectionist Responses to the Crisis: Damage Observed in Product-Level Trade" - Finds evidence that, while there was no widespread protectionist action and only a limited generalized impact on trade, protectionist measures had a strong impact on trade in the particular products to which they were applied. ### Developments in trade integration (recent bilateral and regional initiatives) - United States actions: - In October 2011, the United States ratified three bilateral free trade agreements with Columbia, Panama, and South Korea. - Trans-Pacific Partnership (TPP): - In November (2011), nine Asia-Pacific countries embraced the Trans-Pacific Partnership. - Japan’s commitment to join the TPP talks is noted as particularly important for opening up sensitive sectors. - With the world’s third largest economy, the TPP would be the largest free trade zone, representing close to 40 percent of the world economy. - Broader point: Trade integration is regaining strength through bilateral and regional initiatives; multilateral agenda needs to address emerging issues to avoid unilateral “trade remedies” and exclusive smaller-group deals. ### IMF work program and policy tools in the pipeline - Three main lines of work: - Trade finance monitoring: - Launched in December an ad-hoc trade finance survey, in collaboration with the International Chamber of Commerce, in light of recent deleveraging by European banks. - Purpose: to monitor risks to global trade credit and provide timely input into ongoing discussions by the Group of Twenty advanced and emerging market economies. - Global supply chains: - Ongoing work to examine value-added trade flows and implications for trade interconnectedness and exchange rate assessments. - Index of protectionist pressure: - Developing a new index to summarize key macroeconomic variables—such as growth rates, unemployment, imports, and exchange rate regimes—that help foreshadow protectionism. - The index would be amenable to regular updates in line with revisions to the IMF’s global projections and could serve as the Fund’s own gauge on trade winds. ### Policy implications and recommendations - Resist protectionist pressures during protracted crises when unemployment is high. - Re-energize trade integration to support global recovery; trade should contribute to, not detract from, growth and jobs. - Pursue multilateral progress on the Doha Development Agenda (launched in November 2001) while expanding the multilateral agenda to address open regionalism, and food and energy security. - Use improved monitoring tools (trade finance survey, value-added trade analysis, and an index of protectionist pressure) to inform policy and multilateral discussions. *IMF Blog — Trade Winds—Has the Spectre of Protectionism Blown Away?* --- ## Content in this bundle - **Changing Patterns of Global Trade ; IMF Policy Paper; June 15, 2011** - [Changing Patterns of Global Trade ; IMF Policy Paper; June 15, 2011 (Markdown version)](/external/np/pp/eng/2011/061511.pdf.md){rel="alternate" type="text/markdown"} - [Changing Patterns of Global Trade ; IMF Policy Paper; June 15, 2011 (PDF)](/external/np/pp/eng/2011/061511.pdf){rel="external" type="application/pdf"} - **wp11139** - [wp11139 (Markdown version)](/external/pubs/ft/wp/2011/wp11139.pdf.md){rel="alternate" type="text/markdown"} - [wp11139 (PDF)](/external/pubs/ft/wp/2011/wp11139.pdf){rel="external" type="application/pdf"} --- ## References - [https://www.imf.org/wp-content/uploads/2012/01/spr-trade-policy-post_jan2011.jpg](https://www.imf.org/wp-content/uploads/2012/01/spr-trade-policy-post_jan2011.jpg) - [trade conference](http://www.imf.org/external/np/seminars/eng/2011/trade/index.htm) _Source: https://www.imf.org/en/blogs/articles/2012/01/05/trade-winds_