Trade and the Crisis: Protect or Recover

IMF Staff Position Notes, April 16, 2010

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The pace of trade reforms waned from the mid-2000s as protectionist sentiment began to increase.
With the onset of the global financial crisis, reform progress not only halted but began to reverse.
New trade restrictions have had—in the limited products they targeted—a strong negative impact on trade.
The aggregate impact of new restrictions is modest, at about 0.25 percent of global trade, as most countries have resisted a widespread resort to protectionism.

Sustained high unemployment, uneven growth, and an unwinding of government stimulus measures suggest that protectionist pressures may rise.
Gaps in World Trade Organization (WTO) commitments leave ample scope to further restrict trade.
Unless all countries vigorously resist protectionism, increased restrictions could threaten the economic recovery and drag down future growth.

Continue and further enhance monitoring of all protectionist measures.
Maintain high-level political awareness of the macroeconomic risks associated with protectionism.
The surest way to avoid a downside scenario is to tighten multilateral trade commitments by completing the WTO Doha Round.
Completing the Doha Round can be viewed as a key part of the exit strategy from the global economic crisis.

Subject: International trade, Protectionism, Tariffs, Trade balance, Trade barriers, Trade finance, Trade policy
Keywords: contraction, distortionary trade measure, G20 industrial nations, Global, Protectionism, protectionist measure, protectionist pressure, protectionist response, protectionist surge, resurgent protectionism, risks of protectionism, SPN, trade, Trade balance, Trade barriers, trade contraction, Trade finance, trade measure, trade openness, Trade policy, trade response, trade volume

Source: Trade and the Crisis: Protect or Recover (IMF Staff Position Note, April 16, 2010).