In the wake of the economic crisis, protectionism has emerged in many countries in a number of subtle and not so subtle ways. It will be difficult to reverse such tendencies even after the economies revive.
Global trade has been a principal casualty of the ongoing economic crisis.
The World Trade Organization estimates trade to contract by 9 per cent this year. Collapsing global demand and severe curtailment of trade finance by banks and other lenders have been the main factors responsible.
Together they have created constraints to export growth, especially in many developing countries. Obviously developed countries have been affected equally if not to a greater degree.
The financial crisis that morphed into an economic crisis started in the U.S. which still remains the epicentre of the crisis. Global economic recovery is dependent to a large extent on how soon the U.S. economy stabilises. The fall in demand and investment in the U. S. and Europe is a principal reason for the major setback in world trade.
All round fall in exports
Exports from the U.S. are down 30 per cent and imports 34 per cent in the first quarter of the year compared to the previous three months. Japan, heavily dependent on the U.S. market, saw its exports plunge 45.5 per cent in March this year on a year-on-year basis. Consequently its economy, the second largest in the world, contracted by 15.2 per cent, its worst ever performance since 1955. Exports from China and Brazil fell by 20 per cent in the first quarter compared with a year ago. Countries more closely linked to the U.S., Mexico for instance through the NAFTA, have fared even worse. Its exports fell by 29 per cent while its economy declined 21.5 per cent, more than three times the rate of contraction in the U.S.
The crisis in trade, though originating from the financial and economic crises, has not probably received the same degree of attention from policy makers the way those crises have. Nevertheless, following the G-20 summit in London and thereafter, trade related issues have been brought back to centre stage as it were.
Looming protectionism
Two other developments have aggravated the downturn in global trade. Protectionism has emerged as a major threat to trade liberalisation not only for now but over the foreseeable future. Voters in many countries have come out against outsourcing and other vehicles of globalisation. Political leaders find it convenient to blame other countries for loss of jobs.
Global trade has been a principal casualty of the ongoing economic crisis.
The World Trade Organization estimates trade to contract by 9 per cent this year. Collapsing global demand and severe curtailment of trade finance by banks and other lenders have been the main factors responsible.
Together they have created constraints to export growth, especially in many developing countries. Obviously developed countries have been affected equally if not to a greater degree.
The financial crisis that morphed into an economic crisis started in the U.S. which still remains the epicentre of the crisis. Global economic recovery is dependent to a large extent on how soon the U.S. economy stabilises. The fall in demand and investment in the U. S. and Europe is a principal reason for the major setback in world trade.
All round fall in exports
Exports from the U.S. are down 30 per cent and imports 34 per cent in the first quarter of the year compared to the previous three months. Japan, heavily dependent on the U.S. market, saw its exports plunge 45.5 per cent in March this year on a year-on-year basis. Consequently its economy, the second largest in the world, contracted by 15.2 per cent, its worst ever performance since 1955. Exports from China and Brazil fell by 20 per cent in the first quarter compared with a year ago. Countries more closely linked to the U.S., Mexico for instance through the NAFTA, have fared even worse. Its exports fell by 29 per cent while its economy declined 21.5 per cent, more than three times the rate of contraction in the U.S.
The crisis in trade, though originating from the financial and economic crises, has not probably received the same degree of attention from policy makers the way those crises have. Nevertheless, following the G-20 summit in London and thereafter, trade related issues have been brought back to centre stage as it were.
Looming protectionism
Two other developments have aggravated the downturn in global trade. Protectionism has emerged as a major threat to trade liberalisation not only for now but over the foreseeable future. Voters in many countries have come out against outsourcing and other vehicles of globalisation. Political leaders find it convenient to blame other countries for loss of jobs.
