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  • RESPONSIBILITY LIES WITH THE G20

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    Responsibility Lies with the G20

     

     
     
    International Trade Forum - Issue 1/2009

     At their November 2008 meeting in Washington, world leaders thought of this crisis as a landmine that the United States and European economies had stepped on; as these economies had planted it, other emerging nations seemed only indirectly concerned.

    In the past six months, that 'landmine crisis' has become a 'cluster-bomb crisis', throwing recession-inducing projectiles in every direction. Emerging economies are now directly implicated; their economies are being damaged by a decade of G7 governance failures in financial markets. This changes the type of political guidance that is needed now from the G20.

    Trade is experiencing a sudden, severe and globally synchronized collapse. Protectionism is not yet a cause of the plunge, but it would be irresponsible not to recognize that the mercantilist spectre is knocking at everybody's door; that recession will embolden protectionist forces inside every G20 member. A perverse feedback between recession and protectionism is no longer an historical reminiscence of the 1930s, but a possible scenario today. What G20 leaders did at the London Summit was useful, but they should do more. They should try to get out in front of the crisis and take concrete steps to ensure the spiral never gets started.

    Trade experts from around the world have recommended a list of such steps. These include a commitment to a more specific and broader standstill on new protection, backed up by real-time surveillance; a pre-commitment to negotiating the removal of all crisis-linked measures in three years time; and a head-of-state negotiation of a compromise that would get the Doha talks back on track. Former Mexican President Ernesto Zedillo has even made the bold proposal of keeping the peace by preparing for war. He suggests that countries pledge to use whatever legal means they have at their disposal to retaliate against others for protectionist actions that harm their exports.

    Time is of the essence. A protectionist spiral in the next nine months would be a tragedy, aborting any hope that the stimulus packages will work, as well as killing any hopes that cooperation on the economic crisis could set the stage for cooperation on climate change.

    This is based on an e-book co-edited by Richard Baldwin and Simon Evenett, titled 'The collapse of global trade, murky protectionism, and the crisis: Recommendations for the G20'.