Ecuador resorts to protectionism in the crisis. Major nations are also leaning towards protectionism. Can we avoid the kind of disaster that happened to world trade in the 1930’s. More at Christian Science Monitor.
“Ecuador is really the outlier here, it’s been the most enthusiastic,” says Gary Hufbauer, a trade policy expert at the Peterson Institute for International Economics in Washington. “From what I’ve heard, it’s been the most dramatic example of protectionism.”
Guidelines to prevent such barriers from going up are a centerpiece of the Group of 20 summit today in London. But it will be no easy task. While Ecuador’s policy stands as a dramatic example, governments around the globe have put in place nearly 100 such measures since August, says Mr. Hufbauer.
The World Trade Organization estimates that the volume of global trade will shrink by 9 percent this year – the largest contraction since World War II. And if the recession continues to deepen, the political pressures on governments to prop up their domestic markets will only grow.
“Up to now, there have not been major [protectionist] policy decisions by governments.… [T]here is a powerful lesson from the 1930s, and we don’t want to go there,” says Edward Gresser, trade director at the Progressive Policy Institute in Washington. “But I think there is a pretty widely held feeling that if a major country decided to begin closing its markets, others might quickly follow. You’d get a quick chain reaction.”