London summit outcome

Trade and the London Summit outcome

|Richard Baldwin |Print   Email |
|4 April 2009 |Comment   Republish |

|G20 leaders made a number of commitments on trade in their London Communiqué.This column argues that the anti-protection pledge is more credible than the one agreed in the Washington |
|Declaration. The commitment on the Doha Round, by contrast, was pitiful. |
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|The London Communiqué confirms that issues surrounding international trade have moved up the G20 agenda. The commitments made could have been much stronger, but I believe that what was agreed on|
|protectionism can be graded as “not bad”. On the Doha Round, the Summit’s pledge waspitiful – it should be graded “very sad”. Yet, given the current disarray in the US’s trade policymaking |
|machinery, it was perhaps the best that could have been accomplished. |
|What did they agree in London?|
|The commitments on trade fall into three basic categories: |
|Anti-protectionist pledges,|
|Reinforcing trade credit, and |
|Advancing the Doha talks.    |
|The anti-protectionist pledge    |
|The London Summit Communiqué is no weaker than the Washington Declaration – and in two importantways, it is stronger and more credible. As Table 1 (at the end of the column) shows, the general |
|pledge is equivalent, and the specific “standstill” commitment is identical. |
|Of course, the Washington pledge turned out to be full of holes. A frequently cited World Bank study,first posted on Vox last month, listed 57 protectionist measures undertaken by G20 nations |
|since their pledge. Nevertheless, I would say that the protectionism we’ve seen to date isn’t that bad. I don’t know any trade economist around the world who seriously argues that protectionism |
|has been an important cause of collapsing trade. In this sense, the Washington pledge worked.|
|As former Mexican President Ernesto Zedillo argued on Vox last month, what we really need to do is postpone a protectionist spiral for the next 9 months – enough time for the macro stimulus time|
|to start to work. If the economy recovers, protectionist pressures will fade on their own. If it doesn’t and...