Global Financial Crisis, Protectionism, and World Trading System

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Global Financial Crisis, Protectionism, and World
Trading System

• Wongun Song
• Korea Economic Research Institute

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? Global financial crisis caused world
trade to reduce sharply.

• Pace of reduction in global production
• and trade is faster and severer than that of
  any recent global economic downturn.

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• World trade grew more than 6 a year. (1990-2006)
• Reduction of World Trade in 2009 (predicted) 9
  (WTO), 11 (IMF)

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Adoption of Protectionist measures in country A
Retaliatory adoption of Protectionist measures
in countries affected by measure of country A
Trade War
Collapse of Global Trade
Worsening Global Economic Crisis
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Subsidies
Tariffs
Anti-dumping
Other NTBs
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? Raise tariffs Ecuador, Russia, India etc
? Subsidies to troubled domestic industries
Automobile industry (US, Europe, Canada,
China, Brazil etc)
? Discriminatory procurement provisions in fiscal
stimulus bills Buy American, Buy
Chinese Provisions
? Anti-dumping increase in investigations
initiated
? Other Non-tariff barriers import bans,
discretionary licensing requirements
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Fiscal Stimulus Bills and World Trading System

• Subsidizing troubled domestic industries is
  included
• in almost all fiscal stimulus bills.
• (e.g. automobile industry, steel industry)
• It may violate WTO norms but ambiguity remains
  
• whether it has broke WTO rules.
• Expansionary fiscal policies can be used as a
  way
• of subsidizing and protecting domestic
  industries in a
• competitive or retaliatory fashion.
• Widespread use of subsidies might lead to the
• dismantling of world trading system
  constructed by
• decades of global efforts towards free trade.

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Ways to Avoid Protectionism
Completing Doha
Embarking on a New Round
Agreement on Co-ordinating Fiscal Policy
Empower WTO for standstill with G20
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Completion of DDA

• Once DDA is completed

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Ways of Enforcing the Standstill
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Thank You!!