Slowing the protectionist juggernaut

Gary Hufbauer

At the G20 Summit, held in November 2008, leaders pledged to avoid protectionist policies.  Before the ink was dry, India and Russia put up new barriers. Since the turn of the year, Britain has engaged in financial protectionism, France and Italy both proposed restrictive auto measures, and the US has enacted a “buy American” rider on its stimulus package. At least 16 other countries have contemplated or passed new measures that throw sand in the wheels of the world economy.  None of these actions may breach World Trade Organisation (WTO) or other international obligations, but all of them defy the spirit of the G20 proclamation. The juggernaut of protection is rolling, slowly for now.  What can be done to keep the speed from picking up?

Create a “name and shame” bench
A visionary private foundation should convene a high-standard and independent bench to act as a watchdog. The bench would be charged with grading new trade restrictions on an accelerated schedule. How would it work?

Members
The bench would consist of 12 eminent economists and lawyers from all over the world. It would be independent of any government and the WTO.

Timeline
The bench is suggested as a crisis measure; it is not meant to be permanent.  Hopefully the economic slump will turn around in two years or sooner, and the protectionist juggernaut will come to a natural rest.  Therefore, the bench should have a defined life of two years.

Case selection
The chair person of the bench, the president of the World Bank and the director-general of the WTO would all be empowered to assign cases for evaluation by the bench.

Method
The bench would convene electronically, in panels of three, with the help of junior assistants. Panels would evaluate measures against the standards of the WTO, any relevant Free Trade Agreement, the G20 pledge of November 2008, the G7 pledge of February 2009, and any subsequent G20 pledge.

Reports
Case reports would be issued within 30 days. Reports would describe the measure and determine whether it violates the relevant standards. The reports are meant only to “name and shame”; they are not meant to be used as evidence in subsequent WTO disputes or other judicial proceedings.

Speedy reports are more important than detailed legal analysis.  The idea is to slow the protectionist juggernaut, through the force of informed opinion.  Press citations of “protectionism” far exceed the extent of protective action. But smoke often precedes a blaze, and a relaxed attitude is wrong when the world economy is sinking and protectionist sentiment is soaring.

Gary Hufbauer is Reginald Jones senior fellow at the Peterson Institute for International Economics