“We reaffirm our commitment to maintain and promote open markets and reject all protectionist measures in trade and investment.”
This statement was issued by the leaders of 17 countries, including the United States, at the G-8 Summit earlier this summer. Last Friday, the Obama administration announced that it was implementing duties between 25 percent and 35 percent on tires imported from China. A few days later, China announced that it would launch an investigation into U.S. exports of chicken and auto parts, and that it would file a complaint with the World Trade Organization over the duties.
All of this follows the ongoing dispute with Mexico over NAFTA (the $2.4 billion in punitive tariffs Mexico slapped on U.S. exports continue) and the tensions with Canada over the “Buy American” provision passed earlier this year as part of the stimulus bill (see article that appeared this week in the Wall Street Journal).
But the United States is not alone in not “walking the talk” on protectionism. According to a report issued today by Global Trade Alert, “Broken Promises: A G-20 Summit Report by the Global Trade Alert,” protectionist measures are being implemented around the world. Here are the key findings from the report (directly quoted from the press release):
- At least 70 harmful measures have been implemented in every quarter of 2009. Almost every nation has been harmed by another’s beggar-thy-neighbour policy. Fewer than 5 percent of product categories have escaped being hit by some type of protectionist measure.
- There are another 134 protectionist measures in the pipeline. This is equivalent to half a year’s protectionism at current rates.
- The full scale of the G20’s failure to keep its no-protectionist pledge is now apparent. Conservatively estimated, 121 beggar-thy-neighbour measures have been implemented by G20 governments since last November. Every three days a G20 government has broken their no-protectionist pledge.
What does this all mean? According to a joint report issued by the WTO, OECD, and UNCTAD on Monday, the tariffs, subsidies, and other measures that have been applied in recent months have acted as “sand in the gears of international trade that may retard the global recovery.” The heads of the three organizations say that “it is urgent that governments start planning a coordinated exit strategy that will eliminate these elements as soon as possible.”
The G-20 will meet in Pittsburgh, Pennsylvania next week. I predict more hot air.
In the meantime, supply chain executives need to consider the risk and financial impact of increased duties and quotas on their products. The “dark shadows on global trade” that I wrote about back in June are only getting darker.
