Recent slowdown in global trade: Cyclical or structural
Emine Boz, Matthieu Bussière, Clément Marsilli 12 November 2014
The past three years have witnessed a slowdown in global trade. This column shows that the slowdown was particularly pronounced in advanced economies, especially the Eurozone. In a panel of 18 OECD economies, most of the slowdown can be explained by cyclical factors. However, structural factors – global value chains and especially protectionism – may have played a role too.
Global trade started to slow down markedly in the course of 2011, after it bounced back from the Great Trade Collapse of 2008–2009.1 In 2012 and 2013 the growth rate of global trade volume reached only 3%, against nearly 7% in the pre-crisis period (2002–2007) and 6.8% in the period 1985–2007 (Figure 1).
Global crisis International trade
great trade collapse, trade slowdown, global crisis, trade, global value chains, protectionism
Trade policy through 2013: Signs of improvement but new policy concerns
Chad P Bown 27 June 2014
Temporary trade barriers have become more than an important bellwether for contemporary protectionism; with persistent tariff levels, they are now a primary obstacle to free trade. The World Bank’s newly updated Temporary Trade Barriers Database suggests that the Great Recession-era increases in import protection may be levelling off. Now policymakers begin to face the daunting task of dismantling all of those temporary barriers they imposed during the early phase of the crisis.
How countries apply their trade policies has been of heightened interest since the early days of the Great Recession (Baldwin and Evenett 2009). While applied import tariffs have proven resilient to change, the temporary trade barriers of antidumping, safeguards, and countervailing duties have become important to understanding the year-to-year churning that arises under modern commercial policy. Here we summarise evidence from the World Bank’s Temporary Trade Barriers Database – that has been newly updated with data through 2013 – for more than 25 major economies.
G20, protectionism, Trade barriers, Great Recession, TTBs
Economic liberty in the long run: Evidence from OECD countries
Leandro Prados de la Escosura 07 April 2014
Measures of economic freedom provide useful cross-country comparisons, but lack the time dimension to track intertemporal progress. This column presents a new measure and extends it back in time to tell a history of economic freedom over the course of the twentieth century.
How has freedom evolved over time? A distinction has been made between ‘negative’ freedom – a lack of interference or coercion by others (freedom from) – and ‘positive’ freedom, the guarantee of access to markets that allow people to control their own existence (freedom to) (Berlin 1958). An example of negative freedom is economic liberty. A country is economically free to the extent that privately owned property is protected, contracts enforced, prices stable, barriers to trade small, and resources mainly allocated through the market (Friedman 1962).
OECD, protectionism, negative freedom, economic freedom, economic liberty
The dragon awakes: Is Chinese competition policy a cause for concern?
Mario Mariniello 09 November 2013
Since the adoption of the Anti-Monopoly law in 2007, the Chinese competition authorities have stepped up enforcement of mergers and anti-competitive practices. The Chinese Ministry of Commerce has relied heavily on behavioural remedies in merger cases (as opposed to the more efficient structural remedies favoured by the European Commission). Furthermore, merger policy has been used to protect domestic industries from competition. In contrast, Chinese fines for cartels have shown no foreign bias, and if anything have been too low.
Foreign businesses are increasingly realising that China has antitrust laws, and is not shy about using them. The Glencore/Xstrata merger in the spring was cleared only with conditions imposed by the Chinese Ministry of Commerce. In August, the Chinese National Development and Reform Commission imposed a record €82 million fine on milk powder producers for a price-fixing conspiracy. The Chinese authorities are also taking more decisions.
China, international trade, protectionism, Competition policy, antitrust
The BRICs party is over
Anders Åslund 04 September 2013
Emerging markets are under pressure. This column argues that this is not a mere headwind but that the BRICs’ party is over. Their ability to get going again rests on their ability to carry through reforms in grim times for which they lacked the courage in a boom.
After a decade of infatuation, investors have suddenly turned their backs on emerging markets. In the BRIC countries – Brazil, Russia, India and China – growth rates have quickly fallen and current-account balances have deteriorated.1 The surprise is not that the romance is over but that it could have lasted for so long.
From 2000 to 2008 the world went through one of the greatest commodity and credit booms of all times. Goldman Sachs preached that the BRICs were unstoppable (e.g. Wilson and Purushothaman 2003).
Development International trade
Russia, China, India, commodities, protectionism, BRICs, Brazil, BRIC
Five More Years of the G20 Standstill on Protectionism?
Simon J Evenett 03 September 2013
G20 leaders are currently meeting in St Petersburg to discuss protectionism. This column, which summarises the key findings of the new 14th Global Trade Alert report, argues that the current G20 approach to promoting open trade and investment is not working. In recent years G20 members resorted to protectionism more frequently than at the beginning of the economic crisis and, indeed, the stock of crisis-era protectionist measures imposed by the G20 members keeps on growing. The G20’s ‘softly softly’ approach isn’t working.
“We are deeply concerned about rising instances of protectionism around the world”. So declared G20 Leaders at the end of their last summit in Los Cabos, Mexico.
Well, did performance improve?
Moreover, we are approaching the 5th anniversary of the G20’s standstill on protectionism, how effective has it been? Should alternatives be considered?
Reading the 14th report of the Global Trade Alert, it seems clear that the current G20 approach is not working:
protectionism, Global Trade Alert
Protectionism’s quiet return: The GTA’s pre-G8 summit report
Simon J Evenett 13 June 2013
Commentators increasingly talk about the steady rise of protectionism. This column presents evidence from the newest Global Trade Alert report to suggest that they’re right: the past twelve months have seen a quiet, artful, wide-ranging assault on free trade. Little of this has showed up in traditional monitoring. Protectionism in Q4 2012 and Q1 2013 far exceeds anything seen since the onset of the global financial crisis.
As the recent public recriminations over the Sino-EU trade dispute on solar panels have shown, favouring domestic firms at the expense of foreign rivals can be a transparent, noisy, and diplomatically painful matter. Such protectionism may have much in common with the 1930s but it is not representative of contemporary policy choice, as the 12th Report of the Global Trade Alert shows.
Fighting financial protectionism
Dirk Schoenmaker 18 April 2013
International banking is under threat in the aftermath of the Global Crisis Supervisors across the world are pushing for a split of international banks into national subsidiaries. This column discusses ‘financial protectionism’, offering some governance solutions that may help to international banks. These solutions boil down to burden sharing. In Europe, the first step is banking union.
International cooperation between national supervisors broke down during the Global Financial Crisis. The collapse of Lehman and Fortis provide vivid illustrations that national supervisors ultimately choose for their national interest in crisis management. Reform of global governance, guided by the G20 and executed by the Financial Stability Board, has so far focused on soft law solutions (Arner and Taylor 2009). Regulators adopt a consensual approach towards the setting of international standards.
Global crisis International finance
protectionism, Eurozone crisis
Emerging-economy trade policy has become more responsive to economic shocks under the WTO
Chad P Bown, Meredith Crowley 08 February 2013
For most of the postwar period, rich nations had much lower average tariffs than developing nations, but they frequently applied variable protection – dumping duties etc. – in reaction to business cycles and exchange-rate movements. Massive, unilateral tariff-cutting by developing nations since the 1990s evened out the averages. This column presents new evidence that emerging economies are now tying variable protection more closely to business cycles and exchange rates – just like the high-income economies.
The use of temporary protection has spread like wildfire in recent years. Even if these measures – antidumping and anti-subsidy duties for example – are perfectly consistent with WTO trade rules, there are worries that this signals a shift to protectionism (Baldwin and Evenett 2012 and Aggarwal and Evenett 2012). But there is an alternative view. Temporary protection may facilitate trade liberalisation – just as easy firing can encourage hiring.
WTO, antidumping, protectionism, temporary trade barriers
‘No gain without pain’: Antidumping protection hurts exports
Hylke Vandenbussche, Jozef Konings 30 January 2013
The rise of international production sharing – ‘global value chains’ – has transformed international commerce and pushed economists into new territory. This column argues that there is evidence to suggest that old-fashioned protection can have an unexpected negative effect on firms that are part of a global value chain. In an increasingly globalised world, exporters’ success seems to positively depend on the free entry of imports rather than the other way round.
Protection is often viewed as a powerful instrument to help domestic firms to raise their sales at the expense of foreign importers. But this view is now being challenged by recent research showing that the effects of protection really depend on the international orientation of the firms i.e. whether they are exporters or not. Protected firms that are well integrated in global value chains may actually lose sales whenever the imports of inputs are subject to protection.
France, EU, trade, tariffs, protectionism, global value chains