The OECD, World Trade Organization (WTO) and the UN’s Conference on Trade and Development (UNCTAD) today called on the leaders of the G-20 (Group of Twenty) countries to resist protectionism or the prospects for economic recovery may be wiped out.
In their second combined report on G-20 Trade and Investment Measures, the three organisations find that most G-20 members are holding to their commitments to open trade and investment in the wake of the global economic crisis. However, they say protectionist pressures may continue to gather force in the face of job losses and high unemployment.
The OECD, co-author with UNCTAD of the report’s chapter on investment, says there was no open discrimination against foreign investors in the six months to mid-February 2010, but warns that discretion in the application of the many state support and rescue programmes for troubled firms may be used to favour domestic companies and disguise protectionism.
The report cautions that the holdings acquired by governments as a response to the crisis may jeopardise governments’ impartiality in policy making and law enforcement. Government ownership and rescue of firms may also distort and protract restructuring of economic sectors. It also notes that recent G-20 investment measures have continued to point towards greater openness and clarity for foreign investors. The OECD’s own investment instruments strengthen countries’ resistance to protectionism.
OECD Secretary-General Angel Gurría said: “Openness to international investment is a precondition for strong global economy, job creation, and innovation. The OECD will continue to monitor investment policy developments closely.”
The leaders of the G-20, which comprises the world’s largest economies, committed to resist protectionism and promote global trade and investment at summits in November 2008, in April 2009 and again in September 2009. They mandated WTO, OECD and UNCTAD – the leading international organisations in the area of international trade and investment policies – to monitor policy developments and report publicly on these commitments.
This second report to G-20 leaders covers measures taken or announced by G-20 members between 1 September 2009 and mid-February 2010. The previous report was issued ahead of the G-20 Summit in Pittsburgh in September 2009.
The report says the trade and investment policy response to the global recession has so far been relatively muted. There has been no indication of a significant intensification of trade or investment restriction since the last Report to the G-20 in September 2009. However, past experience shows that prolonged periods of job losses and unemployment are one of the main catalysts for more restrictive policymaking. The International Labour Organisation (ILO) reported recently that 27 million people around the world lost their jobs in 2009, taking the global unemployment rate to its highest level ever and the number of jobless to over 200 million people. The report says unemployment rates are expected to remain high throughout 2010. Coupled with uncertainties about when, and how strongly, sustained global economic growth will resume, this points to the need for G-20 governments to remain vigilant in opposing protectionism, to devise and announce publicly as soon as possible exit strategies from any trade restrictions or other measures with trade restrictive or distorting effects that were taken in response to economic conditions last year, so as to undercut protectionist pressures in favour of making these measures permanent.
The report says that since September 2009, recourse to new trade restrictions by G-20 members has been less pronounced than in the period covered by the first G-20 Report. Although some G-20 members continued to implement new trade restrictive policies, in apparent contradiction to their pledges at London and Pittsburgh, the overall extent of these restrictions has been limited and an escalation of protectionism has continued to be avoided. There have been fewer instances than in earlier periods of G-20 members taking potentially trade restrictive measures, and more cases of trade opening measures and of the termination of investigations into "unfair" trade practices without the imposition of new trade remedy measures. The WTO Secretariat has calculated that new import restricting measures introduced since September 01, 2009 until mid-February 2010 by G-20 members, along with new initiations of investigations into the imposition of trade remedy measures (at least some of which may never result in the actual imposition of the measures or the restriction of trade), cover around 0.7 percent of G-20 imports, or around 0.4 percent of total world imports. If one measure alone, involving an increase of import tariffs on fuel imports, were to be excluded from the calculation, the trade coverage would amount to around 0.4 percent of G-20 imports, or 0.2 percent of world imports.
The G-20 represents about 90 percent of global gross national product, 80 percent of world trade (including trade within the European Union) as well as two-thirds of the world's population, according to the IMF.
The G-20 comprises Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the UK and the US, plus the European Union, represented by the rotating Council presidency and the European Central Bank. The Managing Director of the International Monetary Fund and the President of the World Bank, plus the chairs of the International Monetary and Financial Committee and Development Committee of the IMF and World Bank, also participate at G-20 meetings.
