Economy Sparking Protectionism, Global Trade Disputes?

The world may be on the brink of a gentler kind of trade war.

By Anthony Faiola
The Washington Post

In 1930, Congress fired the first shot in a protectionist battle that prolonged and deepened the Great Depression. After passing a bill aimed at saving American jobs by effectively barring 20,000 imported goods, including French dresses and Argentine butter, other nations retaliated by raising their own barriers on U.S. products, effectively bringing global commerce to a halt.

In the aftermath, organizations like the World Trade Organization sought to ensure that never happened again. Nations agreed to put on economic straitjackets permitting them to raise tariffs within hard-fought limits. That is likely to help prevent a repeat of the devastating and overt trade wars seen during the Great Depression, since it is now far harder for nations to increase tariffs on a wide array of imports at once.
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But there remains a surprising amount of wiggle room in international trade and commerce treaties, and that, analysts say, is where the battle is now being fought as leaders worldwide face intense pressure at home to protect domestic jobs in the deepening financial crisis. They are engaging in a more subtle form of protectionism that often skirts those rules.

This weekend at the World Economic Forum in Davos, Switzerland, the annual event drawing the world’s leaders, luminaries of industry, commerce and philanthropy, a host of dignitaries raised a crescendo of alarm over growing economic nationalism. “We will resolutely fight protectionism,” Japanese Prime Minister Taro Aso told reporters there, giving voice to the general sentiment.

Yet even as leaders call for nations to do the right thing on the international stage, actually doing it at home is proving far tougher.

British Prime Minister Gordon Brown, for instance, delivered a particularly impassioned plea for nations to remain on the path of free trade yesterday. “This is not like the 1930s. The world can come together,” he said. However, back in Britain, the government is directing British banks with global operations now being rescued with taxpayers’ dollars to boost lending to British businesses and citizens first.

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