Trade and Economic Effects of Responses to the Economic Crisis
The dramatic collapse in world trade in 2009 is, this report shows, mainly due to: the drop in demand for highly traded products; the drying up of trade finance; and the vertically integrated nature of global supply chains. Contrary to expectations, protectionist measures were relatively muted and did not play a significant part. In fact, because of their sheer size, stimulus measures may have had more impact on trade than direct trade policy measures Nevertheless, dollar for dollar, direct trade restricting measures have the most strongly negative impacts on growth and employment: a one dollar increase in tariff revenues results in a USD 2.16 drop in world exports and a USD 0.73 drop in world income.
The analyses presented here suggest that exit strategies from measures to deal with the crisis will be most effective in boosting growth and jobs if they first roll back measures that discriminate between domestic and foreign firms and those that target specific sectors. General demand stimulus measures and active labour market policies are preferable under current conditions.
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Summary, Conclusions and Recommendations
This chapter summarises the main findings of this report and draws out the main conclusions. While the report finds that protectionist responses to the crisis were relatively muted and protectionism does not explain a major part of the fall in trade that occurred, vigilance is nevertheless needed. Stimulus measures taken behind borders may have very significant effects on trade, especially if they target specific sectors or only domestic goods or firms. Analysis of the stimulus measures generates some insights into exit strategies that could be supportive of growth, employment and trade. It is expected that protectionist sentiment will increase as unemployment remains high and governments are increasingly under fiscal pressure. Concluding the Doha Development Agenda negotiations could prevent backsliding and provide a much needed impetus to growth.
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