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Protectionism cited as biggest threat to global recovery
Weighing in on Asia’s responsibility in leading the global economic recovery, speakers representing the region’s voice at a forum hosted by the International Monetary Fund here on Monday say the resurgence of protectionism is the single biggest threat to sustainable global economic growth
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eighing in on Asia’s responsibility in leading the global economic recovery, speakers representing the region’s voice at a forum hosted by the International Monetary Fund here on Monday say the resurgence of protectionism is the single biggest threat to sustainable global economic growth.
The speakers argued the current pace of economic recovery, which largely relies on the robust economic growth of emerging economies in Asia, would not be enough to establish the foundation for more sustainable growth and rebalance the global economy.
Victor K. Fung, chairman of global trading giant Li Fung Group and an honorary chairman to the International Chamber of Commerce (ICC), said the world economy was still in the process of recovery, stipulating the recovery was progressing very slowly.
“The demand is not coming back strongly. Demand in the US would have to recover if we want to have sustainable recovery. The biggest risk is rising protectionism,” Fung said at a plenary session at the forum, under the theme “Asia 21: Leading The Way Forward”.
A research issued by ICC late last month shows that over the last two years all G20 economies have implemented various protectionist trade measures. By September 2009, the G20 were responsible for 172 such measures being implemented, with hundreds more “in the pipeline”.
If only half the upcoming measures were to actually take effect, the world could see a global cycle of protectionist retaliation not seen since the Great Depression, the research argues.
Protectionist trade measures meant to protect jobs, the research says, have the opposite effect as other countries either emulate or retaliate against them. It estimates that the 43,000 jobs that the US government claimed to be saved by the “Buy American” legislation could result in a loss of over 200,000 jobs because of foreign emulation or retaliation.
Russia, the United States, India, Argentina and Brazil are the five most protectionist countries based on measures implemented from 2008-2009 and those “in the pipeline”. The least protectionist countries are Mexico, Turkey, Australia, the South Korea, South Africa and Saudi Arabia.
“Protectionism continues to rise. One great confidence builder would be the completion of the Doha round. The G20 should not forget the role of the multilateral trading system in laying the foundations for a sustainable growth,” Fund said.
Toyota president for Asia Pacific Eiji Hirano shared Fung’s concern on protectionism. He said
avoiding protectionism should be a target for all countries, including those in Asia.
IMF managing director Dominique Strauss-Kahn said the world economy would be better off if the multilateral trade deal under the Doha round could be completed sooner. He warned, however, Asia should remain focused on improving its domestic consumption so as to create a more balanced global supply and demand chain.
In response to Kahn’s statement, Bank Indonesia deputy governor Hartadi A. Sarwono told The Jakarta Post that Indonesia’s responsibility to ensure a strong domestic consumption was to keep the inflation rate in check.
“Developing the infrastructure is still our main issue. What we need is an improvement in the supply site. So, infrastructure development will create faster supply site response in the face of growing demand,”
Hartadi said.
