Open trade best rescue package

Source: People Daily | 02-06-2009 09:58

The specter of trade protectionism has begun to resurrect under the shadow of an economic recession. Recently, both words and deeds from a related developed economy on the "promotion of home-made products" or the "protection of manufactures from sale of foreign goods" have incurred wide-ranging criticisms. Public opinions hold that such practice could result in a global trade war, which would aggravate the financial crisis and retard economic recovery.

Pascal Lamy, director general of the World Trade Organization (WTO), cited the creation to trade barriers upon the onslaught of the financial crisis as unacceptable. On Nov. 15, 2008, G-20 leaders committed themselves to refraining from imposing any new trade or investment barrier in a joint statement issued at the world economic summit convened in the United States. However, some countries made adjustments and started to raise import tariffs of some products shortly afterwards.

Crisis and trade protectionism have been a "pair of twin sisters", noted Professor Zhang Hanlin, the Dean of China‘s WTO Academe of the University of International Business and Trade in Beijing in a recent interview with PD reporters, and there is a rising risk of trade protectionism in the wake of financial crisis. In fact, whenever global economy is beleaguered, some countries would take the unilateral measure of raising import tariffs or imposing limits on imports, and such a practice has not been rare in history.

After the world economy entered into the Great Depression in 1929, the U.S. Congress passed the Hawley-Smoot Tariff Act in the following year, which increased nearly 900 American import duties. The act was signed into law despite the strong opposition of 1,028 noted U.S. economists, who signed a petition against this legislation on May 4, 1930. Consequently, an all-out trade war broke out and the entire world was led estray to a dead end. It was only several decades later that the surging currents of trade protectionism looming all over the globe gradually faded away .

With the ongoing economic globalization, business activities have become very complicated and are likely to spur investment, enterprise and trade advancement, attracting foreign funds, investment and technology and enhancing the innovative ability at vared chains of production in different countries. So, the cost from the disruption of such a business mode can be very high.

At the 2009 World Economic Forum at Davos, Switzerland, Chinese Premier Wen Jiaobao said, "Experience shows that in crisis it is all the more important to stick to a policy of Opening and cooperation." Not long ago, WTO Director General Pascal Lamy also appealed to all nations to take prompt actions in an joint, massive effort to restrain from rehearsing trade protectionism and economic isolation of the 1930s.

The Doha round of WTO, designed to promote (economic) development via trade, has once again drawn global attention amid voices of opposition against trade protectionism. British Prime Minister Gordon Brown said that he hoped for Doha trade talks to resume at an early date. If WTO member nations are able to resolve their differences and achieve results at the Doha round this year, this can be the best rescue endeavor for global economy.

Nevertheless, it is foreseeable that there are still forces of resistance to deter the Doha trade talks. Noting that a favorable turn could possibly occur in the later half of 2009 and it would be likely at the end of the year, Professor Zhang Hanlin said the United States was the key factor, and that the U.S.‘return to the Doha round can be an impetus to the Doha trade talks itself.

It is the shared objective of international community to rid itself of the crisis and get out of the shadow of recession. WTO Director General Pascal Lamy has explicitly said that the opposition to trade protectionism is a crucial factor in response to global financial crisis. Hence, trade and investment liberalization and facilitation have, beyond any doubt, have provided a vital, important prerequisite for the prosperity of global economy, whereas open trade represents the best rescue package for world economy.

Editor:Shi Taoyang