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International Trade under Threat: Stopping Protectionism Through Institutional Reforms

Author

Listed:
  • Georg Erber
  • Ulrich Thießen

Abstract

The global economic crisis has led to a massive increase in unemployment, and nearly all governments have declared the protection of domestic jobs to be a central economic policy aim. In the US, an additional $790-billion economic stimulus package was adopted immediately after President Obama took office. The package includes a "Buy American" clause intended to give preferential treatment to domestic suppliers in public procurement, and is leading to countermeasures by other countries. In some cases, there have been tariff increases and trade-distorting currency depreciations. Already the announcement of protectionist measures can have immediate adverse effects on policy decisions elsewhere and one is reminded of the US Smoot-Hawley act of 1930 with its dramatic negative consequences on global trade and economic growth afterwards. Efforts should be made to strengthen multilateral organizations at this moment in the current global crisis. DIW Berlin advocates the reform of the International Monetary Fund. In addition, the G-20 should play a larger role in combating international financial crises. Finally, in the future, the EU should only be represented in the G-20 by a single representative.

Suggested Citation

  • Georg Erber & Ulrich Thießen, 2009. "International Trade under Threat: Stopping Protectionism Through Institutional Reforms," Weekly Report, DIW Berlin, German Institute for Economic Research, vol. 5(15), pages 101-107.
  • Handle: RePEc:diw:diwwrp:wr5-15
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    File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.98926.de/diw_wr_2009-15.pdf
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    More about this item

    Keywords

    Buy American Clause; Stimulus package; Protectionism; Trade-barriers;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations
    • F59 - International Economics - - International Relations, National Security, and International Political Economy - - - Other

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