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Trade and the Crisis; Protect or Recover

Author

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  • Mika Saito
  • Christian Henn
  • Rob Gregory
  • Brad J. McDonald

Abstract

The pace of trade reforms waned from the mid-2000s as protectionist sentiment began to increase. With the onset of the global financial crisis, reform progress not only halted but began to reverse. As we show in this note, new trade restrictions have had—in the limited products they targeted—a strong negative impact on trade. The aggregate impact of new restrictions is modest, at about 0.25 percent of global trade, as most countries have resisted a widespread resort to protectionism. Looking ahead, however, in 2010 sustained high unemployment, uneven growth, and an unwinding of government stimulus measures suggest that protectionist pressures may rise. Gaps in World Trade Organization (WTO) commitments leave ample scope to further restrict trade, so unless all countries vigorously resist protectionism this could threaten the economic recovery and drag down future growth. Continuing and further enhancing the monitoring of all protectionist measures and maintaining the high-level political awareness of the associated macroeconomic risks will help. But the surest way to avoid such a downside scenario is to tighten multilateral trade commitments by completing the WTO Doha Round. This can be viewed as a key part of the exit strategy from the global economic crisis.

Suggested Citation

  • Mika Saito & Christian Henn & Rob Gregory & Brad J. McDonald, 2010. "Trade and the Crisis; Protect or Recover," IMF Staff Position Notes 2010/07, International Monetary Fund.
  • Handle: RePEc:imf:imfspn:2010/07
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    References listed on IDEAS

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    1. Iacovone, Leonardo & Zavacka, Veronika, 2009. "Banking crises and exports : lessons from the past," Policy Research Working Paper Series 5016, The World Bank.
    2. Matthieu Bussière & Emilia Pérez‐Barreiro & Roland Straub & Daria Taglioni, 2011. "Protectionist Responses to the Crisis: Global Trends and Implications," The World Economy, Wiley Blackwell, vol. 34, pages 826-852, May.
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    5. Malouche, Mariem, 2009. "Trade and trade finance developments in 14 developing countries post September 2008 - a World Bank survey," Policy Research Working Paper Series 5138, The World Bank.
    6. Michael P. Leidy, 1997. "Macroeconomic Conditions and Pressures for Protection under Antidumping and Countervailing Duty Laws: Empirical Evidence from the United States," IMF Staff Papers, Palgrave Macmillan, vol. 44(1), pages 132-144, March.
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    Cited by:

    1. Marga PEETERS, 2011. "The Changing Pattern in International Trade and Capital Flows of the Gulf Cooperation Council Countries in Comparison with other Oil-Exporting Countries," Journal of Knowledge Management, Economics and Information Technology, ScientificPapers.org, vol. 1(7), pages 1-29, December.
    2. Nidal Rashid Sabri & Marga Peeters & Diama K. Abulaban, 2012. "The impact of exchange rate volatility on trade integration among North and South Mediterranean countries," International Journal of Business and Globalisation, Inderscience Enterprises Ltd, vol. 9(2), pages 107-121.
    3. Ortiz, Isabel, & Cummins, Matthew. & Karunanethy, Kalaivani., 2015. "Fiscal space for social protection options to expand social investments in 187 countries," ILO Working Papers 994877663402676, International Labour Organization.
    4. Chauvin, Nicolas Depetris & Ramos, Maria Priscila, 2013. "The welfare effect of the new wave of protectionism: The case of Argentina," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 151626, Agricultural and Applied Economics Association.
    5. Isabel Ortiz & Jingqing Chai & Matthew Cummins, 2011. "Identifying Fiscal Space:Options for Social and Economic Development for Children and Poor Households in 184 Countries," Working papers 1108, UNICEF,Division of Policy and Strategy.
    6. Peeters, Marga & Sabri, Nidal Rachid, 2012. "International financial integration of Mediterranean economies : A bird’s-eye view," MPRA Paper 38081, University Library of Munich, Germany.
    7. Marga Peeters, 2010. "The changing pattern of international trade and capital flows of the GCC countries," European Economy - Economic Papers 2008 - 2015 415, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    8. Marcel Kohler & Adrian Saville, 2011. "Measuring the Impact of Trade Finance on South African Export Flows," Working Papers 232, Economic Research Southern Africa.
    9. Brad J. McDonald & Christian Henn, 2011. "Protectionist Responses to the Crisis; Damage Observed in Product-Level Trade," IMF Working Papers 11/139, International Monetary Fund.
    10. van Bergeijk, P.A.G., 2011. "One is not enough!," ISS Working Papers - General Series 22964, International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague.
    11. Baccini, Leonardo & Kim, Soo Yeon, 2012. "Preventing protectionism: international institutions and trade policy," LSE Research Online Documents on Economics 45573, London School of Economics and Political Science, LSE Library.
    12. Leonardo Baccini & Soo Kim, 2012. "Preventing protectionism: International institutions and trade policy," The Review of International Organizations, Springer, vol. 7(4), pages 369-398, December.

    More about this item

    Keywords

    Protectionism; Global Financial Crisis 2008-2009; Trade restrictions; Trade policy; Unemployment; World Trade Organization; Transparency; WTO; trade flows; world trade; global trade; bilateral trade;

    JEL classification:

    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General

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