Oliver Griffiths

Trade at the London Summit

One of the headline aims for the London Summit on 2 April is to put the world on track for sustainable growth. Central to this aim will be reiterating the importance of open markets to the economic recovery (a point made by the Prime Minister in his address to Congress last week) and addressing the threat of protectionism. 

The communique from the G20 Summit in Washington contained useful standstill language on protectionist measures, with leaders agreeing to 'refrain from raising new barriers to investment or to trade in goods and services, imposing new export restrictions, or implementing WTO inconsistent measures to stimulate exports.' Most G20 countries have kept to the spirit of the pledge. Uri Dadush at the Carnegie Endowment for International Peace has this week made a number of policy recommendations for trade at the coming Summit.

There has been some interesting debate about what constitutes protectionism, as this voxeu piece looking at 'murky protectionism' highlights. Many governments have taken necessary and unprecedented domestic action to stimulate their economies.  However the impact of this patchwork of bailouts and stimulus packages on international trade flows is not always clear. There is a clear onus on governments to bear in mind the dangers of behind-the-border protectionism.  

The London Summit will be looking for a recommitment to keep away from the edge of the protectionist abyss and to ensure that effective monitoring mechanisms are put in place. For a thought-provoking piece on the role that the US Administration could play on trade at the London Summit, see this article in the Wall Street Journal.

For those in Washington, Dominick Chilcott, Deputy Head of Mission at the British Embassy, will be speaking at a roundtable hosted by the German Marshall Fund at 12.30 on Friday 13th March on the topic of 'The London Summit and the Fight against Protectionism'. Please contact Mark Allegrini on mallegrini@gmfus.org if you would like to attend - though beware that space is limited.

Posted at 11:10 12 March 2009 by Oliver Griffiths  |  Comments[0]

American attitudes to trade

I have been looking at the recent Gallup poll on trade. The interesting story to write on US public attitudes to trade is that support is falling off a cliff and the US is about to pull up the gangplank to global trade. So the Gallup headline - 'Americans more negative than positive about foreign trade' - writes itself. But I have a couple of observations on the data which do not fit well within the narrative of a calamitous and unprecedented collapse in US support for trade: first, this year's figures (47% seeing trade as an opportunity, 44% as a threat) are almost exactly the same as in President Clinton's first year (46% and 44% respectively); second, support for trade improved significantly between 2007 and 2008, from negative 11 to negative 3. As an aside, it is also worth noting the exquisite mercantilist framing of the question: 'do you see foreign trade more ... as an opportunity for economic growth through increased American exports or a threat to the economy from foreign imports'. Under this formulation, bananas and coffee beans - both barely produced in the US - are somehow an economic threat. The logical conclusion of the question is that the best thing for the US is to export as much as possible and import nothing, which is a self-evident nonsense.

But it is notable how international trade, which is seen as being at the centre of 'Anglo-Saxon capitalism', has so little support in the US compared to other countries. The US public is consistently among the most suspicious of the effects of trade. See, for example, page 19 of the Pew Global Attitudes survey from last June, where US support for trade stood at 55%, compared to 79% in France (a country which is often rolled out as being instinctively anti-trade). Quite why US support for international trade is so low is a puzzle. Has America, which maintained high tariffs throughout the nineteenth century, retained a Hamiltonian appreciation for the benefits of protection - in which case, why have other countries which followed a similar developmental pattern not? Has trade had more baleful impacts on the US economy than on others - in which case, why has this effect been felt most keenly in the US, with a ratio of trade volume to GDP much lower than most other developed countries? Is free trade tainted by being a relatively partisan issue in Washington - in which case, why is there so little distance between the views of those polled who identify themselves as Democrat or Republican? Do supporters of international trade talk the wrong language - in which case, how has the dialogue been so different in other countries? Is it because employers provide many benefits provided by the state in other countries, making the loss of a job more traumatic - in which case, why is it international trade, which is estimated to cause under 5% of American job losses (and create many more), that bears so much of the criticism? I think this is a fascinating topic.

Professor Doug Irwin notes that before the second world war most self-respecting US Congressmen prefaced comments on international trade with the proviso 'I'm not a free trader but ...' and that this switched during the 1950s to 'I'm not a protectionist but ...'. I think and hope that we are some way from the first proviso coming back into fashion (though the last few months have shaken the firmness of my conviction on that). In that regard the Gallup poll is relatively reassuring.

Posted at 10:35 05 March 2009 by Oliver Griffiths  |  Comments[5]

Deglobalisation

Gordon Brown's speech on the global economy yesterday contained a very interesting section on the dangers of deglobilisation (it starts at 11.30 on the video clip, if you don't want to watch the whole thing).

The traditional worry is that during tough economic times trade and investment barriers are put up - this was what the G20 leaders sought to address through a standstill clause in the G20 Washington Summit communiqué in November. The WTO has been collecting data in the interim looking at recent instances of countries raising barriers: the 'periodic reports on global trade trends' referred to by Pascal Lamy during a speech at the Department of International Development last week. The hope is that scrutiny and some powerful arguments about the negative economic and public policy impacts of traditional protectionist measures will stop them in their tracks.

A different, and more subtle, threat is of government and corporate behaviours that, taken together, have the potential to balkanize the global economy. The most stark example is in capital markets, where financial markets (often nudged this way by politicians) have retrenched to the familiarity of their home markets. In the most globilised of sectors, countries' borders matter again. Similarly, as governments put in place fiscal stimulus packages and intervene to support individual sectors, the focus will inevitably be on the domestic market. Unfortunately you can easily imagine the net effect being the partial fragmentation of the global economy without governments touching tariffs on foreign investment rules. Food for thought in the snowfields of Davos and during the run-up to the London G20 Summit in April.

Posted at 14:31 27 January 2009 by Oliver Griffiths  |  Comments[0]