Do Temporary Trade Barriers Lead to Freer Trade in the Long Run?

To combat the recent recession many countries, especially developing nations, have begun to impose temporary trade barriers, such as antidumping, countervailing duties, and safeguards.  According to Bown and Crowley these new measures might not lead to prolonged protectionism.  Instead they suggest that these measures could be a positive sign.  High-income nations typically have lower tariffs than developing nations; however high-income nations have often implemented protectionist policies during downturns in the economy.  If developing nations are mimicking the patterns observed in high-income nations, then temporary trade barriers might actually lead to increased trade liberalization in the future. 

Optimistically, the trade barriers are an indication that developing countries are beginning to follow in the footsteps of developed nations and that in the long-term trade will continue to liberalize.  However, developing countries are not the only nations that are implementing trade barriers. Although the G20 continue to advocate for free trade, trade barriers have been increasing.  The Economist, in contrast with Bown and Crowley, views the increasing trade barriers as a signal that the global economy is heading down a slippery slope.  They suggest that the WTO should continue to condemn the protectionist policies of the G20. Moreover, the Economist points out that modern trade barriers are not often taking the form of high tariffs but instead countries are implementing more informal barriers- import licences, customs controls, etc.  The “red tape” now being imposed can effectively keep imports out of the market and it is difficult to detect and stop.  If trade barriers continue to raise the global economic situation will be reminiscent of the 1930s when extreme protectionism was rampant and the world plunged into the Great Depression. 

    

Thankfully, in contrast with 1930 there are currently international institutions in place that help regulate international trade.  The goal of the WTO as stated by the Director-General Pascal Lamy:

“The WTO’s founding an guiding principles remain the pursuit of open borders, the guarantee of most-favored-nation principle and non-discriminatory treatment by an among members, and a commitment to transparency in the conduct of its activities. The opening of national markets to international trade, with justifiable exceptions or with adequate flexibilities, will encourage and contribute to sustainable development, raise people’s welfare, reduce poverty, and foster peace and stability”

In his mission statement Lamy recognizes that exceptions and “flexibilities” are a necessary part of trade agreements; however trade liberalization remains the main goal of the WTO.  If Bown and Crowley are correct and the increase in temporary trade barriers is in fact a sign of converging economic policy, then the WTO should be cautious about criticizing protectionist policies that are responding to the business cycle.  On the other hand, if the current protectionist policies are just the beginning of a long-term trend, then the WTO should take action. Both the WTO and individual countries are trying to cope with the effects of the worst recession since the Great Depression.  The economy is finally starting to show signs of life again.  The WTO now must walk a fine line to encourage global economic recovery and growth.