Ministers Against Protectionism

Whoever seeks to isolate himself from the economic crisis causes extreme damage: that’s the message coming from the G-7 summit in Rome. But back home, the pressure toward protectionism grows.

The participants at the G-7 summit in Rome publicly stress their wish for harmony; we’ll all work together against the economic crisis. Above all, the main thing to avoid is a tendency for nations to try protecting their markets from one another. That was the principle message coming out of Rome, and it was repeated over and over at every opportunity.

Countries had to “avoid protectionist measures” that would result in accelerating the downward spiral in which the world economy now found itself. Erecting new trade barriers must also be avoided, and the ministers of the G-7 nations pledged to conclude the Doha round of negotiations as quickly as possible.

It’s credible that the financial ministers and central bank chiefs mean what they say. They’re presumably aware that everyone loses in the end if one nation tries to clean up its own financial problems at the expense of its partners.

But will they be able to bring this realization back from their luxury hotels at the international summit circus and apply it effectively to daily politics? At home, governments are confronted with industries that beg for protection from their competition, as well as with taxpayers not really keen on supporting foreign economies with their own money.

For example, the new U.S. Treasury Secretary Timothy Geithner who is taking part in his first G-7 summit: he assured everyone that his country intended to fulfill all its obligations to the World Trade Organization (WTO) but pointed out that Obama’s administration was under pressure from those opposed to free trade, as was clearly recently illustrated by the fierce fights over Obama’s economic package in congress.

But no path exists that circumvents candor and cooperation. If German and Austrian banks aren’t willing to make loans in Eastern Europe because their governments are pressuring them to tend to domestic markets first, whole nations in the East may collapse. The damage would be immense, especially for the export-oriented German economy.

That’s why it’s smart for German Finance Minister Peer Steinbrück to publicly express his willingness to jump in with German funds to help seriously threatened nations – even though it may be unpopular among German taxpayers. It is said that countries have no friends, just interests. And sometimes it’s in one’s own interest to help others.