The Temptation of Protectionism

The crisis is global and serious – very serious. The experts, bosses and politicians, whose meeting in Davos ended on Sunday, did at least all agree on that much. Hope for a rapid recovery in the wake of the “Obama effect” has proved to be short-lived. The last remaining optimists (foolish or otherwise) finally lost their case on Friday with the announcement that the American economy had contracted by 3.8% at the end of 2008.

The global crisis is and continues to worsen. The financial sector, where the storm first hit, continues to suffer after more than 18 months of hell. There are growing waves of job losses.

However, there is some good news. Known remedies do exist. The World Economic Forum at Davos has managed to encapsulate them, if nothing else: there must be coordinated international action to stabilize the financial sector and stimulate consumption. In addition, there must be a commitment to support the business sector. World trade is the answer to development and economic growth – not forgetting its role in world peace.

But unfortunately the barriers are already being erected. London, Brussels and Washington are even now giving way to the demands of pressure groups and demonstrators.

The emerging countries are worried. The flow of capital into the South is already starting to run dry, and it is going to become more difficult for them to access the markets of the North.

Speaking at Davos, the Brazilian minister for foreign affairs warned that protectionism in 1929 had tipped a recession into a depression. At that time the beneficial effects of commerce were perhaps unknown. That is no longer the case today. The temptation to protectionism must be resisted. The commitments made at Davos must be honoured, particularly at the G20.