G20 should stop protectionists deepening recession

By Thompson Ayodele, in Lagos

As the Group of 20 top industrialised and developing economies prepared to meet in London, UN Secretary General Ban Ki-Moon warned them that "the economic crisis may soon be compounded by an equally severe crisis of global instability." A key problem is that trade is deteriorating every day and political pressures demand import restrictions to protect employment. This is no way out: such protectionism would make this particular depression ‘Great’. 

Everyone says trade is the best way out – but on their own terms: last November, the G20 leaders signed a pledge against protectionism yet, in the second half of 2008, 17 out of the G20 passed 47 restrictions of trade, the World Bank claims. Already exports from Chile, South Korea and Taiwan have dropped by about 20% this year and Africa’s by more than 30%. Free trade delivers all-round gains but protectionists claim to be acting in the national interest. Although this can show apparent short-term success, protectionism quickly gets hijacked by vested interests while increasing prices for everyone, as Africa has demonstrated disastrously for decades – we Nigerians are still paying for our vainglorious cement factories. 

Apostles of import restrictions such as the pressure group Oxfam claim they will protect “fledgling” industries, increase exports, minimise imports and yield a trade surplus. But this is fiction. Such policies are why most sub-Saharan Africans are still poor while other people have lifted themselves out of poverty in the last 50 years. Protectionists believe one nation can only gain at the expense of others: in real life, trade requires both a willing buyer and willing seller. Now the US government is propping up its auto industry, India has banned Chinese toys, China has banned Irish pork and the EU has new export subsidies for dairy products. In the UK, jingoists, unions and the Prime Minister want “British jobs for British workers.”

Other, hidden, barriers include health and technical certification requirements. Between 1986 and 2007, tariffs fell worldwide from 26% to 8.8%, boosting the world economy. Developing countries have nearly doubled their share of world exports since 2000, to 37% in 2007. The G20 must follow its own declarations: free trade has worked before, it works now and it will work even better if we let it.

*Thompson Ayodele is Director, Institute for Public Policy Analysis, (IPPA), Lagos, Nigeria