How seriously should we view G20 words on resisting protectionism?

Every declaration by G20 leaders since 2012 has pledged to resist protectionism. Their record has not matched their rhetoric

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By Peter Ungphakorn
POSTED AUGUST 31, 2016 | UPDATED SEPTEMBER 6, 2016

G20 countries have increasingly introduced protectionist measures, according to a study released on the eve of the elite group’s summit in Hangzhou, China, September 4–5, 2016, by Simon Evenett and Johannes Fritz of St Gallen University in Switzerland.

Hangzhou_1412
Hangzhou, 1412

Evenett’s and Fritz’s latest Global Trade Alert Report highlights the group’s poor record in combatting its members’ own protectionist tendencies, and particularly those of seven key economies, six of the G7 plus Australia.

This follows the World Trade Organization’s own monitoring with similar if less sophisticated findings, and comes amid calls for the G–20 to make a firm commitment in Hangzhou to curb protectionism.

And yet every year since 2012, the G20 has pledged to resist protectionism. We could even claim a statistical correlation: in 2013 the number of references to protectionism in the leaders’ declaration peaked at five. Since then, as actual protectionism has increased, the references have dropped to one per declaration.

Not that words could ever speak louder than actions

UPDATE — The 2016 Hangzhou communique mentions protectionism four times (see below). We can look forward to GTA’s next report to see if anything has changed in practice

First, some charts from the GTA report
evenettgta20fig1
Figure 1. Correcting for reporting lags, resort to protectionism by G20 members has accelerated since 2012 | GTA report (Click the image to see it full size)

 

evenettgta20fig2
Figure 2. Seven G20 members have implemented more protectionist measures this year compared to their crisis-era annual average 2012 | GTA report (Click the image to see it full size)

Then a look at the G20 summit declarations on protectionism since 2012

Source: Universtiy of Toronto G20 Information Centre

Los Cabos, Mexico, June 19, 2012
  1. We are firmly committed to open trade and investment, expanding markets and resisting protectionism in all its forms, which are necessary conditions for sustained global economic recovery, jobs and development. We underline the importance of an open, predictable, rules-based, transparent multilateral trading system and are committed to ensure the centrality of the World Trade Organization (WTO).
  2. Recognizing the importance of investment for boosting economic growth, we commit to maintaining a supportive business environment for investors.
  3. We are deeply concerned about rising instances of protectionism around the world. Following up our commitment made in Cannes, we reaffirm our standstill commitment until the end of 2014 with regard to measures affecting trade and investment, and our pledge to roll back any new protectionist measure that may have arisen, including new export restrictions and WTO-inconsistent measures to stimulate exports. We also undertake to notify in a timely manner trade and investment restrictive measures. We uphold the inventory and monitoring work of the WTO, OECD and United Nations Conference on Trade and Development (UNCTAD) on trade and investment measures and encourage them to reinforce and deepen the work in these areas, consistent with their respective mandates.
September 6, 2013, St Petersburg
  1. We reiterate our commitments to move more rapidly toward more market-determined exchange rate systems and exchange rate flexibility to reflect underlying fundamentals, and avoid persistent exchange rate misalignments. We will refrain from competitive devaluation and will not target our exchange rates for competitive purposes. We will resist all forms of protectionism and keep our markets open.

[…]

  1. We recognize the risks of economic slowdown and trade weakening posed by protectionism. We extend until the end of 2016 our standstill commitment; being fully committed to further progress in removing barriers and impediments to global trade and investment, we reaffirm commitment to roll back new protectionist measures. With these commitments we stress the importance of further curbing protectionism through the WTO, and to this end we will endeavor to make MC9 successful as a step towards a successful conclusion of the Doha Development Round and as an impetus for negotiations on a roadmap to reach this goal.
  2. We value monitoring of trade and investment restrictive/opening measures by the WTO, the OECD and the UNCTAD. We call on them to continue and reinforce this work consistent with their respective mandates so as to better resist protectionism and promote liberalization of global trade and investment. We welcome the WTO’s public website providing transparency over these measures for the benefit of governments, private sector, and civil society.
Brisbane, November 16, 2014
  1. Trade and competition are powerful drivers of growth, increased living standards and job creation. In today’s world we don’t just trade final products. We work together to make things by importing and exporting components and services. We need policies that take full advantage of global value chains and encourage greater participation and value addition by developing countries. Our growth strategies include reforms to facilitate trade by lowering costs, streamlining customs procedures, reducing regulatory burdens and strengthening trade-enabling services. We are promoting competition, entrepreneurship and innovation, including by lowering barriers to new business entrants and investment. We reaffirm our longstanding standstill and rollback commitments to resist protectionism.
Antalya, Turkey, November 16, 2015
  1. We will continue to implement sound macroeconomic policies in a cooperative manner to achieve strong, sustainable and balanced growth. Our monetary authorities will continue to ensure price stability and support economic activity, consistent with their mandates. We reiterate our commitment to implement fiscal policies flexibly to take into account near-term economic conditions, so as to support growth and job creation, while putting debt as a share of GDP on a sustainable path. We will also consider the composition of our budget expenditures and revenues to support productivity, inclusiveness and growth. We remain committed to promote global rebalancing. We will carefully calibrate and clearly communicate our actions, especially against the backdrop of major monetary and other policy decisions, to mitigate uncertainty, minimize negative spillovers and promote transparency. Against the background of risks arising from large and volatile capital flows, we will promote financial stability through appropriate frameworks, including by ensuring an adequate global financial safety net, while reaping the benefits of financial globalization. We reaffirm our previous exchange rate commitments and will resist all forms of protectionism.
Hangzhou, September 5, 2016
  1. In this context, we, the G20, as the premier forum for international economic cooperation, forge a comprehensive and integrated narrative for strong, sustainable, balanced and inclusive growth, and thereby adopt the attached package of policies and actions — the Hangzhou Consensus — based on the following:

––––Vision. We will strengthen the G20 growth agenda to catalyze new drivers of growth, open up new horizons for development, lead the way in transforming our economies in a more innovative and sustainable manner and better reflect shared interests of both present and coming generations.––––Integration. We will pursue innovative growth concepts and policies by forging synergy among fiscal, monetary and structural policies, enhancing coherence between economic, labor, employment and social policies as well as combining demand management with supply side reforms, short-term with mid- to long-term policies, economic growth with social development and environmental protection.

––––Openness. We will work harder to build an open world economy, reject protectionism, promote global trade and investment, including through further strengthening the multilateral trading system, and ensure broad-based opportunities through and public support for expanded growth in a globalized economy.

––––Inclusiveness. We will work to ensure that our economic growth serves the needs of everyone and benefits all countries and all people including in particular women, youth and disadvantaged groups, generating more quality jobs, addressing inequalities and eradicating poverty so that no one is left behind.

[…]

  1. We reiterate our opposition to protectionism on trade and investment in all its forms. We extend our commitments to standstill and rollback of protectionist measures till the end of 2018, reaffirm our determination to deliver on them and support the work of the WTO, UNCTAD and OECD in monitoring protectionism. We emphasize that the benefits of trade and open markets must be communicated to the wider public more effectively and accompanied by appropriate domestic policies to ensure that benefits are widely distributed.

Updates: September 6, 2016 — Hangzhou communiqué added

Picture credit: Picture of Hangzhou from a book in French from 1412 | public domain


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Author: tradebetablog

I used to work on trade issues and am now retired. I am an occasional freelance journalist, focusing mainly on international trade rules, agreements and institutions, with periodic analyses for AgraEurope www.agra-net.com/agra/agra-europe. This blog is for trialling ideas on trade and any other subject, hence “β”. You can respond by using the contact form or tweeting @CoppetainPU — Copyright © Peter Ungphakorn except where stated