World Trade Set to Fall 13%, OECD Urges Governments to Avoid Protectionism

(OECD)

With world trade volumes likely to shrink by as much as 13% in 2009 from 2008 levels, the OECD is urging governments to avoid protectionist measures and keep markets open in order to allow economies to benefit from the recovery when it comes.

Speaking at a meeting in Brussels to present a new OECD publication on trade policy, International Trade: Free, Fair And Open?, OECD Director for Trade and Agriculture Ken Ash warned that government actions to discriminate against foreign goods, services, firms or workers “could have a devastating effect in terms of prolonging and deepening the recession.”

• Consumers would be hurt by higher prices and reduced choice.

• Domestic industries would face higher input costs, as a huge amount of trade today is in intermediate goods and services.

• Exporters would be penalised twice: through higher costs and through retaliation from other countries. The net effect on the economy would be even bigger job losses than otherwise
European Trade Commissioner Catherine Ashton, speaking at the same event, stressed the need to help citizens better understand the role of trade in contributing to economic growth and job creation.

The new OECD publication, International Trade: Free, Fair And Open?, was written with that objective. Part of the OECD’s Insights series of publications aimed at a wide public, it explains that while open markets are a necessary condition for growth and prosperity they are not sufficient on their own to guarantee positive outcomes. Trade policy must be accompanied by other policies if the potential benefits are to be realised and the negative impacts of liberalisation on vulnerable individuals and sectors are to be addressed. “Today, in particular, effective labour market policies need to be in place to assist those that need to adjust,” Mr. Ash said.