Global Trade to Help Economies Rebound, Report Says

(QMI Agency/Toronto Sun)

Global trade dragged Canada and other economies more deeply into recession than they would have otherwise gone, but is also likely to drive a faster rebound, a report by an independent think-tank found.

While governments have increased protectionist measures in response to the crisis, the increasingly interlinked nature of the global economy has limited their ability to impose trade barriers, the Conference Board of Canada said.

Economists blame the clampdown on trade following the Great Depression of the 1930s for making that economic crisis longer and more severe than it otherwise would have been. Policymakers have largely avoided that mistake this time around, the report says.

“The highly integrated nature of global production makes it unattractive for governments to impose new trade barriers that affect not only the flow of final goods, but also has a domino effect on all of the related intermediate inputs and components,” said Danielle Goldfarb, associate director of the board's International Trade and Investment Centre. “In short, tight global linkages may have blunted the protectionist response.”

The board urges G20 leaders to commit not just to free trade in goods, but also in services and to liberalize investment rules.

The report is the seventh in a series called Lessons from the Recession and Financial Crisis (available from the Conference Board for $85).