Countries around the world are adopting more and more trade-protectionist measures, and that’s not good news for the global economy.
The World Trade Organization reported at the end of April that Group-of-20 (G-20) nations had imposed 124 rules restricting trade since mid-October, according to The New York Times. Those regulations affect about 1 percent of global trade.
It’s understandable that governments would turn to protectionism at a time of sluggish economic growth.
But the results can be dangerous, because the globalization of the past 30 years has made economies more and more dependent on trade.
In the 34 countries that are members of the Organization of Economic Cooperation and Development, trade accounts for about 25 percent of GDP on average. That matches the figure for the United States alone.
The trend is particularly alarming in that trade protectionism helped lead to the outbreak of World War II.
“Cleary G-20 nations need to seriously step up their efforts to fight protectionism,” Karel De Gucht, the European Union trade commissioner, says in a recent statement.
“It sends the wrong signal to global trading partners, it sends the wrong signal to investors, and it sends the wrong signal to the business community.”
The fact that so many countries are dependent on trade may actually help prevent a trade war, as governments will hopefully come to realize that their protectionism is ultimately self-defeating.
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