This morning in the Washington Post Anthony Faiola warns against the rise of trade barriers in response to the global economic downturn:
At least 17 of the 20 major nations that vowed at a November summit to avoid protectionist steps that could spark a global trade war have violated that promise, with countries from Russia to the United States to China enacting measures aimed at limiting the flow of imported goods, according to a World Bank report unveiled yesterday.
The report underscores a “worrying” trend toward protectionism as countries rush to shield their ailing domestic industries during the global economic crisis. It comes one day after Mexico vowed to slap new restrictions on 90 U.S. products. That action is being taken in retaliation against Washington for canceling a program that allowed Mexican truck drivers the right to transport goods across the United States, illustrating the tit-for-tat responses that experts fear could grow in coming months.
Oddly, the article gives only this brief mention
“Leaders must not heed the siren-song of protectionist fixes, whether for trade, stimulus packages or bailouts,” said World Bank Group President Robert B. Zoellick.
to the most serious protectionist measures that many countries have taken in recent months: the gargantuan subsidies they’ve been giving to banks. Whether it is effective or not, the $750 billion (so far) Troubled Assets Relief Program is an enormous subsidy paid to U. S. banks. That a good part of the funds given to AIG have trickled down to foreign banks doesn’t alter the fact that we’re subsidizing AIG, too.
The U. S. isn’t alone in providing titanic subsidies to its banks. The United Kingdom has given billions in subsidies to save the Royal Bank of Scotland. The French government has midwifed a merger deal among several banks there to prop up the investment bank, Natixis. The German government has subsidized Hypo Real Estate Holdings AG. The list goes on.
I continue to be bemused that anybody believes that it’s possible to have a solid, dependable international market for financial services without international regulations for financial services companies or the institutions to back them up. It seems to me that we have the choice between a greatly strengthened international regime or greatly weakened financial services companies.
None of the above will be a catastrophe.