Buried in all the dense language of the G-20 communique is a very important statement concerning a matter that has gotten relatively little public attention during the financial crisis—trade. In paragraph 13, the leaders pledge to refrain—for 12 months, at least—from raising new barriers to investment or trade, or to imposing new export restrictions. That's a reassuring signal at a time when the spread of recessionary forces around the globe is raising the specter of protectionism, which could easily make an already-deep slump even worse. So it's helpful that the G-20 leaders are putting themselves on the record as promising that individually, they won't succumb to the temptation to wall off imports. Of course, since the recession is only now building strength, the leaders haven't yet felt the full force of the pressures they're likely to face to protect individual industries from foreign competition. It will be very interesting to see how firmly this pledge is adhered to.
To show they mean business, the leaders also make another, very ambitious statement, by saying that they "shall strive" to reach an agreement this year in the Doha Round concerning the formulas for cutting tariffs and subsidies for manufactured and agricultural goods, and adding that they "instruct [their] trade ministers to achieve this objective." This could mean another major meeting of trade ministers will convene in December, just four and a half months after a similar meeting ended in collapse in late July.
The question is, why do these policymakers think they'll succeed now when they couldn't do so before, even after nine days of very arduous negotiations? The agreement that was on the table then could have provided a very important insurance policy against protectionism, by lowering the "bound" tariffs (that is, the legal maximum duties) that countries are allowed to impose on goods. So approving such a deal now could help enormously in cementing the leaders' commitment to maintaining openness. But I'm very skeptical that this will come to pass.
The claims that trade ministers were "very close" to a deal at their July meeting is, frankly, exaggerated. And the negotiations that have taken place in Geneva since then have made pathetically little progress; in some ways they've gone backwards. True, the economic crisis may help spur governments toward compromise—the Doha Round, after all, was conceived in crisis in the weeks after the 9/11 attacks. But with a new administration coming to power in the United States, it's going to be extra difficult for other nations to make concessions when they can't be sure the new president and his trade representative, or the Congress, will accept the overall deal.
We could be setting ourselves up for another big disappointment in December, and in that case, the G-20's words on this topic will be exposed as empty rhetoric. Let's hope they know what they're doing.