Protectionism Continues its Climb

Editor’s Note: Chad P. Bown finds that although the G-20 committed to reduce trade protectionism and barriers following the start of the financial crisis, almost all of them have turned to trade “remedy” policy instruments in response to domestic industry demands for protection from import competition. New data and a study, produced by Bown, show that the first half of 2009 had a 30.5 percent increase in the imposition of new import-restricting measures, as compared to the same time period in 2008.

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Executive Summary

Despite the Group of 20’s (G-20) commitments to refrain from imposing new protectionist measures in the wake of the global economic crisis, virtually all of them have turned to trade “remedy” policy instruments such as antidumping, safeguards, and countervailing duties (anti-subsidy policies) in response to domestic industry demands for protection from import competition. This study examines newly available data that tracks the combined use of these trade policies and finds a continued increase in protectionist resort to these import barriers in the second quarter 2009. The second quarter 2009 increase is above and beyond the sharp increase that began in 2008 with the global spread of the financial crisis.

Compared to the same time period in 2008, the second quarter of 2009 saw a 12.1 percent increase in initiated investigations in which domestic industries request the imposition of new import restrictions under trade remedy laws. While India and the United States combined to initiate 50 percent of the new investigations during this period, other G-20 members that also initiated at least one new investigation during the second quarter of 2009 include Argentina, Australia, Brazil, Canada, China, European Union, and Turkey. Other developing countries also resorting to these instruments include the Dominican Republic, Pakistan and the Kyrgyz Republic. China’s exporters were the dominant target for these new investigations that may result in import restrictions, being named in over 80 percent of the new country-level investigations.

One new and striking feature of the data is that much of the new protectionism taking place in the first half of 2009 is through use of the global “safeguards” policy. While use of the antidumping policy in 2009 has leveled off after the initial escalation associated with the crisis in 2008, safeguards use has spiked only more recently. If continued through the second half of the year, the 2009-to-date pace of new safeguard investigations would make 2009 the second most prolific year since the WTO’s 1995 inception.

Finally, compared to the same time period in 2008, the first half of 2009 also saw a 30.5 percent increase in the imposition of new import-restricting measures upon completion of earlier investigations initiated under these trade remedy laws, a trend that will almost certainly continue to increase throughout the remainder of 2009 and into 2010. Most striking in the second quarter 2009 data is that China’s exporters were targeted in 100 percent of the new product-level import-restrictions imposed under other WTO members’ trade remedy laws that require the investigating country to name at least one exporting country.