G20 London Summit: The New Face of Finance
|April 1, 2009|
By Joseph S. Germani, Contributor
In the midst of the global financial crisis, the worldwide economy stands to take on a new personality. The debates and decisions at the London Summit of G20 will help determine the new face of global financing and international trade. Already, the buzz preceding the conference indicates some of the themes that will shape its discussions.
Addressing the alarming trend towards protectionism should be a major priority of the leaders attending the Summit. When this group last met, in November, leaders pledged to avoid putting in place protectionist measures in their countries. This pledge, at least to some degree, has amounted to merely paying lip service to the virtues of free trade. A recently released World Bank study reports that 17 G20 members have put in place 47 trade-restricting measures since the November 2008 Washington Summit. These range from “Buy American” restrictions on bailed-out U.S. companies, to EU export subsidies on butter, cheese, and milk powder, to an Indian ban on Chinese toys, and many other trade restrictions.
Whether these policies amount to major trade restrictions, or are simply a drop in the bucket, is not really the point. What they do represent is a troubling spirit of protectionism that, if pushed too far, could have devastating effects on the global economy. Most economists agree that protectionism, by limiting the range of products available to consumers, decreases economic efficiency and hurts the economy.
If world leaders continue to bend to increased pressure from insecure populations that believe protectionism is the answer to their economic woes, a series of trade wars could erupt. The beginnings of such a problem are already apparent in some trade battles already underway.