Abstract
The global economic crisis places national economies under strain, and governments around the world may be tempted to support local producers and workers by putting in place protectionist policies. In spite of the formal G-20 promise to abstain from such steps, recent evidence shows that countries, including those from the G-20, have been introducing measures to the detriment of international trade and investment. Policies of this kind proved seriously harmful during the Great Depression of the 1930s. Today, the international legal landscape is markedly different but can it serve as an effective break on protectionism in crisis times? This article reviews relevant international disciplines in the areas of trade, investment and state aid and concludes that while the system will generally prevent protectionist policies, existing lacunae, ambiguous provisions and a lack of effective enforcement all indicate that it cannot be relied upon to provide a durable guarantee against economic nationalism, especially if the economic situation continues to deteriorate.
Highlights
The current economic crisis has assumed truly global proportions
Having its origins in the financial market of the United States, it has spread around the world like a bush fire, with most countries heading into economic recession and volumes of international trade and investment contracting fast
The financial crisis has had a devastating effect on the banking system, a major pillar of a healthy economy
Summary
The current economic crisis has assumed truly global proportions. Having its origins in the financial market of the United States, it has spread around the world like a bush fire, with most countries heading into economic recession and volumes of international trade and investment contracting fast. In the declaration resulting from the G-20 meeting in Washington DC (November 2008), the heads of State “underscore[d] the critical importance of rejecting protectionism and not turning inward in times of financial uncertainty” and promised to refrain from protectionist measures for the following 12 months.[3] This has not prevented several countries, including 17 of the G-20, to implement at least trade-restrictive measures, which have included tariff increases, import licensing requirements, domestic sourcing provisions, restricted entry, tightening of standards, and even outright import bans on particular products.[4] Various countries including Canada, China, France, Germany, United Kingdom, Sweden, the United States and others have been granting state aid to particular industries, notably the automobile industry that has received a total of some US$ billion worldwide.[5] While it is suggested that so far the negative impact of these trade-restrictive measures has been relatively minor (the drop in trade is being attributed primarily to the rapid contraction of credit necessary to finance export and import operations, decline in asset prices, weakened demand and decreased production), they constitute a dangerous trend. The question is whether, and in how far, these legal structures can prevent economic nationalism and beggar-thy-neighbour policies in the current situation
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