Increased protectionist measures by various countries could hamper global economic recovery and drag down future growth, IMF economists have said.
High unemployment for a longer period, uneven economic growth and slow unwinding of stimulus measures could result in increased protectionist measures.
“Gaps in World Trade Organisation (WTO) commitments leave ample scope to further restrict trade, so unless all countries vigorously resist protectionism this could threaten economic recovery and drag down future growth,” the economists said.
They have also called for enhanced monitoring of all protectionist measures and high-level political awareness of the associated macroeconomic risks.
“The surest way to avoid such a downside scenario is to tighten multilateral trade commitments by completing the WTO Doha Round. This can be viewed as a key part of the exit strategy from the global economic crisis,” the paper titled ‘Trade and the Crisis: Protect or Recover’ said.
According to the IMF economists, protectionism pressures might rise in the wake of continued high unemployment, different growth rates across countries, and governments scaling back their spending.
“... new trade restrictions have had — in the limited products they targeted — a strong negative impact on trade. The aggregate impact of new restrictions is modest, at about 0.25 per cent of global trade, as most countries have resisted a widespread resort to protectionism,” it noted.
Global trade declined about 18 per cent between 2008 and January 2009.