World Economic Forum Annual Meeting 2013

  • Preventing Protectionism

    Thursday 24th January 2013 - 12:30pm - 1:45pm

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  • As the world's leading economies continue to face tough times, how can they ensure that rising levels of protectionism will not derail economic integration?

    Key Points

    • Protectionism exists, but not nearly as high a level as during the Great Depression in the 1930s. 
    • Bilateral agreements allow for experimentation with new rules in novel areas of trade.
    • Developing countries suffer from the subsidies and high tariffs that wealthy countries place on agriculture; they create distortions which have a deleterious effect on poor farmers. 
    • Standards in the name of health, safety and the environment function as de facto protectionism favouring developed countries. 

    Synopsis

    Liberal trading regimes have largely replaced traditional protectionism – such as tariffs or trade barriers – around the world. That mode of sheltering demand is anachronistic after globalization because companies now produce all over the world. Globalization should also render obsolete the “misguided dogma that exports are good and imports are bad”, said one participant. Producers linked to a global supply chain want imports as quickly and as cheaply as possible to export their products more successfully. 

    What has happened instead is a rise of “murky” protectionism, where governments promote domestic production – buy USA campaigns, for example – instead of closing off their market. This makes it more difficult to determine when a country is behaving fairly. “If we raise a tariff, we don’t want to be in the dogbox because someone else has a high degree of murky protectionism,” said one participant. By creating a “baseline” for murky protectionism, another participant said, it will help to provide a fairer gauge of the levels of protectionism around the world. 

    The rise of the global value chain does not mean that all links on that chain are created equal. African countries remain at “the bottom end” of that chain, said one participant; those countries need policy instruments that help them to move up. Even if some might classify those instruments as murky protectionism, the participant added, industrialized countries resorted to “those things in the past” and industrializing countries cannot let the world “kick away the ladder” from beneath them. 

    The social aspect of development often gets overlooked in the protectionism debate. Creating an industrial base and providing decent jobs are a domestic good; some level of public intervention will always be needed, said one participant. He added that unfair competition necessitates protectionism. “Countries should be competing on innovation and efficiency, not on how much they can exploit their workers,” he said. It’s a question of politics; another participant said; domestic industrial policies inform trade policies. 

    Changing the language used in discussing protectionism could make pro-trade policies more palatable to domestic audiences; for example, framing free trade as a method to lift people out of poverty and create jobs, or as the elimination of bureaucracy or red tape. 

    Disclosures

    This summary was written by Isaac Stone Fish. The views expressed are those of certain participants in the discussion and do not necessarily reflect the views of all participants or of the World Economic Forum.

Session objectives

As the world's leading economies continue to face tough times, how can they ensure that rising levels of protectionism will not derail economic integration?

Dimensions to be addressed:

  • Accelerating regional cooperation
  • Reducing trade tensions
  • Rethinking labour mobility

Speakers

  • Bernard Hoekman Bernard Hoekman
    Director, European University Institute, Italy

    Graduate, Erasmus University, Rotterdam; PhD in Economics, University of Michigan. Experience in the...

  • Richard Baldwin Richard Baldwin
    Professor of International Economics, The Graduate Institute of International and Development Studies, Switzerland

    1986, PhD in Economics, MIT. 1990-91, Senior Staff Economist, President's Council of Economic Adviso...

  • Anabel González Anabel González
    Senior Trade and Competitiveness Director, World Bank, USA

    Degree in Law, University of Costa Rica; LLM, Georgetown University. Trade policy-maker and practiti...

  • Craig Emerson Craig Emerson
    Minister for Trade and Competitiveness of Australia

    PhD in Economics, Australian National University. Formerly: Economic Analyst, UN; Senior Policy Advi...

  • Rob Davies Rob Davies
    Minister of Trade and Industry of South Africa

    Degree in Economics, Rhodes University; Master's in International Relations, University of Southampt...

  • Jyrki Raina Jyrki Raina
    General Secretary, IndustriAll Global Union, Switzerland

    1985, Master's in Law, Helsinki University, 1985, Lawyer and Collective Bargaining Officer, Finnish ...

  • Ron Kirk Ron Kirk

Moderated by

  • Ngaire Woods Ngaire Woods
    Dean, Blavatnik School of Government, University of Oxford, United Kingdom

    BA in Economics and LLB (Hons) in Law, Auckland University; Rhodes Scholar, MPhil and DPhil, Univers...

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