Protectionism or free trade?

The world is slipping dangerously into protectionism, threatening to strangle global economic recovery, the World Trade Organization said. WTO, in its stern advisory, also has communicated that the effect of protectionist measures by some countries would be devastating for our society. The effect: far-reaching consequences, for instance; measures will strangle the international trade and hinder the global recovery, are hard to avoid.

The WTO is bent to step up its monitoring of trade policies introduced by governments struggling to cope with the worldwide economic crisis.

WTO Director-General Pascal Lamy said free trade has suffered "significant slippage" this year as countries have established new barriers to import, for instance tariffs, subsidies and other measures designed to protect domestic industries.
Lamy also requested the government to avoid trade restricting and distorting measures otherwise the restrictions could gradually suffocate international trade.

Furthermore the WTO catalogued higher tariffs, new on-tariff barriers and more resort to trade defence measures, which increased by a quarter in 2008. Besides the actions of the major traders, that restrict the import of footwear, offer assistance to the domestic car industries, are hazardous. They will create a situation of uncompetitive industries and sectoral overcapacity.
As well as higher border barriers decrease the impact of fiscal and financial stimulus packages. These packages serve for stimulating the aggregate demand.
The WTO announced earlier this week that commercial activity was expected to shrink by 9 percent this year, the worst collapse since World War II.

According to me, we have to encourage free trade because of its advantages. First and foremost in case of free trade companies produce low-priced products and products of superior quality. Secondly the prosperity will increase. On the other hand protectionism boosts the employment and the ‘infant industry’, they have the possibility to develop into market leader.

Written by Marie Maes

Source: The Financial Times
Article: WTO warns against protectionism
Published: March 27, 2009
By Frances Williams in Geneva