Thus far, political leaders have shown a heightened awareness of the risks of protectionism. Mindful of the 1930s experience and trade’s contribution to macroeconomic performance, leaders of the Group of 20 (G-20) economies pledged in November 2008 to “refrain from raising new barriers to investment or to trade in goods and services, imposing new export restrictions, or implementing WTO inconsistent measures to stimulate exports.”In April 2009, G-20 leaders extended this pledge through 2010 and asked the WTO and other institutions to monitor their countries’ adherence to this pledge.
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This provided further impetus for monitoring activities. WTO monitoring reports cover trade measures for all countries and reports prepared jointly by the WTO, OECD, and United Nations Conference on Trade and Development (UNCTAD) cover the trade and investment measures of G-20 countries, the latter specifically in response to a G-20 request. Other institutions and unofficial entities supplement this with their own monitoring, perhaps the most ambitious of which is Global Trade Alert (GTA), associated with the(London based) Centre for Economic Policy Research and supported by the World Bank and others.
In addition to the heightened awareness of the risks of protectionism, several other factors have worked to limit the protectionist response:
a. Multilateral rules and institutions have clarified the types of policy actions considered responsible. The strong WTO-based trade system has been central. There appears to have been very little resort to new WTO-inconsistent measures, and even where rules exist but leave scope for policy reversal, such as with tariff ceilings, this scope has not been widely used.
b. As we observed above, trade declined much more rapidly than did overall economic activity. The ratio of imports to GDP declined as well. Although job losses mounted, they were not by and large blamed on trade.
c. Macroeconomic and financial sector policies were supportive of trade. Monetary policy has been highly expansionary, with interest rates down to record lows in most advanced and many emerging economies, while central bank balance sheets expanded to unprecedented levels in key advanced economies, including in support of the financial sector. Many governments injected additional fiscal stimulus, beyond“automatic stabilizers.” The coordination of the fiscal stimulus across countries—reflecting IMF advice, helped to sustain demand. And McKibbin and Stoeckel(2009) argue that a coordinated fiscal stimulus reduces protectionist sentiment by more than individual packages could do alone.