WTO warns of protectionism

City A.M. Reporter
PROTECTIONIST policies could hold back global economic recovery and weaken key industries long after the current crisis ends, the World Trade Organisation (WTO) said yesterday.<br /><br />In a joint report with the UN trade and development agency UNCTAD and the Organisation for Economic Cooperation and Development (OECD), the WTO said most leading economies have invoked &ldquo;trade defence mechanisms&rdquo; to weather the downturn.<br /><br />&ldquo;The fiscal and financial packages introduced to tackle the crisis clearly favour the restoration of trade growth globally, but some of them contain elements that favour domestic goods and services at the expense of imports,&rdquo; the agencies said.<br /><br />They warned corporate bailouts and other crisis steps could &ldquo;create a legacy of uncompetitive industries and sectoral over-capacity that will continue to generate protectionist pressures even after economic activity picks up again&rdquo;.<br /><br />The report, prepared for the G20 leaders&rsquo; meeting later this month in Pittsburgh, projected the recession would reduce world volumes of merchandise trade by 10 per cent this year, and push foreign direct investment 30 to 40 per cent lower.<br /><br />The agencies concluded that so far major economies had avoided &ldquo;a descent into high-intensity protectionism&rdquo; but warned policies adopted to date could easily be amplified alongside more job losses in the years to come. <br /><br />&ldquo;The main risk is that G20 members will continue to cede ground to protectionist pressures, even if only gradually, particularly as unemployment continues to rise,&rdquo; they said.<br />