Page 65 - Accelerating out of the Great Recession

ACCELERATING OUT OF THE GREAT RECESSION

whereby companies in one country would sell products in another
country for less than the cost of production or the amount they
charge in their home market—increased by some 200 to 300 per-
cent. This time around, there has been only a modest increase in
the number of antidumping investigations. Global Trade Alert, a
free-trade watchdog group, thinks that one reason for this is the
ongoing global negotiations over tightening antidumping stan-
dards, which reduce the incentives for countries to initiate inves-
tigations. It is also a fact that any increase in investigations tends
to lag recessions, so the number may yet rise more sharply.
Developing countries have taken the lead in imposing tariff and
nontariff barriers—accounting for more than 50 percent of all
trade restrictions—despite warnings that even small tariff increases
can hurt worldwide growth dramatically. The European Central
Bank, in its September 2009 monthly bulletin, pointed out that a
5 percent unilateral tariff increase in a large economy could lower
GDP growth by 1 percentage point over four years. And if several
economies took such action, the impact would be altogether worse.
And therein lies the real risk: a spiral of protectionism.
But modern trade protectionism typically does not take the
crudely old-fashioned form of increased tariffs—although
Russia and India have introduced such financial penalties on
foreign cars and steel, respectively, and there was a well-publi-
cized spat between the United States and China over tires.
World Trade Organization (WTO) and European Union rules
have forced countries to find more indirect (but often not so
subtle) forms of protection.
In February 2009, interest groups in the United States began
lobbying for a “Buy American” clause to be added to industries
receiving funds from the stimulus package. For example, all
public buildings and works projects were expected to use only

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