Running in Place on Trade

NEW YORK – Meetings of G-20 leaders regularly affirm the importance of maintaining and strengthening openness in trade. June’s G-20 summit in Toronto, although not very effusive on trade, did not back away from it. Yet talk is cheap, and the open-mouth policy of (generally pro-trade) pronouncements has not been matched by action.

The paradox is that this has been good for holding the line on protectionism. After all, actions are also necessary to “roll back” open trade. So we have largely stood still, in trade jargon.

But lack of trade activism has also meant that we are not moving forward with trade liberalization. The long-standing Doha Round of multilateral trade negotiations seems to have been put on indefinite hold.

That governments did not break out into protectionism after the global financial crisis hit surprised many. In retrospect, it is easy to see why. Policy is driven by three “I’s”: ideas, institutions, and interests (i.e., lobbies). On all three dimensions, protectionist policy was hemmed in.