March 31st, 2009
04:12 PM GMT
LONDON, England – One of the five "pillars" of the G-20 meeting is protectionism. World trade has naturally fallen in this recession and British Prime Minister Gordon Brown is worried politicians will start to build up import barriers to "protect" jobs at home.
In reality, of course, jobs are often lost when barriers rise for two main reasons; other countries retaliate, hurting exports, and also because nowadays many companies import raw materials which become more expensive during a trade spat. Mr. Brown calls the danger of protectionism "de-globalization."
Now, you might think this means countries are resisting protectionism; clearly not. The World Bank estimates that 17 of the 20 G-20 "countries" (The European Union is treated as one country in this group) have erected barriers of one form or another to protect certain industries.
The United States has its "Buy America" provision signed into law by Barack Obama as part of the stimulus package.
France appears to have succeeded in its bid to keep auto jobs at home when Renault created 400 jobs at a plant outside Paris to make the tiny Clio automobile, claiming its Clio plant in Slovenia was at capacity. France's auto bailout came with calls for the French automakers not to cut jobs at home.
Then there was Russia's duty increase for imported used cars, etc. etc.
Martin Brougton, the president of the UK's Confederation of Business Industry (CBI), told me that even a bank bailout can be protectionist if it helps a domestic bank compete unfairly. He says most companies don't want protectionist measures and says it is politicians who can't help but fiddle with trade rules to please voters.
Remember, at the last G-20 Meeting just a few months ago, the leaders pledged to resist protectionism measures and then did it anyway.
You might say these moves are symbolic or minor and that's probably correct. But what happens after this G-20 meeting could set the trade tone for years to come.
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