*{Stop protectionist backlash now [http://www.iccwbo.org/home/news_archives/1999/stop_protectionist_backlash_now.asp]
  
by Maria Livanos Cattaui

Paris, 25 February 1999 -} With recession biting deeply in many parts of the world, the lure of politically expedient, discriminatory protection of domestic goods and services is beckoning again. We have been down this     path before and know where it leads.

Unless the United States and the European Union cooperate to smother its resurgence and uphold global rules-based trade, protectionism can eventually crush the trade expansion that is the world’s best hope for broad-based growth and stability in the 21st century, and effectively march us back into the 1930s. 

But no such cooperation seems imminent. Indeed, rather than leading by example to discourage new retreats behind tariff walls and other beggar-thy-neighbor trade measures, the world’s two most powerful economic entities have chosen to squabble; chosen to lock horns over, of all things, bananas and to fight skirmishes with their other trade partners on issues ranging from steel to timber, textiles, beef and even the cross-border transfer of personal data.

Both sides should take the time to remember the 1930s and the havoc that followed passage of the Smoot-Hawley Act, the law that raised US tariffs an average 53% overnight. Smoot-Hawley provoked so many other countries to join a vicious circle of retaliation that they strangled trade and investment and turned a recession into the Great Depression.

The financial crisis in South East Asia, turmoil in Russia, economic stagnation in Japan, the threat to China and the repercussions in South America undeniably have prepared some strategic ground for economic nationalists who doubtless would have fought for Smoot-Hawley. And they have not been slow about seizing that ground.

Excess capacity and shrinking industrial demand in many parts of the world have raised concerns about job security. Thus the pleas for anti-dumping protection by US and European steel makers as they compete against imports of the Asian steel that lacks buyers on depressed Asian markets. 

Other signs of growing protectionism may themselves seem small, but they are troubling in their implications. The squabble between the US and the EU over the Europeans’ imports of bananas from the Caribbean and Africa rather than from Latin America is a noisy recent case in point. While the sums involved were comparatively insignificant, the dispute has threatened to undermine the World Trade Organization’s dispute settlement procedure, the lynchpin of its supranational authority to enforce the rules holding the multilateral trading system together. 

The US Administration’s recent pledges to resist domestic protectionist pressures and take the lead in further liberalizing world trade are heartening. But recent US actions in the trade frictions with the European Union undermine the credibility of those pledges. For the freer trade the US Administration says it supports will require not only the "fast-track" negotiating authority it advocates, but also renunciation of the kind of   menacing megaphone diplomacy that has characterised the banana war and related skirmishes. 

There is a broader, better approach, an approach with a growing international constituency. Great enthusiasm already exists on both sides of the Atlantic for launching a new round of global trade negotiations when WTO ministers meet in Seattle at the end of this year. As the private international organization that develops many of the rules and terms used in global trade transactions, the International Chamber of Commerce shares that enthusiasm. 

Politically, it always is easier to liberalize trade when economies are humming and hard to do so in tough times, when protectionism is at its most seductive. Economically, however, tough times are precisely when the world economy can benefit most from the jump start of a new round to further liberalize trade and investment. Now is the moment for joint leadership from the world’s two major economies.

A clear resolve to launch and rapidly complete global trade negotiations would provide a powerful tonic to restore the business confidence in the emerging nations so needed to spur recovery from the economic upheavals of the past two years. It would forestall the re-emergence of protectionism in the bargain. The opportunity must not be lost.

*{Commission on International Trade and Investment Policy

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