December 22, 2008

Trade duties could slow global recovery

Protectionist trade policies emerging in India, Indonesia, Russia and South America could be a setback for economic recovery, trade policy experts said.

World leaders meeting in Washington Nov. 15, vowed to hold off on new protectionism policies for at least a year, The Washington Post reported Monday.

Three days later, India began a new import duty for some soybean oils and Russia has since raised taxes on foreign car imports, as well as poultry and pork products.

Indonesia is increasing fees on 500 imported products, while the World Trade Organization said Argentina and Brazil are looking to raise tariffs on a number of products.

Raising import duties is dangerous ... because it is a move that could spread to other nations, said Franklin Vargo, vice president of international economic affairs at the National Association of Manufacturers.

Trade restrictions, caused by trade wars, can shut down exporting firms that tend to be innovative, dynamic and capable of generating good job growth, said Eswar Prasad, a professor of trade policy at Cornell University.

Their suppliers shut down, job losses get worse, and you can quickly have a spiraling downward effect on the entire economy, Prasad said.