World Business Leaders Call Protectionism Real Risk to Economy

It is important for nations to shun protectionism and coordinate efforts to establish an open global trade system, seven world political leaders and business elites told Xinhua on the sidelines of the China Development Forum 2009.

Murilo Portugal, deputy managing director of the International Monetary Fund, said it was very important that the leaders of the G20 made a common pledge last November in Washington to not take protectionist measures.

If they didn't make the pledge, the situation would have been worse now, he said, adding that an early conclusion of the Doha Round of talks is of great importance to boost trade liberalization and shore up confidence in the global economy.

But what is needed to improve the situation, I think it is basically two things, Portugal said. One is to move ahead with the reform of financial system. And second, to maintain the accommodation of monetary policies, fiscal policies, stimulus policies by those countries which have the fiscal space to do so.

Nobel Prize winner Joseph Stiglitz, a professor at Columbia University, said it's very important for world leaders to honor the spirit that they should not have protectionism. But there are protectionist measures already. Seventeen of the G20 countries have undertaken them since G20 summit last November. So, clearly, something more needs to be done.

Protectionism is a real risk at the economy, said Ian Davis, global managing director of McKinsey and Company. Protectionism destroys jobs, destroys wealth, and also increases the risk of geopolitical tension and the risk of terrorism.

When there is economic stress and people find themselves in economic difficulty, there is a tendency to pull back and to say we're going to engage in protecting area industries. I think that is understandable, but it's a wrong policy, said William Cohen, former U.S. secretary of defense, citing the Buy American clause in the U.S. stimulus package.

It's certainly bad for economics, bad for politics ultimately...so I want to speak out against protectionism, against this kind of nationalism, said Cohen, who is currently chairman and CEO of the Cohen Group.

The goal of the Doha Round negotiations and other types of economic summits is to reduce trade barriers, not to add them. It's a very difficult time. The G20 is going to talk about not resorting to protectionism at the time of economic stress, he added.

Zheng Yongnian, director of the East Asia Institute at the National University of Singapore, called on all countries and regions to enhance cooperation to eliminate trade barriers and build a reciprocal win-win world trade system.

An open and fair trade system is important in fighting protectionism, which is also a major goal that G20 should achieve,he said.

Talking about resisting protectionism on theoretical and philosophical levels is not enough, he said, noting that only system-building can solve the problem.

Dirk Messner, director of the German Development Institute, said the G20summit in London next week should publish "a strong statement to avoid any protectionism.

He added that it is also important to conclude the Doha Round of talks in 2009 to avoid any new manners of protectionism.

Masahiko Aoki, an honorary professor at Stanford University, said that although the economic crisis is unfortunate, it gave birth to a new way of cooperation, such as the upcoming G20 summit.

The G20 summit will bring together advanced economies and emerging ones such as China, India and Russia and will be a good platform for discussions, said Aoki, director of the Virtual Center for Advanced Studies in Institution, Tokyo Foundation.

By this way I think protectionism sentiment is going to be controlled, he said. Protectionism usually comes from special interest groups of economy, like automobile industry and agriculture. International pressure is very important. It can provide a good instrument for politicians to deal with domestic interest groups.

Source: CRIEnglish