Moves towards trade protectionism result from broader policy failure: UNCTAD

The recent moves towards trade protectionism should be understood as part of a more general policy failure to generate a sufficient number of well-paid jobs and achieve inclusive recoveries in advanced economies after the financial crisis, a UN trade body has told the IMF.

United Nations Conference on Trade and Development (UNCTAD) Secretary General Mukhisa Kituyi, during the ongoing spring meeting of the IMF, said that such measures will not achieve such outcomes, and there is a real worry that just when greater policy coordination is needed to address mounting global challenges, the systemically important economies are moving on the opposite direction.

Over the last 30 years, at bilateral, regional and multilateral levels, trade rules have been shaped not simply by the demands of advanced economies but in alignment with the interests of a subset of corporations that dominate their trade, he said.

"The root cause of the current 'trade war' conflict is a valid complaint by advanced countries middle classes, shared by the poorest Least Developed Countries (LDCs), that the globalisation of international trade embodied in the multilateral system has left them behind," Kituyi said.

According to him, there is little doubt that developing countries would face serious collateral damage from tit-for-tat retaliation between the leading trading powers.

In response, and with an impasse in trade negotiations at the WTO, it will be important that developing countries fashion a more positive integrated trade agenda that seeks to reshape the rules in a way that gives countries the policy space they need to build sustainable and inclusive growth paths but retains a multilateral commitment to flexibilities, safeguards against shocks and a willingness to deal effectively with any resulting disputes, he said.

Along with persistent global imbalances and weak global aggregate demand, recent trade measures should be understood as part of a more general policy failure to generate a sufficient number of well-paid jobs and achieve inclusive recoveries in advanced economies after the financial crisis, Kituyi said.

"Greater policy coordination is needed to address these challenges, however, the systemically important economies are moving in the opposite direction.

"In response, it is important that developing countries fashion a more positive integrated trade agenda that seeks to give countries the policy space they need to build sustainable and inclusive growth paths but retains a multilateral commitment to flexibilities, safeguards against shocks and a willingness to deal effectively with any resulting dispute," Kituyi added.