Unemployment threatens world market openness

The world’s largest economies have continued to refrain from restricting trade and investment flows to protect domestic economies amid the downturn, but this trend could be reversed due to continued unemployment, a joint report released on Tuesday by several international organizations said. Policy responses of the Group of 20 (G20) to the global recession have remained "muted" from September 2009 to February 2010, the report by the World Trade Organization, Organisation for Economic Cooperation and Development, and the United Nations Commission on Trade and Development said. During this period, instances of potentially restrictive trade measures from the G20 have decreased since the last report in September 2009, the report found. "Since September 2009, recourse to new trade restrictions by G20 members has been less pronounced than in the period covered by the first G20 report," it said. "There have been fewer instances than in earlier periods of G20 members taking potentially trade restrictive measures (sic), and more cases of trade-opening measures and of the termination of investigations into ‘unfair’ trade practices without the imposition of new trade remedy measures," it said, based on notifications submitted by G20 members and other official and public sources. Trade restrictions imposed recently covered only a 0.7 percent share of the G20’s total imports. Those imposed from October 2008 to October 2009, in contrast, covered a larger 1.3 percent share, the report said. There were reports of stricter application of product standards that may have made the entry of imports more difficult, "but this kind of trade obstacles is not easy to substantiate empirically," it added. The Philippine Exporters Confederation, Inc. earlier noted a tightening of safety standards imposed on the products of its members. But the Bureau of Export Trade Promotions said Philippine exporters had not complained about increased barriers abroad. The report said investment policies and trade in services had likewise remained open. "G20 policy changes continued to point towards greater openness and clarity for foreign investors. As in the period covered by the first G20 report, a substantial number of measures were introduced to facilitate international investment and financial flows," the report said. Sought for comment, Board of Investments Special Projects Department Director Rudy B. Cana agreed that no foreign policies discouraging the flow of investments into the Philippines had been observed. The report warned, however, that continued state intervention in various industries through bailouts and guarantees would eventually hurt global competition, especially in the financial sector. The prolonged period of job losses could likewise threaten market openness. "Past experience shows that prolonged periods of job losses and unemployment are one of the main catalysts for more restrictive policy making," it said, noting that global unemployment had hit record levels last year, with 27 million losing their jobs, according to the International Labor Organization. With unemployment rates poised to remain high this year, governments must take extra pains to resist protectionist measures, the report said. G20 members would also do well to push for the rapid conclusion of the Doha Round of talks for a global trade deal so that "restrictive measures taken to combat the crisis will be quickly reversed." — Jessica Anne D. Hermosa, BusinessWorld