Rising trade protectionism and Turkey

According to the 10th Global Trade Alert (GTA), which monitors trade tensions, the initial wave of protectionist measures, shown by the number of measures, the number of tariff lines and the trading partners affected, peaked in the first quarter of 2009. The third quarter of 2009 showed another peak and represented the highest levels of tariff lines affected.

Looking at the breakdown among G20 members, the two peaks were driven by different countries. The US was mostly responsible for the first peak, with Russia and Germany piling on. The second peak was mostly driven by China, again with Russia and Germany piling on. Another peak in the second quarter of 2010 was led by the US.

The protectionist trend continued in 2011, as most of the pipeline measures of 2010 were implemented in 2011. As a matter of fact, the initial reports of the incidence of protectionism in the third quarter of 2011 are as high as in the most troubling quarters of 2009, when protectionist fears were at their peak early in the crisis.

GTA shows that protectionism has been at its highest level as of the second half of 2011 since the immediate aftermath of the Lehman Brothers crisis in 2009 (See given table). According to the latest data, the EU has become the most protective region amid rising debt-ridden crisis concerns, and Russia has been the second most protective country since 2008. This second revival of projectionist waves is related to the deteriorated macroeconomic conditions in Europe and China, and doubts about the strength of any US economic recovery could not be shaken off. Also, government policy is likely to move further into a defensive posture. Moreover, several large trading nations have taken across-the-board measures that adversely affect many trading partners or sectors. Moreover, high-profile commercial policy disputes between leading nations are no longer confined to currency wars and misalignments.

Less than a third of these protectionist measures taken have been tariff increases or trade defense measures; worse, some of these measures have been taken by large trading nations and affect many sectors or trading partners. Since July 2011, new protectionist measures have outnumbered liberalization measures by nearly three to one. As the vast majority of these initiatives are not traditional trade defense measures or tariff increases, but new forms of protectionism such as discriminatory investment measures, export subsidies, discriminatory bailouts, wage subsidies and so on, they go mostly unnoticed, and conventional WTO measures have failed to catch them.

What is particularly troubling is that in recent months, trade disputes between leading trading nations are widening in scope. For much of 2010 and early 2011, the highest-profile disputes concerned so-called currency wars and misalignments. Nowadays, many of the subsidy regimes instituted early in the crisis are becoming the subject of disputes between leading trading nations. The disagreements between China, India, the United States and the European Union over local content requirements, technology transfers and subsidies in the solar power industry are cases in point.

The given country list here that covers the period between 2008-2010 shows composite country rankings, derived by averaging the ranks of countries across the three metrics for both final and pipeline measures. The top five most protectionist countries remain almost the same, namely Russia, the United States, India, Argentina and Brazil. The least protectionist countries across the metrics are Turkey, Australia, Republic of Korea and Saudi Arabia. Turkey’s uncontrollably rising current account deficit suggests that Turkey has become one of the most dramatic victims of rising protectionism.