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Protectionism could hamper recovery


Protectionist policies could hold back global economic recovery and weaken key industries long after the current crisis ends, the World Trade Organization (WTO) said today.

In a joint report with the United Nations Conference on Trade and Development (UNCTAD) and the Organization for Economic Cooperation and Development (OECD), the WTO said most leading economies have invoked “trade defense mechanisms” to weather the downturn, Reuters reported.

“The fiscal and financial packages introduced to tackle the crisis clearly favor the restoration of trade growth globally, but some of them contain elements that favor domestic goods and services at the expense of imports,” the agencies said.

They warned that corporate bailouts and other measures could “create a legacy of uncompetitive industries and sector over-capacity that will continue to generate protectionist pressures even after economic activity picks up again.”

The report, prepared for the G20 leaders’ meeting later this month in Pittsburgh, projected that the recession would reduce world volumes of merchandise trade by 10 percent this year and push foreign direct investment 30 to 40 percent lower.

The agencies concluded that so far major economies had avoided “a descent into high-intensity protectionism” but warned policies adopted to date could easily be amplified alongside more job losses in the years to come.

“The main risk is that G20 members will continue to cede ground to protectionist pressures, even if only gradually, particularly as unemployment continues to rise,” they said.

Click here to read the Reuters article at CNNMoney.com.

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