Trade is the glue that connects the global economy. Trade has grown much faster than economic growth for most of the last few decades, thanks largely to the globalization wave. Only twice since 1982 has global trade growth trailed economic growth.
But trade has weakened over recent quarters. According to the International Monetary Fund, trade growth volume is projected to slump to 3.2% this year, down from 5.8% last year and 12.6% in 2010. The World Trade Organization recently cut its forecasts for global trade by more than a full percentage point for this year and next. Absent fundamental policy changes, these data mean that the IMF's global GDP forecasts for this year (3.3%) and next (3.6%) are challenging to meet.
Yet even this cyclical weakness is not the gravest concern. What if the cyclical has become structural, and economic potential is falling? What if the world is getting more fragmented and the gains from globalization are being forgone and forgotten? What happens if policy makers remain preoccupied with short-term urgencies to the exclusion of long-term priorities?"
Protectionism is not the preserve of only a few countries. It is exercised by both the developed and developing worlds in times of economic crisis to protect domestic interests. Whether it actually protects domestic interests in the long run is an entirely debatable issue. Further, whose interests are actually protected is also open to scrutiny. Nevertheless, the increasing trend of "buy local" in France or aggressive "import licensing requirements" in Argentina is only symptomatic of a reaction of countries to address issues of economic crisis in a global world. As long as trade exists, there would be measures of protectionism. To what extent they spread and to what degree they violate trade agreements is the crucial factor.