Pretending We're Not In a Trade War

Even in the darkest days of the recession, as job reports registered stomach-flipping descents, politicians around the globe swore not to give in to protectionism. Now, as the economy starts to stabilize, the World Trade Organization has offered them a muted congratulations. Its analysis of anti-free trade actions in 2009 reveals some minor slippage, but in general "paints a reassuring picture."

But like all self-portraits, this one tends to flatter the painter. The WTO relies on countries to report their own transgressions, "and when you grade yourself, you tend to be an easy grader," says Gary Clyde Hufbauer, an economist with the Peterson Institute for International Economics. That's especially true when the guidelines allow for lots of wiggle room. When the U.S. slaps a tariff on Chinese tires, it's a clear act of protectionism and is duly reported to the WTO. But elbowing foreign firms out of government purchases--as the U.S. did to Airbus over a $40 billion contract for aerial-refueling tankers--doesn't require a confession.

A more accurate assessment of the state of trade comes from independent watchdog Global Trade Alert, which estimates that governments enacted at least 100 new protectionist measures per quarter last year. "Any suggestion that 2009 was a benign, low protectionism era should be dismissed," the latest report reads. The "reassuring picture," it turns out, has plenty of blemishes.

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