Sydney Morning Herald (Australia)
April 2, 2009
IN LONDON today, the leaders of the Group of 20 nations will declare themselves united, absolutely, in tackling the Global Economic Crisis – just as they were in Washington last November when it was still just a global financial crisis. The question is: can they agree on any measures to pull us all out of the mess, or at least stop it getting worse? The signs are not too good.
Already, the two big "Anglo-Saxon" powers, the United States and Britain, have had a falling out with continental Europe over a plan for a massive new
co-ordinated fiscal stimulus. Angela Merkel of Germany worries about the eventual inflationary impact of printing money on such a scale. Nicolas Sarkozy of France thinks Washington hasn’t gone far enough to supervise hedge funds and derivatives. These arguments will no doubt be papered over in a final communique pledging resolute action.
Yet the G20 is already falling down on one of its pledges in Washington: to refrain from raising new trade barriers and get basic agreement on the long-stalled Doha round of free trade negotiations by the end of 2008. The World Bank points out that since then, 17 of the group’s 20 members have instituted new protective measures, including Australia. With developed countries, these are mostly subsidies for car makers and other ailing industries; with developing countries, either outright tariff hikes or dubious blocking of imports on health grounds.
Meanwhile, global trade is falling at a rate not seen since World War II, by a likely 9 per cent this year, according to the World Bank and World Trade Organisation, by 13.2 per cent by the estimate of the Organisation for Economic Co-operation and Development. The World Bank’s chief, Robert Zoellick, is spearheading a push to do something about this, putting the economics in the bluntest of terms: between 200,000 and 400,000 babies in developing countries will die this year because of falling economic activity. As well as rolling back trade barriers, he wants the big economies to set up a massive new fund to finance exporters and traders in these developing countries of Asia, Latin America and Africa.
The trade collapse is bringing Asia’s trading nations off the sidelines where they’d been sitting in November, believing the crisis was mostly self-inflicted damage happening in New York and London. Instead of flaying the corpse of financial market fundamentalism, the G20 would show its usefulness by bringing the rich countries into a partnership with its developing world members to return growth to global trade.