Out of Gaps in Treaties, First Salvos of Trade War

A government can engage in protectionism by closing barriers and strictly limiting products that enter the country or taking steps to give its products a leg up. In 1930, US Congress limited imports, which prolonged the Depression, notes Anthony Faiola in an article for the Washington Post. Recognizing that free trade promotes widespread prosperity and diminishes conflict, governments formed the General Agreement on Tariffs and Trade, forerunner to the World Trade Organization. “But there remains a surprising amount of wiggle room in international trade and commerce treaties, and that, analysts say, is where the battle is now being fought as leaders worldwide face intense pressure at home to protect domestic jobs in the deepening financial crisis,” explains Faiola, listing subtle protectionist moves emerging in Europe, developing countries and the US. A massive stimulus package proposed for the US includes “buy American” provisions that could be illegal under WTO trade rules. The WTO provides greater leniency to poor developing countries than wealthy ones like the US. Yet any who engage in protectionism can anticipate backlash and the conditions that created the Great Depression of the 1930s. – YaleGlobal