First published: guardian.co.uk, 11/11/2010
As the G20 chair passes from South Korea to France, it will be down to President Sarkozy to try to stop the protectionist trends of the last two years. The G20 nations have introduced more than 400 trade restraint measures, according to the monitoring organisation Global Trade Alert. And Japan, China, Brazil and several other emerging nations have been intervening in markets to stop their currencies rising. US treasury secretary Timothy Geithner’s proposal to establish a policy framework in which balance-of-payments surplus countries, such as China, would increase their imports, was shot down by China and Germany.
Most recently a number of emerging nations, including Brazil, Korea, and Indonesia, have put controls on inflows of capital from abroad. These have picked up sharply following the move by the US central bank, the Federal Reserve, to start a second round of quantitative easing (QE) by buying up to $600bn of treasury bonds over the next few months. The decision was criticised by China, Germany and a few other nations as a form of monetary protectionism before the summit, and clearly soured the mood between the major G20 participants. We now face the prospect of still more protectionism that could destabilise the world economy. David Cameron may have tried to convey this message to China’s leaders earlier this week, but this is really an issue for the US and China to …more