June 25, 2010
by PLANT STAFF
OTTAWA: A Conference Board of Canada report suggests global supply chains and the trend to more integrative trade may have pulled Canada and the world more deeply into recession, but it’s also limiting the scope protectionist reaction.
“The highly integrated nature of global production makes it unattractive for governments to impose new trade barriers that affect not only the flow of final goods, but also has a domino effect on all of the related intermediate inputs and components. In short, tight global linkages may have blunted the protectionist response,” says Danielle Goldfarb, the Conference Board’s associate director of the International Trade and Investment Centre.
The report, Lessons From the Recession and Financial Crisis: Lesson 7—Integrative Trade Can Pull Us Down and Up, says growing reliance on global and regional supply chains will likely drive trade recovery. Trade in intermediate goods, an indicator of global supply chain activity, tends to rebound strongly after down cycles. The reports says a similar trend can be expected this time around, unless businesses fail to take advantage of emerging opportunities, or policy makers, including G20 leaders, get in the way.
The publication says new protectionist measures are likely to affect at most one-half of one per cent of world imports, according to the World Trade Organization; and it says there’s solid evidence that protectionist announcements have slowed down in recent months.
The Conference Board says Canada and other G20nations need to commit to integrative trade policies, which will require the removal of barriers to trade, investment for exports, but also imported inputs and technologies.
The report is available at a cost.