6-1 Discussion: Recessions and Trade
View profile card for Courtney Hilton
Courtney Hilton posted Mar 21, 2018 7:16 PM
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I was incredibly interested in this discussion topic, as my family and I were personally and deeply affected by the recession of 2008/2009. Developed markets such as Canada, Europe, the U.S. and Japan saw a GDP decrease of anywhere between 3.3% and 8%. Emerging markets such as China may not have seen a recession, but market growth did slow. The first year of the recession brought about import restrictions on a narrow range of products (Hart & Dymond, 2010). In fact, a study documented that over 1,400 new policies that discriminated against foreign products were put into place between November 2008 and the end of 2010 (Gawande, Hoekman & Cui, 2011).
An example of one such recovery measure that was put into place in the U.S. is the Recovery and Reinvestment Act of 2009. This Act included a ‘buy American’ clause with the intent of encouraging sales of domestic products. In addition, many countries also increased tariffs on certain products such as iron, steel and agrifood products. Circling back to iron and steel, certain countries like Malaysia replaced their import license system pertaining to steel with compulsory standards. Other countries like Argentina and Indonesia have since adopted import licensing systems for designated products.
Panitchpakdi, S. (2012). International trade after the economic crisis: Challenges and new opportunities. Retrieved from http://unctad.org/en/Docs/ditctab20102_en.pdf
Hart, M. & Dymond, B. (2010). The great recession and international trade. Policy Options. Retrieved from http://policyoptions.irpp.org/magazines/g8g20/the-great-recession-and-international-trade/
Gawande, K., Hoekman, B. & Cui, Y. (2011). Determinants of trade-policy responses to the 2008 financial crisis. Vox. Retrieved from https://voxeu.org/article/determinants-trade-policy-responses-2008-financial-crisis
- Unread postView profile card for John Blathras
Thu at 11:12 AMHi Courtney,Sorry to hear that. Fortunately neither I nor my family was affected. A decrease for a developed country of between 3.3% and 8% is very large considering over the past 6 years the US GDP’s largest growth quarter was Q# FY2014 at 5.2% and the lowest was Q1 FY2011 of -1.5% (Statista, 2018). 1400 new policies discriminating against foreign products seem excessive. I am a firm believer that governments instill these policies to fix problems that they inherently created to begin with. The fact that so many policies needed to be put in place seems punitive at best. Consumer confidence helped the recovery more in my opinion than anything the government did. To quote a previous president, “Shovel Ready Jobs”. Shovel ready jobs didn’t seem to materialize. Monies were spent bailing out companies like Chevrolet instead of letting let fail or succeed on their own merits. I believe government should play a part in the economy but not one as large as they typically play.ThanksJohnStatista, 2018. Quarterly growth of the real GDP in the United States from 2011 to 2017. Retrieved from: https://www.statista.com/statistics/188185/percent-chance-from-preceding-period-in-real-gdp-in-the-us/
- Unread postView profile card for Deepak Panicker
Thu at 5:54 PMDear Courtney,Loss of demand via trade linkages was a key factor in the internationalization of the Great Depression for many countries. Extensive global trade linkages also characterize the global economy today. In addition, indeed, a trade collapse has accompanied the recent financial crisis and global recession. The reported fall in real exports in both busts in the first year of the downturn was of the order of 20 per cent. Global output fell on average 4 per cent in both periods (Grossman & Meissner, 2010).Two important factors that helped the global economy to avoid a 1930s-style trade collapse are floating exchange rates and the World Trade Organization (WTO). Floating exchange rates between Japan, Europe, and the United States have allowed for smoother adjustment and less reliance on an implicit exchange-rate guarantee for producers. Moreover, less concern about exchange-rate levels in the advanced economies have liberated monetary policy-makers, allowing them to adopt simultaneous, if not fully coordinated, expansionary monetary policies. If the gold standard mentality contributed to tariffs, then we clearly no longer have this problem. The WTO has demonstrated itself quite capable of imposing sanctions on egregiously protectionist policies: the WTO seems to work. Although the Global Trade Alert has focused on a number of acts of ‘murky protectionism’, there has been no return to near autarky levels of tariffs like that of the 1930s. Multilateralism has held strong on the trade front, especially for the EU, meaning better outcomes in a significant bloc of nations.
Grossman, R., & Meissner, C. (2010). International aspects of the Great Depression and the crisis of 2007: Similarities, differences, and lessons. Oxford Review of Economic Policy, Volume 26, Number 3, 2010, pp. 318–338. Retrieved from – http://piketty.pse.ens.fr/files/GrossmanMeissner2010.pdf
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