World Video | Defence | Foreign Affairs | Natural Events | Trade | NZ in World News | NZ National News Video | NZ Regional News | Search

 

Economy: Tensions Could Turn Into Protectionism

Economy: Rising Tensions Could Degenerate Into Protectionism, Warns OECD-UNCTAD Report

G20 leaders must remain vigilant against the risk that tensions over current account imbalances could slow investment or degenerate into a protectionist spiral, according to the OECD and UNCTAD.

In their fourth report to the G20, the organisations find that most new investment measures taken from mid-May to mid-October by governments were aimed at facilitating and encouraging investment flows.

However, some countries have recently put in place capital controls and regulations to buffer their economies from foreign exchange volatility and capital flows. While such measures may serve legitimate purposes under exceptional circumstances, they could lead to a fragmentation of international capital markets along national lines, and may be difficult to dismantle once in place, says the report.

"Foreign exchange intervention is not the most helpful instrument for macro-economic management," OECD Secretary-General Angel Gurría said. "It can prompt countervailing intervention and may trigger new protectionist responses."

Besides steering clear of further intervention in currency markets, governments must also wind down emergency schemes as quickly as is prudent. Exit strategies should be transparent and accountable. While 12 G20 countries implemented emergency programmes for the financial sector, India is the only country to date that has fully dismantled them and retains no related assets or government guarantees.

"G20 countries have to respect the letter as well as the spirit of the anti-protectionist pledges they have made," Mr Gurría said. "Keeping international investment open in the months and years ahead will be key to a strong, sustainable recovery."

Looking ahead, the report warns that governments must remain alert to two principal dangers:

* Signs of intensifying protectionist pressures, as unemployment remains high in many G20 countries and tensions over exchange rates continue;

* The need to manage investment measures taken in response to the crisis. Countries must ensure that exit measures remain transparent and non-discriminatory against foreign investors.

Leaders of the G20, which comprises the world's largest economies, committed to resist protectionism and promote global trade and investment at summits in 2008, 2009 and 2010. They mandated WTO, OECD and UNCTAD - the leading international organisations in the area of international trade and investment policies - to monitor policy developments and report publicly on countries' respect of their commitments.

This report has been prepared for the meeting of G20 leaders in Seoul, 11 - 12 November 2010. The previous report was issued in June 2010.

ENDS

© Scoop Media

 
 
 
World Headlines

 

Pacific: Tongan PM 'Akilisi Pohiva Dies, Aged 78

A constant thorn in the side of the monarchy and nobility, Mr Pohiva's lifelong battle for representation had seen him fired from the public service and charged with sedition... More>>

ALSO:

Untied Kingdom: UK PM Moves To Suspend Parliament In Weeks Before Brexit

The Prime Minister has briefed Cabinet colleagues that the government will bring forward an ambitious new legislative programme for MPs’ approval, and that the current parliamentary session will be brought to an end. More>>

ALSO:

Gordon Campbell: On The Hong Kong Protest Movement

The pro-democracy protests enjoy huge support among Hong Kong’s youth, partly because the democratic systems currently at risk have only a limited time span. More>>

ALSO:

Pacific Island Forum: Australia v Everyone Else On Climate Action

Traditionally, communiques capture the consensus reached at the meeting. In this case, the division on display between Australia and the Pacific meant the only commitment is to commission yet another report into what action needs to be taken. More>>

ALSO:

For NZ, It Was May 6: Earth Overshoot Day 2019 Is The Earliest Ever

Humanity is currently using nature 1.75 times faster than our planet’s ecosystems can regenerate. This is akin to using 1.75 Earths... More>>

ALSO: