Protectionism and International Banking

This book is a collection of papers presented at the International Conference on Protectionism and International Banking held in Frankfurt in October, 1987. This was the fourth conference organized by the Permanent Advisory Committee on Eurodollars (PACE) in co-operation with the Institut der Deutschen Wirtschaft, Cologne. Protectionism threatens to aggravate some of the most pressing problems confronting the world economy today. One is the international debt situation. Another problem is the huge trade imbalances and exchange rate fluctuations among the industrialized countries. Since international policy coordination so far has had only limited success, various governments are now considering protectionist measures. Yet protectionism is clearly a counter-productive strategy. It might eventually lead to a trade-war which no party can win. The recent resurgence of protectionism is in sharp contrast to most the post-World War II period when trade barriers were successively lowered or eliminated altogether. As a result of the liberalization efforts, world trade expanded greatly and this was an essential precondition for the high degree of prosperity now enjoyed by most economies.
Protectionist measures slowly began to make a reappearance, however, when by the mid-1970s growth rates generally declined and unemployment increased. The emphasis of this "new protectionism" has shifted from tariffs, which are banned under GATT rules, to non-tariff trade barriers such as subsidies and voluntary export restraints. Their number has been growing steadily over recent years. According to trade experts' estimates, up to 30 per cent of total imports of industrialized countries' are currently subject to some form of non-tariff barriers. On a theoretical level, the case against protectionism is straightforward. It imposes substantial costs on consumers and has complex and pervasive effects throughout the economy. The longer-term adverse impact on investment efficiency and growth is most likely to outweigh any improvement in net exports. Banks and other financial institutions have a particular stake, and indeed responsibility, in the free international movement of goods and capital. For one thing, they are directly involved in financing world trade. For another, banking business which is not trade related is rapidly becoming international in nature.
In recent years international money and capital markets have in fact displayed an unprecedented growth.