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Good for Economy – Bad for Trade? The effects of EU and US economic stimuli on international trade and competition
03.07.2009, 14:53
In a meeting organized by the CES - Centre for European Studies, Christina Langhorst and Dr. Stormy-Annika Mildner were given the stage to discuss their most recent research paper
"Good for the economy - bad for trade?
The effects of EU and US economic stimuli on international trade and competition"
with the audience as well as with the other speakers, namely Bertin Martens and Vitor Gaspar.
Generally, Ms. Mildner and Ms. Langhorst pointed out that the economic stimulus packages passed by major industrialized countries contain subsidies and buy-local clauses that have the potential to seriously distort competition and thus harm international trade. Within the EU, state guarantees and subsidized loans for large strategic companies are a source of particular tension among the member states. In the US, official aid for domestic manufacturers and suppliers could equally have a negative effect on foreign manufacturers. Especially, the "buy American" clause is considered highly problematic. In both cases a special focus was provided on the auto industry.
By the time both women mentioned that these potentially trade distorting practices however fall within the WTO rules, Vitor Gaspar pointed out that this is in fact good, as countries create measures to cope with the financial crisis in specific sectors, they are doing so by respecting the WTO rules. However, Ms. Mildner countered that in this way, the WTO is not really able to sanction this trade distorting behavior. Additionally, Ms. Langhorst mentioned the missed opportunity by government officials to link car scrapping schemes to fuel efficiency improvements, and argued that these measures should not protect inefficient structures of industries themselves.
The audience stressed that in fact these subsidies are discriminating against countries which lack money to do the same, but that it is a question of how short-term the impact will be, as competition is indirectly affected by those measures, and in turn it will directly impact on economy. All in all, the spokesmen agreed that measures should be timely, targeted and temporarily, and therefore not trade distorting on a long-term basis.