Optimists like to point out that we have learned the lessons of protectionism from the Great Depression. The argument goes, that the major countries of the world recognize the adverse effects of protectionism and will not resort to those measures again.
Hence the show of solidarity at the recent G20 meeting in October. However when the proverbial hits the fan, some individual nation states are quick to embrace protectionism. The following paragraph by David Rosenberg of Merril Lynch appeared in John Maudlin's Outside The Box this week:
Since the G20 meeting in Washington in October, five of those countries - Russia, India, Indonesia, Brazil and Argentina - have announced their intentions to raise import tariffs or otherwise restrict trade. Russia has announced plans to raise tariffs on autos; India has already lifted duties on iron, steel and soy; Brazil and Argentina are putting together a case within Mercosur for boosting external tariffs. Vietnam just raised taxes on steel imports to 12% from 8%. The EU said it may reimpose duties of 79% on a paper-binder component in retaliation against China. French President Sarkozy has established a $7.5 bln fund to invest in domestic companies so as to avoid foreign takeovers. China has reinstated export rebates and now we see that US steel, textile and paper markets intend to file complaints against Chinese imports, and did anyone notice that this auto-bailout excludes foreign companies?
For the record, I don't believe we are headed for another Great Depression but I do think we are in for the worst economic downturn since The Second World War.