The threats to an open trading system mounted in the second half of 2011 for several reasons.
First, macroeconomic conditions deteriorated in Europe and China and doubts about the strength of any US economic recovery could not be shaken off. Government policy is likely to move further into a defensive posture.
Second, the initial reports of the incidence of protectionism in the third quarter of 2011 are as high as the most troubling quarters in 2009, when protectionist fears were at their peak early in the crisis. Moreover, several large trading nations have taken across-the-board measures that adversely affect many trading partners or sectors.
Third, high profile commercial policy disputes between leading nations are no longer confined to currency wars and misalignments.
Each of these developments is contributing to mounting trade tensions and likely reflects an erosion of various domestic political restraints on protectionism. The world trading system may face its greatest test in the year ahead.
Release date: 21 November 2011