Trade policy in a time of crisis: Suggestions for developing countries
Source: Centre for Economic Policy Research

The world is enduring the worst economic setback since the Great Depression. Real estate and share prices have fallen sharply; major firms are failing; credit conditions are extremely tight; manufacturing production has dropped like a stone; commodity prices have plunged; and unemployment is rising everywhere. Major central banks are riding to the rescue with near-zero interest rates, deposit guarantees, emergency loans to private firms, and the purchase of corporate debt. The US, other advanced countries, and a few emerging nations with ample reserves are enacting huge fiscal stimulus programs. The G20 has promised to boost the resources of the IMF and the Multilateral Development Banks by over $1 trillion. But even these unprecedented monetary, fiscal and international resource measures will take time to put the world on the road to recovery. Misery is widespread and could last well into 2010.

Poor countries are especially hard hit. According to the World Bank, slower economic growth in 2009 will add an additional 53 million people to those living on less than $1.25 a day and 64 million to those living with less than $2 a day (World Bank, 2009). This figure comes on top of the 130-155 million people pushed into poverty by soaring food and fuel prices during 2008. As World Bank President Robert B. Zoellick stated: ‘While much of the world is focused on bank rescues and stimulus packages, we should not forget that poor people in developing countries are far more exposed if their economies falter. This is a global crisis requiring a global solution. The needs of poor people in developing countries must be on the table’ (Giles and Barber 2009).

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