Keep trading

Yes,this is a downturn,but analogies to the Great Depression should not be made lightly. Yet,details of the US stimulus package passed by the House of Representatives made the reference unavoidable: in particular,the requirement that all the investment financed by the stimulus use only American iron and steel. For those haunted by the mistakes made by the international community,the parallel was obvious to the Smoot-Hawley Act,which was passed in the dark days of 1929,enhanced American protectionism,set off a massive trade war,and led directly to the tragedies and political turmoil of the 30s. Those mistakes must not be repeated.

British Prime Minister Gordon Brown made as much clear: This is not the 30s, he said,todays world can come together. The danger is that a domino effect could be set into motion,with stimulus packages that are supposed to be coordinated suddenly competing,instead. Unfortunately,nobody in America seemed to be listening: its sclerotic political process meant that no trade negotiator has been confirmed,and the treasury secretary was busy elsewhere which meant the seniormost American official available was White House adviser Valerie Jarrett,who gave a speech on President Obamas connections to Chicago that seemed more appropriate for a fundraising dinner than a gathering concerned about international policy. The United States cant afford to waste an opportunity to lead in creating a new era: the Senate debates the stimulus package this week,with an added provision that spreads the protectionist impulse across sectors. President Obama,if he wishes to lead,mustnt let that pass.

If he does,the forces that could act to subvert a global response to this very global problem will be empowered. Not just the few hundred confused protesters in Geneva: not just the Chinese premier,willing to blame the US while ignoring his inflated reserves and artificially low currency; but all those willing to put narrow interests first while ignoring the bigger,shared problem. Such as the European Union,willing to re-impose export subsidies on dairy products. Instead,the new administration must stand with India in asking for the Doha trade round to be reopened. Whatever caused this crisis,free trade was not responsible; and free trade is part of the cure. On the sidelines of Davos,a group of trade ministers reaffirmed their commitment to reinvigorate trade talks in 2009. As Commerce Minister Kamal Nath said,protectionism is a panic response,and will hurt.