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BRT Urges President Obama to Avoid Isolationism

President of the United States
The White House
Washington, DC 20500

Dear Mr. President:

As you prepare for the upcoming G20 meeting next month in London, the Business Roundtable wants to reiterate its commitment to work with you to promote financial stability and economic growth. We also want to express our growing concern that governments are not honoring their November 2008 pledge to refrain from promoting protectionist and isolationist policies.

Last November we welcomed all the initiatives set out in the G20’s Declaration of the Summit on Financial Markets and the World Economy. Given the disastrous history of countries turning inward when confronted by serious economic problems, we especially welcomed the G20 recognizing the “critical importance of rejecting protectionism and turning inward in times of financial uncertainty.” The G20 pledge “to refrain from raising new barriers to investment or to trade in goods and services, imposing new export restrictions, or implementing World Trade Organization (WTO) inconsistent measures to stimulate exports” must be enforced to prevent the spread of protectionism.

It is deeply disturbing that less than four months later there is growing evidence, recently confirmed by the World Bank, of countries implementing new trade and investment restrictions and discriminatory financial and regulatory policies. These are simply the wrong signals to send at the worst possible time when countries are trying to cooperate in restoring economic growth and financial stability. If unchecked, these policies will undermine the positive effects of fiscal stimulus and financial stability initiatives around the world, prolonging and deepening the global economic recession.

There are many critically important issues for the G20 to address in London on April 2, but one of the most urgent, given the disturbing drift over the last several months toward protectionism and isolationism on a global scale, is for the G20 to take decisive action to reinforce its November 20 anti-protectionist and isolationist pledge:

  • An important step in curbing this dangerous trend would be for the Administration to use its “public interest” authority to waive the new Buy American restrictions in the American Recovery and Reinvestment Act. Removing these new restrictions will facilitate the projects anticipated by the Act and create political momentum to roll-back restrictions in other countries through a strong demonstration of American leadership.
  • The G20 should take steps to expose new protectionist and discriminatory policies by dramatically increasing the level of transparency and debate on those policies. The Director General of the WTO has initiated a process of reporting to members on rising trade protectionist sentiment among member countries. This is a welcome initiative. However, in the light of the proliferation of formal and informal trade and investment barriers and discriminatory financial and other regulatory policies, more direct action is needed. We urge the G20 to work with the WTO Director General and the Managing Director of the IMF to put in place comprehensive surveillance mechanisms that would require all WTO and IMF members to notify (1) the WTO of new protectionist and discriminatory trade and investment barriers and policies and (2) the IMF of any new discriminatory financial stability policies.
  • To reinforce these surveillance mechanisms and the G20 “standstill” pledge, the G20 should also urge the WTO and the IMF, in cooperation with the World Bank and the regional development banks, to use all their authority and influence to roll-back any new protectionist and discriminatory policies.
  • The G20 should also take steps to utilize the expertise in these multilateral institutions and to promote closer cooperation among them by including their leaders in G20 meetings. The Organization for Economic Cooperation and Development (OECD), along with the IMF and World Bank, should maintain a coordinated vigil against investment protectionism. A significant drop in capital flows (in particular to emerging or developing market economies) will exacerbate an already heavy reliance on foreign direct investment. Such monitoring must include the effects of fiscal stimulus packages on the overall recovery of the global economy.
  • Finally, the G20 needs to put in a place a strategy to conclude the WTO Doha Development Agenda with an ambitious and balanced outcome. The successful conclusion of the WTO Doha Development Agenda is an important part in the ongoing battle to blunt the drift toward protectionism and isolationism in the global economy.

Along with bold action to stem the spread of protectionism and isolationism, the G20 also needs to find effective ways to deal with many other pressing global issues, including—

  • How to promote global recovery efforts that will stimulate economic growth in the short term and provide a solid foundation for sustained growth over the long term.
  • How to coordinate global stimulus efforts to ensure they are effective.
  • How to manage systemic financial risk.
  • How to ensure the IMF has adequate resources and deploys them effectively.

We look forward to action by the Administration to remove the new Buy American restrictions and to the results of the upcoming G20 meeting, and we pledge to continue our efforts to help overcome this global economic crisis.

Sincerely,

Harold McGraw III
Chairman, President and CEO
The McGraw-Hill Companies
Chairman, Business Roundtable

James W. Owens
Chairman & CEO
Caterpillar Inc.
Chairman, International Engagement Initiative, Business Roundtable

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