So far from the international commitment to a coordinated fiscal boost he once dreamed of, the Prime Minister now seems content to accept a mere stock-taking exercise at the G20 summit next week: "Nobody is suggesting that people come to the G20 meeting and put on the table the budget they're going to have for the next year. What we are suggesting is that we have to look at what we have done so far... I see consensus, not a disagreement on that."
Yet fears are now growing that a failure to agree on such a coordinated boost will leave nations such as the US and Japan, who are keen on further packages of public spending increases and tax cuts, exposed. If they reflate their economies they may only succeed in sucking in imports – while other nations refuse to do the same and offer a boost to their exports in return.
The dangers were crystallised in a report from the World Trade Organisation (WTO) in advance of the summit in London next week. In it, its head, Pascal Lamy, warns of "significant slippage" towards protectionism.
The WTO report "names and shames" a variety of nations for imposing new tariffs and quotas in defiance of the G20 Communiqué in November and the letter or spirit of the WTO rules. The report praises efforts by some leaders, such as the Brazilian President Luiz Inacio Lula da Silva, to reject or reverse decisions aimed at making it harder for companies in foreign countries. The US President Barack Obama was also commended for ensuring that "Buy American" provisions in the US $789bn (£545bn) stimulus package comply with international agreements.
However, its list of infringements was longer.
In the footwear sector alone, Argentina, Brazil, Canada, Ecuador, the EU, Turkey and Ukraine have enacted or are considering measures designed to slow imports from China or Vietnam, the report showed.
Australia, Brazil, Britain, Canada, France, India, Russia, and the US were cited for automotive tariffs, subsidies, credits, licences or other changes deemed dangerous to trade.
Argentina, the EU, Egypt, India, Indonesia, Malaysia, Philippines, Russia, Turkey, the US and Vietnam were listed for protective steel regulations.
Future reports will be delivered every two months as the WTO continues its monitoring of the crisis.
Earlier this week the WTO forecast that global trade will plunge by 9 per cent this year, the worst decline since the end of the Second World War. Japan also announced a 50 per cent decline in its exports this week.
Even on the broad consensual area of the need for some sort of macroeconomic boost – fiscal or monetary – differences seem as stark as ever.
Mr Obama has said he wants a "robust" and "sustained" fiscal stimulus and has said all countries must share the burden of rescuing the global economy. If only the US – and possibly Japan and a few others – undertake a reflation, then it will disadvantage them, as they will suck in imports, but not enjoy a boost to their exports from reflation in other countries. Thus the policy is completely undermined – and the world ends up worse off as a result of the G20 summit than it did before.
The obvious danger, observers say, is that there is a further trend to protection. If the G20 merely crystallises those differences and fails to secure agreement on general deflation, then it may even do more harm than good.Reuse content