The G20 must not allow the fire that is burning in their economies to spread through a new wave of protectionism, Kevin Rudd has warned.
In a passionate appeal in Washington, due to have been delivered at 3am this morning, Melbourne time, the Prime Minister said that nations must remember that in the 1930s Depression, protectionism rose, international trade fell and economic recovery was delayed.
Welcoming the US commitment not to use stimulus packages as a form of protectionism, Mr Rudd said that, despite this, "the global threat of protectionism remains".
"There is real concern that, as US and European banks restructure, they do not withdraw from overseas markets," he told the Peterson Institute, a Washington think tank.
He said the Washington "standstill" against protectionism must be extended for a year, and continued monitoring by the World Trade Organisation of national protection measures must be endorsed.
Mr Rudd said the G20 countries had a long way to go in their negotiations and "there is no certainty of success".
As nations prepare for next week's meeting, there are sharp differences over the desirability of big stimulus packages.
European Union president Mirek Topolanek attacked the United States' economic plans as "a way to hell".
European countries are suspicious of substantial stimulus, putting them at odds with the US approach.
Mr Rudd yesterday told a joint news conference with World Bank president Robert Zoellick that if countries had done less, tens of millions more people would be out of work.
He said the International Monetary Fund had said the global economy needed about 2pc of fiscal stimulus this year and about 2pc in 2010.
The US Administration's plan was consistent with the opinion of "what has historically been a conservative institution in the International Monetary Fund".
Mr Rudd and Mr Zoellick warned that as the financial crisis lengthened and deepened, great concerns would be the social and political aspects.
"During the food crisis, what we saw was … over 30 countries with serious social and political unrest. Some governments being toppled," Mr Zoellick said.
He said the world was already seeing this in parts of Europe.
This was one reason the protectionist issue was so important, "because as unemployment increases, people … might start to take steps that become highly negative".
In today's speech, Mr Rudd said the summit must lay the foundations for long-term recovery.
He again stressed the importance of IMF reform, including more power for China.
"At at time when the world will call on surplus nations such as China to bolster the IMF's resources, it is unsustainable that Europe has eight times the quota of China but only 1.7 times the GDP."
If the summit failed to address the deficiencies in its resourcing, structuring and governance, there was a risk the recession would intensify, he said.
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