Richard Baldwin says that the financial crisis will make the gap between bound and applied rates pretty important:

National politicians, who have not had the wisdom to constrain themselves in the WTO, will find it almost irresistible to attempt to shift demand to local producers by raising tariffs on final goods.

On the bright side, this destructive protectionism will highlight the value of the tariff bindings that developing nations are offering in the Doha Round negotiations. So far, industrialised country exporters have turned their noses up at the tariff bindings offered by developing countries in the negotiation since they often don’t lower the actual tariff rates.

In financial terms, tariff bindings are options. The value of options rise with volatility—a fact that will become abundantly clear as recession spreads around the globe via trade accounts.

World leaders should seize the moment and “buy” these options now by finishing the Doha Round negotiations. This would send a great positive signal that they are aware that coordinated action is needed on the current account as well as the capital account.

Should, but won’t.

Again, I have seen far more warnings against protectionist reactions to the credit crisis than I have seen calls for such measures. Is all this preemption necessary?