WTO Says Widespread Protectionism Avoided but Warns of Trade Barrier Build-up
November 27 , 2009
World Trade/Interactive
World Trade Organization Director-General Pascal Lamy recently released his annual report on developments in the international trading environment. Highlights of this report include the following.
Severe Protectionism Avoided. Lamy pointed out that there has been “trade policy slippage,” including by most of the G-20 countries. An early response to the effects of the global economic crisis in some countries was to increase tariffs and non-tariff barriers on certain imports. In addition, increased state aid was being channeled to certain services sectors and manufacturing industries, mainly in developed countries. More recently there has been an increase in the initiation of trade remedy investigations, particularly by emerging economies in the case of antidumping and safeguard measures and by developed countries in the case of countervailing measures.
However, no WTO member has retreated into widespread trade restriction or protectionism, there has not been any significant instance of trade retaliation, and in general terms the world economy is about as open for trade as it was before the crisis started. The new trade-restricting or distorting measures that have been introduced since October 2008 have covered a maximum of 1% of world merchandise trade and have been concentrated on agricultural goods, iron and steel products, consumer electronics, and textiles, clothing and footwear.
Measures to Encourage Trade. In fact, Lamy said, many WTO members have implemented measures to open up their economies and encourage the expansion of trade and investment, some as a deliberate policy response to help deal with the negative effects of the global crisis, others as a continuation of their national and regional programs of trade liberalization and facilitation. Most developing countries have kept to their existing trade policy course, including autonomous steps to liberalize imports in many cases, and very few have reacted to the crisis with trade restrictions.
Dangers Forecast. There are two dangers that must be avoided in coming months, Lamy warned. One is an incremental build-up of trade restrictions, which together could undercut the effectiveness of policies to boost aggregate demand and restore sustained growth globally. The other is that the longer trade restricting and distorting measures are left in place, the more deeply entrenched the special economic interests depending on them will become and the more difficult it will be to remove the measures. It is therefore important for WTO members to devise and announce exit strategies to remove trade restrictions and production subsidies that they have introduced temporarily to counteract the effects of the crisis and to start implementing those strategies as soon as domestic economic recovery takes hold.
Strengthening the WTO. The WTO has provided a strong platform on which governments could build their political response to resist domestic protectionist pressures, Lamy asserted, and its rules have continued to act as an insurance policy against trade restriction and discrimination and for business to help reduce commercial risk. However, the crisis has highlighted areas where this “insurance policy” needs to be deepened and strengthened, including government procurement, trade-related subsidies, and closing the gap between bound and applied tariff levels.
Trade Agreements. Twenty-five new regional trade agreements were notified to the WTO in the past 12 months, most of them (18) covering trade in both goods and services. This brings the total number of notified RTAs in force to 186, with another 100 or so in force that have not yet been notified. Of these, South and Central American countries are involved in around 60 RTAs, African countries in 30, Caribbean countries in 18, Middle East countries in 17, Asian countries in nine and North American countries in nine. In addition, around 100 other RTAs are in the process of being negotiated.
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