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WTO Members Warn On Emerging Protectionism

“I think everybody expects things to get worse before they get better.”


The risk of a global lurch into protectionism is getting worse, though trade measures taken to tackle the financial crisis have not seriously fuelled it so far, World Trade Organization (WTO) members agreed Feb. 9.

The WTO’s 153 members agreed to intensify monitoring of the impact of moves to block imports or boost exports, a senior WTO official told a news briefing.

“Whilst there was an appreciation that so far we don’t appear to be deep in the mire, I think everybody expects things to get worse before they get better,” said Richard Eglin, director of the WTO’s trade policies review division.

WTO members had earlier reviewed director general Pascal Lamy’s January report which showed that countries had ignored a Group of 20 (G20) plea in November not to raise trade barriers.

“The report has a clear unequivocal pattern: one of emerging protectionism,” Brazil’s WTO ambassador, Roberto Azevedo, told the meeting, noting the report covered only the last quarter of 2008, the early stages of the crisis.

An updated report due in mid-March will give G20 leaders more information about protectionist trends before their summit in London April 2.

Erecting trade barriers to defend jobs may deepen the global recession by making it harder for other countries to sell their goods abroad, as occurred during the 1930s Great Depression.

The latest International Monetary Fund (IMF) forecast sees world trade contracting by 2.8 per cent this year after growing 4.1 per cent in 2008 and 7.2 per cent in 2007 – a particularly worrying trend as slowing trade growth is now the main depressing factor on world output, according to Lamy.

Members also agreed to notify changes in tariffs and other trade measures promptly. Lack of official information meant the January report was largely based on news gleaned from the press.

“There is not nearly enough real-time flow of information on trade policies or trade-related measures available for the WTO, the members, or the international community to draw serious conclusions on the state of trade policy-making in these very, very difficult economic times,” Eglin said.

The WTO monitoring does not aim to criticize individual WTO members. “The purpose of this exercise… is to put a thermometer in there and see: Is the temperature of protectionism going up? And we’ll see that from looking overall at 153 members, not from pointing a finger at this member or that member,” Eglin said.

Some countries had been concerned the monitoring could turn into an IMF-style policing of agreements, and Bolivia and some other members said the report neglected the interests of poor countries. The impact of trade measures on developing countries will be analyzed in the next report.

But the meeting heard some criticism of individual countries’ moves, especially the European Union’s decision to reinstate export subsidies for dairy produce.

The WTO report looks at tariff rises, mainly by developing countries which can raise duties under existing rules. Rich countries’ tariffs are already at or near agreed ceilings.

It details stimulus packages, such as for the car industry, which many developing countries see as a more insidious form of protectionism because they favour domestic producers and poor countries cannot afford the cash.

The WTO report lists financial bailouts, saying they, too, can distort competition between institutions by providing state aid or subsidies, though it is not clear how they will affect trade.

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