No major trade policy reversals, says WTO
by Chakravathi Raghavan
While the report makes references to some of the trade- restrictive actions taken by countries in the aftermath of the crisis, it is so worded as to equate the actions of the crisis- hit countries, and other emerging markets facing threats, with actions in the US and Europe.
And by mixing industrial and agricultural tariffs and tariff cuts and the "integration" process of textiles and clothing (where even official WTO reports show that very few of the actually restrained products in Europe and North America have been integrated), an impression is left that the trade- liberalization momentum is continuing.
The sharp fall in export earnings in Asia and other emerging markets, as well as among commodity exporters, is also masked by references to the volume growth of trade.
If a country exports more in volume to earn less (which is the real meaning of the statement that volume growth has increased, while exports have decreased in value terms), perhaps in the eyes of the WTO it is a sign of the health of the trading system and global welfare.
Early this year, nine months after the financial crisis began in Thailand and had spread to East and South-East Asia, the WTO head and economists were presenting a somewhat optimistic picture of world trade prospects, suggesting that the stricken Asian economies had a low weight in world trade and economy and that if the crisis could be contained within them, there would be no global effects.
Ruggiero told the General Council that the deepening of the crisis in South-East Asia, combined with Japan's largely unanticipated fall into recession, led the WTO to revise downwards its forecasts for trade, and the 1998 trade, in volume terms, could be 4% or half of that higher than in 1997, but experiencing a fall in value terms. While in 1997 trade volume went up by 10%, in value terms it was only up 3%.
But as early as January this year, UNCTAD had in fact forecast that the financial crisis that broke out in South-East Asia would have pervasive effects, through trade and other channels, and the forecasts for Japan had been continually revised downwards from other projections.
And while the WTO economists have stressed that making projections for 1999 was more difficult and precarious, the World Bank's scenarios envisage recession for next year, while UNCTAD and other UN institutions all refer to the serious downside risks for the world economy.
Latest projections from the World Bank and the UN show that the commodity-prices outlook has worsened, with the downward pressures moving from energy to minerals/metals and now to the food and beverage groups.
Ruggiero acknowledged that in value terms world trade in 1998 has declined, and while the strength of import volume growth in the Americas and Western Europe moderated the downward trends in global trade expansion, the widening of the crisis to other emerging markets may have further depressing effects in the second half of the year. For 1998 as a whole, world merchandise trade is likely to stagnate and perhaps even decline in value.
In assessing trends in trade policies, Ruggiero said the worsening of the world's economic conditions in 1998 created more difficult conditions for formulation and implementation of trade and trade-related policies, and the effects of the financial and economic crisis affecting emerging markets and Japan "have far from fully worked themselves through."
However, he said, there have been no major trade policy reversals, and multilateral commitments under the WTO were generally being respected.
He then qualified this by referring to the "pre-emptive" measures, in the form of increased surveillance of imports, in Latin America; the trade frictions among major trading partners, and the worrying developments in the steel market, with the emergence of new anti-dumping activity.
Though he did not identify the regions of such anti-dumping activity in the steel sector, there have been reports of this in North America and more recently in Europe.
But in a separate paragraph later in the overview, Ruggiero has said that though these reports have attracted attention, the information available did not indicate "widespread surge" in anti-dumping activities, and while the anti-dumping activities have grown since the low point of 1995, country and sectoral distribution remains the same as before. Somewhat astonishingly, in the next paragraph, Ruggiero also sought to draw comfort that anti-dumping activities were subject to multilateral review and the dispute settlement system, and that there have been few concerns and challenges.
In fact, in several WTO bodies, developing countries have expressed concerns over the repeated anti-dumping investigations by the EC against the same products from the same countries, and the threats and complaints in the US (in steel and other areas), and the chilling effect these have on trade security and exports. There is also a near-consensus among trade diplomats and trade experts that challenges to anti-dumping actions have been placed outside the WTO dispute settlement process.
Ruggiero also mentioned as examples of the momentum of the trade- liberalization process the financial services agreement signed by 70 WTO Members and said to account for 95% of world trade in financial services; the Information Technology Products accord by 44 Members, accounting for 93% of the world trade in this sector; the Basic Telecommunications accord by 69 Members; and the "zero-for-zero" tariff accord by 22 Members on a range of pharmaceutical products.
As several developing-country experts have pointed out, all these have in fact, benefited the major industrialized countries, and upset the balance within the trade system even more.
The financial services accord accounting for 95% of the world trade in financial services also appears to be based on an interpolation of the IMF balance-of-payments (BOP) data into this trade. However, the IMF (BOP) data record only transactions between residents and non-residents, and not those between foreign residents and local residents inside a country. But the focus in the financial services negotiations and agreement was on commercial presence, with very little in terms of other modes of financial services delivery. (Third World Economics No. 200, 1-15 January 1999)