Info Service on WTO and Trade Issues (July09/18)
discusses Lamy's third report on trade protectionism
Geneva, 14 Jul (Kanaga Raja) -- The Trade Policy Review Body (TPRB) of the World Trade Organization (WTO) on Monday discussed the third report of WTO Director-General Pascal Lamy on recent trade and trade-related developments associated with the financial and economic crisis.
The Director-General had issued his third report on the financial and economic crisis and trade-related developments on 1 July.
In his report, the WTO chief had said that in the past three months (the period from 1 March to 19 June 2009), there has been further slippage towards more trade-restricting and distorting policies but resort to high-intensity protectionist measures has been contained overall, albeit with difficulties (see SUNS #6733 dated 3 July 2009).
According to trade officials, most speakers at the informal meeting of the TPRB on Monday welcomed the Director-General's third report. There were also a lot of ideas voiced for improving the report. Some members also clarified their trade measures at the meeting.
trade officials said,
In his introductory remarks at the informal TPRB meeting, Lamy said that since members last met in the TPRB on 14 April, the world economy remains fragile and the economic outlook is still uncertain.
"There have been a few encouraging signs recently of better-than-expected performance here and there. Some are interpreting this as an indication that we may be turning the corner with the prospect of a return to previous patterns of economic growth."
"I would caution against excessive optimism," said Lamy. Although financial markets are showing signs of stabilizing, the crisis is far from over, in particular in many developing countries that are only now starting to feel its full force on their trade and economic growth. The collapse of aggregate demand is still working its way through the global economy while unemployment continues to increase.
"We should not forget that this crisis is unprecedented in its deepness, wideness and global impact. We must remain vigilant and act collectively to send the right signals and establish the appropriate environment conducive to a sustainable recovery for all."
The WTO chief said that this was a global crisis that required global solutions. "We have seen that no economy in the world is immune. The crisis is being felt hardest by the majority of developing countries that do not have any margin of comfort to help them absorb its impact."
"They do not have the financial means to provide fiscal stimulus packages to help re-boot their economic growth, nor subsidies to help their farmers or businesses ride out the contraction of their markets, nor social safety nets to help protect their populations from declining incomes or prevent families from being pushed back under the poverty line," he added.
The global community needs to act together to help developing countries, especially the poorest among them, to mitigate the worst effects of the global crisis, he stressed.
Commenting on his monitoring report, Lamy said that on the one hand, there has been further slippage towards increased restriction and distortion in certain tradable goods sectors of the world economy.
On the other hand, there have been some signs of improvements as more governments have introduced trade-opening and facilitating measures in the last three months. This is exactly what is needed from trade policy-makers in current circumstances, to reaffirm their commitment to, and confidence in, open markets.
"And there is no indication yet of governments more generally unwinding or removing trade-restricting or distorting measures that they imposed early on in the crisis," he added.
"We can continue to take heart from the fact that the WTO's multilateral trade rules continue to provide a valuable insurance policy against protectionism spiralling out of control. But as long as we continue failing to pay the premiums on that insurance policy, by delaying the conclusion of the Doha Development Round, we are leaving ourselves no room for complacency about the future."
"At a time when the global economy is still fragile worldwide and in face of the unprecedented decline in trade flows, we must send a clear and credible message that protectionism is not the answer," he said, adding that for credibility, "there is no better guarantee than to conclude the DDA (Doha Development Agenda), and I am pleased to say that we are witnessing the renewal of high-level engagement in the DDA negotiations and a genuine desire to finally bring these talks to a successful conclusion."
With regards to the monitoring process, the WTO chief said that the Secretariat has continued to try to track as best as it can the trade-related elements of recent fiscal stimulus programmes and industrial and financial support measures.
"This continues to be a particularly challenging part of the exercise because of the difficulties of collecting hard data in these areas. Without that data, it is not possible to assess the impact they are having on trade flows," said Lamy.
a statement at the informal TPRB meeting,
one, we should accept that as and when the recovery begins, the overhang
of unemployment will continue to depress aggregate demand. Our expectations,
therefore, have to be predicated on the fact that we will see slow or
no growth for the next 2-3 years," said
on some specific areas of the report,
we do see instances of protectionist measures mainly by developed countries
and these are worrisome. Some examples are the recent bailouts of financial
institutions and the putting back of energy sector reform in the EU,"
Noting that the report had undertaken some analysis of the implications of the bailouts, India said that such bailouts have immense implications for global trade and therefore, an in-depth analysis is called for which would cover issues such as the availability and cost of credit to developing countries etc.
-- Examine the implications of the financial crisis for a change in conditions of competition.
-- Assess the trade distortionary impact of the financial bailouts and the impact on developing countries by looking at parameters such as interest rate spreads, cost and availability of credit etc.
-- Assess the potential misuse of the prudential carve-out, which leads to the bypassing of market access commitments.
-- Role of the WTO in general and the CTFS in particular in mitigating the effects of the crisis.
would like a thorough discussion on the issue of subsidies in services,"
Monitoring and surveillance of trade measures becomes all the more important, said India, adding that its proposal for systemic improvement of the WTO, which includes the incorporation of non-tariff barriers in the IDB (Integrated Database), is a step in this direction (see SUNS #6739 dated 13 July 2009).
"At a time when the world is engaged in fashioning a cooperative response to the challenge of climate change, talk of border measures can only be disruptive and will add unnecessary contentiousness to an issue which is already fraught with huge complexities."
Once the world is able to establish an agreed framework for commitments and contributions through the Climate Change agreement, issues like "carbon leakage" or "carbon equivalence" will become redundant, said India, adding: "Therefore, any unilateral imposition of such a nature can only raise the bar for a new and pernicious form of protectionism, something the world can ill afford in these difficult times."
"We know that there has been a reassessment of risks and credit ratings that has been to the disadvantage of developing countries. This has led to the squeezing out of developing countries from capital markets and also raising their capital costs. While some measures to address this issue have been proposed by the World Bank and IMF, much more needs to be done."
its statement at the informal meeting,
For example, "we are concerned that a casual reader may be tempted to assess how protectionist a certain country has been by merely counting the measures listed in the report. This would be a serious mistake.
"Each measure must be evaluated in light of its actual trade impact, bearing in mind three key aspects: (I) the level of development of the country; (ii) the volume of trade at issue; and (iii) the degree of distortion of the measure."
"Therefore, simplistic or merely numerical comparisons must be avoided. We believe that a clear disclaimer to this effect could be helpful."
As one example of the latter, Brazil said that it had exceptionally granted duty-free treatment for eight tariff lines of steel products because of a momentary shortage in supply.
It had recently brought these tariffs back to their normal applied levels - not bound levels - and this has been reported. "We could have clarified this to the secretariat had we been previously consulted on this measure."
the reporting of trade remedies,
It is worrisome that in this section, the Secretariat has highlighted the role played by developing countries. One of the reasons why developing countries are more often resorting to trade remedies is that they were not traditionally big users of those measures. The truth is that they have finally learned to use the same tools that were so often employed against their exports to the developed markets.
to cotton, although some relevant information on reduction of production,
area planted, and trade is provided, there is no data on subsidies'
levels. "Also, the aggregate production data do not allow us to
discern the impact of the situation in developing countries, particularly
among the most vulnerable in
the services and financial sector,
It is important to highlight that trade in services remains vulnerable to the reduction of foreign direct investment. It is also a victim of the embedded nationalism of stimulus packages with buy/lend/hire/invest local provisions.
countries are still the most vulnerable in the economic downturn. "We
therefore welcome the pledges made by key world leaders last week in