TWN Info Service on WTO and Trade Issues (Jul18/04)
9 July 2018
Third World Network
   
G20 trade-restrictive measures almost doubles, says WTO
Published in SUNS #8716 dated 6 July 2018

Geneva, 5 Jul (Kanaga Raja) - New trade-restrictive measures applied by the G20 economies doubled during the period from 16 October 2017 to 15 May 2018, compared to the previous review period, the World Trade Organisation said on Wednesday.

In its latest monitoring report of G20 trade measures, the WTO said that G20 economies applied 39 new trade-restrictive measures during the review period, including tariff increases, stricter customs procedures, imposition of taxes and export duties.

This equates to an average of almost six restrictive measures per month, which is significantly higher than the three measures recorded during the previous review period, it added.

The report, covering new trade and trade-related measures implemented by G20 economies between 16 October 2017 and 15 May 2018, said two trade measures by the United States on steel and aluminium products, following an
investigation under Section 232 of the Trade Expansion Act of 1962, were implemented with in the review period and received considerable attention.

A number of measures were taken or announced in response to the above tariffs. The majority of these measures did not enter into force before 15 May 2018 and as a result do not feature in the Annexes to this report, said the WTO.

The WTO Secretariat will continue to monitor this situation and seek further information on these measures, it added.

"Additional trade-restrictive measures have been announced in the weeks since this reporting period and therefore the deterioration in trade relations may be even worse than that recorded here. This continued escalation poses a serious th reat to growth and recovery in all countries, and we are beginning to see this reflected in some forward-looking indicators," said WTO Director-General Roberto Azevedo, in comments posted on the WTO website.

According to the report, G20 economies also implemented 47 measures aimed at facilitating trade during the review period, including eliminated or reduced tariffs, simplified import and export customs procedures and reduction of import taxes.

At almost seven trade-facilitating measures per month, this is marginally higher than the six measures recorded in the previous period.

The estimated trade coverage of import-facilitating measures (US$82.7 billion) is higher than that of import-restrictive measures (US$74.1 billion) during the review period, but is approximately half the trade coverage reported for these measures during the same period in 2016-17.

Moreover, the trade coverage of import-restrictive measures is more than one-and-a-half times larger than that during the same period in 2016-17.

In a joint summary on G20 Trade and Investment Measures, the heads of the OECD, Angel Gurria; the World Trade Organisation, Roberto Azevedo; and UNCTAD, Mukhisa Kituyi said that while G20 economies continue to implement trade-facilitating measures, the more worrying trend during this period is the increase in trade-restrictive measures which has come at a time of increasing trade tensions and associated rhetoric.

"This should be of real concern to the international community," they said.

"At a juncture where the global economy is finally beginning to generate sustained economic momentum following the global financial crisis, the uncertainty created by a proliferation of trade actions could place economic recovery in jeopardy," the three heads warned.

The multilateral trading system was built to resolve such problems and it has the tools to do so again. However, further escalation could carry potentially large risks for the system itself, they added.

"Its resilience and functionality in the face of these challenges will depend on each and every one of its Members. The G20 economies should use all means at their disposal to de-escalate the situation and promote further trade recovery."

They further said investment policy measures that G20 Members have taken in the reporting period also show a mixed picture.

"While some point towards greater openness for foreign investment and the easing of conditions for international capital flows, especially where enterprise investment is concerned, others introduce new investment restrictions. The majority of G20 Members has not taken any investment policy measures at all ."

In particular, investment policies related to national security continue to attract significant and growing attention in and beyond the G20 membership, they said.

They noted that the scope of transactions that are seen to impair national security is widening and investment screening mechanisms also evolve. While legitimate when confined to genuine national security concerns, these policies require close monitoring to avoid being used as disguised restrictions to international investment.

"The overall continued openness of G20 Members to international investment is a positive signal and economies are likely to benefit from such policies, if embodied in a sound regulatory framework. The commitment to open, transparent and conducive investment policies is even more valuable and important at a time when the multilateral system of international economic relations is under
strain," the three heads concluded.

TRADE AND TRADE-RELATED MEASURES

According to the monitoring report, a total of 318 trade measures were recorded for the G20 economies for the review period. This overall figure includes measures facilitating trade, trade remedy measures and other trade and trade-related measures (restrictive measures).

During the review period, 47 new measures aimed at facilitating trade were recorded for G20 economies, some of a temporary nature (13). This represents 15% of the total number of measures recorded. The monthly average of 6.7 trade-facilitating measures recorded for the period is slightly higher than the average recorded for the previous period and broadly in line with the 2012-17 trend.

Among trade-facilitating measures, the reduction or elimination of import tariffs continues to make up the bulk, followed by simplified customs procedures for imports and various reductions of taxes. On the export side, the elimination and simplification of customs procedures, as well as the elimination of an export duty were recorded.

The trade coverage of the import-facilitating measures introduced during the review period was US$82.7 billion, i.e. 0.68% of the value of G20 merchandise imports or 0.52% of the value of world merchandise imports. This is approximately half of the trade coverage reported for this type of measures during the same period in 2016-17.

The HS Chapters within which the majority of trade-facilitating measures were taken include pharmaceutical products (HS30) 20.7%, machinery and mechanical appliances (HS84) 18.3%, electrical machinery and parts thereof (HS85) 13.3%, and perfumery, cosmetics or toilet preparations (HS33) 6.2%.

During the review period, 232 trade remedy actions were recorded for G20 economies, i.e. 73% of all trade measures recorded (in this report), said the WTO.

Initiations of trade remedy actions taken during the review period outpaced terminations by a ratio of two to one.

Overall, initiations of trade remedy investigations alone represented almost half of the total trade measures recorded (in this report).

Initiations of AD (anti-dumping) investigations continue to be the most frequent trade remedy action, accounting for around 80% of all initiations. This broadly corresponds to the share reported in previous reports.

The monthly average of initiations of CVD (countervailing duty) investigations reached its highest level since 2012.

The trade remedy actions taken during the review period covered a wide range of products. In the case of initiations of investigations, the main sectors (H S Chapters) were iron and steel (HS72) 40%, plastics and articles thereof (HS 39) 11.3%, vehicles, parts and accessories thereof (HS87) 10.3%, and products of iron and steel (HS73) 9%.

The trade coverage of all trade remedy investigations initiated during the review period was US$52.3 billion, i.e. 0.43% of the value of G20 merchandise imports, or 0.33% of the value of world merchandise imports. This is double the trade coverage recorded for such measures during the comparable period in 2016-17.

For terminations, the trade coverage was valued at US$6.2 billion (0.05% of the value of G20 merchandise imports or 0.04% of world merchandise imports).

A total of 39 new trade-restrictive measures were recorded for G20 economies. This equates to an average of 5.6 restrictive measures per month, which is slightly below the 2012-17 trend, but significantly higher than the average for the preceding period.

Tariff increases account for more than three-quarters of all import restrictive measures recorded, followed by stricter customs procedures and imposition of new taxes. With respect to export and other measures, local content regulations, a quantitative restriction and two export duties were recorded.

The measures recorded (in the report) cover a range of products, with the main sectors (HS Chapters) being: mineral and fuels (HS27) 30.2%, electrical machinery and parts thereof (HS85) 20.7%, iron and steel (HS72) 11.4% and aluminium and articles thereof (HS76) 10.2%.

The trade coverage of the trade-restrictive measures affecting imports introduced during the review period was US$74.1 billion, i.e. 0.61% of the value of G20 merchandise imports or 0.47% of the value of world merchandise imports. This is more than one-and-a-half times larger than the trade coverage reported for these measures during the same period in 2016-17.

According to the report, the numerical importance of trade remedy measures, AD measures in particular, in the overall number of trade and trade-related measures is fully consistent with previous reports.

At the same time, the trade coverage of all trade remedy investigations introduced during this review period (US$52.3 billion) was significantly higher than in the two previous G20 reports, perhaps suggesting that these measures are gaining in importance when governments decide on which trade policy tools are effective in managing trade flows, said the WTO.

The WTO said it has recorded a small increase in the monthly average of import-facilitating measures. Although this is an encouraging development for global trade at this point, a more notable and concerning trend is that the monthly average of trade-restrictive measures recorded has increased significantly compared to the previous report.

"It should also be recalled that the predominant trend since 2008 has been for the trade coverage of trade facilitating measures to exceed that of trade restrictive measures. The fact that these figures were almost equal for the current review period is a source of considerable concern and an area where continued monitoring is required."

On a more general note, said the WTO, although this report has confirmed a number of important trends in global trade policy-making, including the fact that G20 economies continue to implement trade-facilitating measures, there are strong reasons for concern.

"At a juncture where the global economy is finally looking to generate sustained economic momentum, the uncertainty created by the proliferation of trade actions, and the reaction to them, could place an economic recovery in jeopardy."

These developments will be closely monitored in the end-of-year G20 report, said the WTO.

TRADE REMEDY ACTIONS

The report also assessed trends in trade remedies during these periods: January-June 2016, July-December 2016, January-June 2017 and July-December 2017.

The most recent available data (July-December 2017) show a 28% decrease in the number of AD investigations initiated by G20 members compared to the previous six-month period (January-June 2017). G20 members initiated 89 AD investigations in the most recent period, compared with 123 during the previous six months.

In 2017, there were notable decreases in the number of investigations initiated by Argentina, Brazil, European Union, India, Indonesia and Turkey compared to 2016. In the same period, a significant increase was seen in the number of investigations initiated by China (from 5 to 24) and the United States (from 37 to 54).

In terms of product breakdown, metal products accounted for the largest share of initiations over the entire reporting period, except for the period between January and June 2017.

This sector accounted for 41 initiations in the first half of 2016 and increased significantly to 53 initiations in the second half. This number dropped back to 41 initiations in the first half of 2017 and decreased to 21 initiations in the second half. Steel products (goods classified under HS Chapters 72 and 73) accounted for the vast majority of these investigations (138 out of 156) - 88%.

In many instances, a single importing Member initiated investigations on the same steel product from a number of different sources simultaneously - ten steel products account for 83 of the investigations over these periods.

China continues to be the most frequent target of investigations on metal products with 16 investigations in 2017, followed by the Republic of Korea and Viet Nam with five investigations each. The United States initiated 28 investigations in this sector in 2017, followed by Australia with 15 and the European Union with five.

Chemical products accounted for the second-largest share of AD investigations overall over the four reporting periods. The number of initiations concerning chemical products significantly increased from 42 in 2016 to 64 in 2017.

According to the report, India was the principal driver behind these initiations, accounting for 47 of the 106 new investigations of products in this sector over the 24 months examined. The Republic of Korea was the most targeted Member by initiations in this sector in 2017 (6 out of 64), with the remainder targeting a wide range of exporting countries or customs territories.

Plastics and rubber ranked third over the reporting periods, accounting for 13% of all initiations during the first 12 month period and 12% in the second. Textiles, which accounted for 9% of all initiations during the entire reporting period, ranked fourth.

The countervailing activities of G20 members decreased in the most recent period (July-December 2017) compared with the preceding six-month period. However, over the two most recent 12-month periods, G20 countervailing activity has increased significantly.

Various sectors were affected by CVD investigations over the four periods, with metal products remaining the most targeted, accounting for 30 of the 69 initiations by G20 economies over the 24-month period examined.

Twenty-four of these investigations involving the metal sector were in relation to steel products. Almost all of the investigations involving the metal sector were conducted concurrently with an AD investigation on the same product.

Over the 24 months covered, a total of 40 CVD measures were imposed by G20 members. However, as it can take up to 18 months for a CVD investigation to be concluded, these measures may not necessarily be the result of initiations in the same period, said the WTO.

The report said that the number of safeguard initiations stayed flat between 2016 and 2017, while the number of impositions increased.

The major users remained relatively inactive. For example, Indonesia, which had been imposing on average three safeguard measures per year between 2011 and 2015, did not impose any measure in 2016 and 2017. Conversely, new users have appeared. For example, the GCC countries have initiated three safeguard investigations in 2016 and 2017. This was the first time they resorted to the safeguard instrument.

These short term trends should be seen against the backdrop of a longer trend where initiations have fallen from a recent high of 13 in 2014, and impositions have fallen from a recent high of 9 also in 2014. It is noteworthy that the United States and China have resorted to the safeguard instrument recently. China initiated its safeguard investigation on sugar in 2016 and imposed a measure in 2017. The last time China imposed a safeguard measure was in November 2002 (on steel products). The United States initiated two safeguard investigations, one on solar cells and the other on washing machines in 2017.

While not included in the statistics (in the report), the United States imposed these two measures in February 2018. The last time the United States imposed a safeguard measure was in March 2002 (on steel products). Also not included in the statistics, is the European Union's safeguard investigation on steel products in March 2018. The last time the European Union initiated a safeguard investigation was in 2002 (on steel products).

From 1 October 2017 to 30 April 2018, G20 economies submitted 424 new regular notifications of technical barriers to trade (TBT) measures out of 1,148 by all WTO Members (37%). This represents a slight increase compared to the new regular notifications submitted during the preceding seven-month period. The top-five notifying G20 members - covering around 60% of all new G20 notifications - were Brazil (63), the United States (54), China and the European Union (51 each), and the Kingdom of Saudi Arabia (39).

Of the 424 new regular notifications made by G20 members that were received during the review period, the majority indicated as main objectives the protection of human health or safety. The remaining notifications related to the protection of the environment, quality requirements and the prevention of deceptive practices and consumer protection.

Although national security does not feature among the most indicated objectives, since 2007 (with the exception of 2012) there has been a marked increase in TBT measures notified in which national security is mentioned as an objective. Among the 51 regular notifications indicating national security as their objective, 31 (60%) were submitted by G20 economies.

According to the report, a greater number of trade concerns were raised in the various WTO bodies where meetings took place between mid-October 2017 and mid-May 2018 compared to the same period in 2016-17. A larger number of trade concerns on measures implemented by WTO Members were raised in nearly all Committees and Councils. Several trade concerns were raised in successive meetings of the same WTO body, suggesting more profound or persistent problems.

Continuing a trend observed previously, several trade concerns were raised in more than one WTO body during this period, suggesting that these concerns involve increasingly complex and cross-cutting issues. It may also provide an indication that WTO Members are soliciting multiple platforms within the WTO committee structure to address various aspects of such trade concerns.

From a systemic point of view, this is significant because of the increased transparency which it brings, but also because it demonstrates that Members are actively using the WTO committees to constructively engage trading partners on potential areas of trade friction.

Finally, said the WTO, the period under review also saw a number of trade concerns raised in successive General Council meetings suggesting more of a political than technical focus.

The report also said although the dispute settlement system is under pressure at the moment, including as a result of the ongoing impasse over the filling of the Appellate Body vacancies, Members continue to use it as a means of resolving their trade disputes.

During the review period, WTO Members filed 13 requests for consultations concerning new disputes and two requests seeking compliance proceedings. Four new panels and three Article 21.5 panels were established. In addition, three new panels were composed during the review period. As of mid-May 2018, seven established panels were in composition.

"While there are no longer any delays in a panel beginning its work, delays are being experienced at the appeal stage due to the high number of recently circulated panel reports which has resulted in an increased workload for the Appellate Body."

By mid-May 2018, there were eight ongoing appeal proceedings, including in the compliance proceedings in the EC and Certain Member States - Large Civil Aircraft (Article 21.5 - US) and US - Large Civil Aircraft (second complaint) (Article 21.5 - EU) disputes, said the WTO.

G20 INVESTMENT MEASURES

Meanwhile, a separate report was jointly released by the OECD and UNCTAD Secretariats, covering investment policy and investment-related measures ta ken between 16 October 2017 and 15 May 2018.

In the reporting period, six G20 Members - Australia, Canada, China, India, Indonesia, Saudi Arabia - amended policies specific to foreign direct investment.

The measures taken show a mixed picture, said the report.

On the one hand, several measures liberalised foreign direct investment in certain industries or promoted foreign direct investment otherwise. On the other hand, some new investment restrictions were introduced, relating mainly to the acquisition of agricultural land by foreigners, foreign ownership regulations in financial services companies, and certain limitations for outward foreign investment.

In contrast to findings for most of the earlier reporting periods under this exercise, the proportion of policy measures that point to greater openness for inward foreign investment has declined, and measures introduced since 16 October 2017 also include restrictions to outward flows.

In the reporting period, three G20 Members introduced new investment policies related to national security; such policies seek to address potential threats to national security that stem from international investment.

The three G20 Members that introduced new policies in this area - Australia, China and Italy - already had mechanisms to manage threats to their national security. The changes that they introduced in the reporting period concern critical infrastructure; expand the scope of the policies' application to additional sectors and newly identified risks and threats associated with advanced technology; or concern the transfer abroad of intellectual property.

The resurgent interest in investment policies motivated by national security concerns is not limited to G20 Members. Several non-G20 Members have taken similar policy measures recently (e.g. Latvia, Lithuania), and more policy changes are planned or considered in both G20 Members (e.g. France, United Kingdom, United States, European Union) and non-G20 economies (e.g. Netherlands and Norway).

The common trait of new policies in most of these countries is a broadening of the notion of sensitive sectors, which traditionally focused on defence and infrastructure hardware. Reforms tend to include advanced and dual use technologies (artificial intelligence, micro-electronics and robotics, as for example included by recent reforms in Germany, Italy, Japan) as well as assets that would grant access to personal data or intellectual property.

"While countries have the right to safeguard their essential security interests, there is a latent risk that such policies are designed or implemented for purposes that go beyond genuine national security concerns," said the report.

Overall, said the report, investment policy measures that G20 Members have taken in the reporting period show a mixed picture. While some point toward s greater openness for foreign investment and the easing of conditions for international capital flows, especially where enterprise investment is concerned, others introduce new investment restrictions. The majority of G20 Members has not taken any investment policy measures at all.

In particular, investment policies related to national security continue to attract significant and growing attention in and beyond the G20 membership. Shifts in policy design and implementation appear in certain G20 Members: the scope of transactions that are seen to impair national security is widening in line with and beyond technological developments, and the perceived mechanisms through which threats may materialize also evolve and accentuate the national security implications of assets that provide access to personalised data and intellectual property.

While legitimate when confined to genuine national security concerns, these policies require close monitoring to avoid being used as disguised restrict ions to international investment.

"The commitment to open, transparent and conducive investment policies is even more valuable and important at a time when the rules-based system of international economic relations is under strain," said the report.

During the reporting period, G20 Members concluded eleven new bilateral investment treaties (BITs) and seven new "other IIAs". No IIA was terminated in the reporting period.

As of 15 May 2018, there were 2,963 BITs and 380 "other IIAs". Countries from all regions have embarked on reform of IIAs. Most recently concluded IIAs include a sustainable development orientation, seek to preserve regulatory space, or alter or omit ISDS (investor-State dispute settlement) mechanisms, said the report.