T S Vishwanath: A thin silver lining

Last Updated: Wed, Nov 07, 2012 21:42 hrs

Trade restrictions across the G-20 countries have reduced over the last five months, according to a report released recently by the World Trade Organisation (WTO). “Nevertheless, the new measures are adding to the stock of restrictions put in place since the outbreak of the global crisis — most of which remain in effect. The G-20 governments need to re-double their efforts to keep their markets open, and to advance trade opening as a way to counter slowing global economic growth.”

The G-20 countries that have been studied to build this report include Australia, Brazil, Canada, China, Indonesia, Japan, the Republic of Korea, Mexico, the Russian Federation, the Kingdom of Saudi Arabia, Turkey, the United States, Argentina, India, South Africa and the European Union on behalf of its members.

The report said since mid-May 2012, 71 new trade restrictive measures have been recorded, covering around 0.4 per cent of the G-20 merchandise imports, or 0.3 per cent of the world imports. The most frequent measures used continue to be trade remedy actions, in particular the initiation of anti-dumping investigations, followed by more stringent customs procedures. These measures account for about 46 of the 71 new restrictions. Some of the reported trade restrictions, the report said, have been implemented on a temporary basis. However, experience shows that once applied, these restrictions remain and continue to hurt market access.

The rise in trade restrictions is primarily because of the poor show of the global economy, which is evident from the WTO secretariat’s forecast for world trade growth. In 2012, the growth is now being predicted at 2.5 per cent instead of 3.7 per cent projected earlier in April 2012. The volume of trade growth in 2013 is now forecast to be at 4.5 per cent, still below the long-term annual average of 5.4 per cent for the last 20 years, the report said.

For the whole of 2012, merchandise exports from developed countries are expected to grow only by 1.5 per cent and those from developing countries by 3.5 per cent, according to WTO. The continued fall in imports by the developed countries has been the main factor contributing to the fall in global trade, the report said.

The silver lining is that measures on trade facilitation for the last five months outnumber those that can be considered as trade restricting. Around 55 per cent of the total number of new measures recorded is trade facilitating compared with 45 per cent at the time of the previous monitoring, the report said. The trade facilitating measures cover around 0.7 per cent of the G-20 merchandise imports.

The other good news for global trade has been that the latest report shows that the pace of removal of previous restrictions is slightly better than before. Of the total measures that can be considered as restricting or potentially restricting trade implemented since October 2008, around 21 per cent have so far been eliminated. At the time of the last monitoring report in May 2012, around 18 percent of the previous restrictive measures had been removed.

Trade restrictions have been a topic of discussion at WTO and bilaterally among member countries for several years. But pressure from domestic constituencies have forced the governments to look at trade restrictions to protect domestic producers, while, at the same time, using genuine trade restrictive practices like trade remedies to keep the market free and fair.

The biggest challenge for the G-20 governments will be to ensure that trade restrictive measures are only created to help domestic players gain competitiveness. Unfair trade protection, as has been noticed in some markets, needs to be challenged. Many countries have been using the WTO dispute settlement process to question trade restrictions and there has been an increase in the number of disputes at WTO in the recent years.

As countries across the globe look at aggressively tackling the headwinds due to the global slowdown, they need to keep a strong lookout on the demands from domestic industry to keep markets protected. India in the recent past has been making substantial progress in opening markets through policy measures. The onus will now be on developed country markets to show leadership in this area of trade liberalisation.

The writer is Principal Adviser with APJ-SLG Law Offices

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