Global Policy Forum

WTO Report Chose ‘Serendipitous’ Topic





By Gustavo Capdevila

July 23, 2009


The central focus of the WTO annual report - the tricky balance between the need to protect national production and the negative economic impacts of such measures during times of crisis - was actually chosen before the current meltdown, but turned out to be just what the doctor, or the world trade body, ordered.

Since the current crisis broke out in late 2008, the World Trade Organization (WTO) Secretariat has cranked up its fight against protectionism, securing the support of a number of the global body's 153 member states to monitor adoption of such measures.

At its London summit in April, the G20 bloc of the world's biggest economies pledged to notify the WTO of protectionist measures and called on the global trade body and other international entities to monitor and report on such barriers to trade.

Nevertheless, some WTO member countries continue to argue that the secretariat lacks a mandate to monitor protectionism, even in an informal capacity.

Other countries toned down their objections, finding that WTO reports on allegedly protectionist measures had become "less politically charged," in the words of one source.

However, they continued to question the WTO's method of drawing up its reports, which put small or medium countries in the dock merely for adopting such measures, without taking into account their relative effect or their trade-distorting impact.

Other critics complain about the scant importance that WTO reports accord to government rescue and stimulus packages granted, for example, to large banks, insurance companies or car-makers in the United States or Europe.

The "World Trade Report 2009; Trade Policy Commitments and Contingency Measures", was released Wednesday in Singapore and Geneva.

Chilean diplomat Alejandro Jara, one of the WTO's four deputy directors-general, said the choice of the report's topic, made over a year ago, was "serendipitous" as "we had little idea then of what we would be confronting now.

"We know very well that today's crisis, just as the last crisis of this magnitude back in the 1930s, was not caused by trade policies. But we also know that protectionist trade policy played a significant role in deepening and prolonging the economic downturn back then," said Jara.

"We have seen an increase in restrictive trade measures since the onset of the crisis. So there is no room for complacency. I do not think we are in a situation where we need to ring the alarm bells, but we need to remain vigilant and open with one another," he added.

The WTO report states that at times of economic crisis, governments face pressure to adopt measures that could restrict trade, "and there are real dangers that such pressures, if not addressed adequately, can lead to a dangerous escalation."

"Contingency measures can act as a safety valve in such instances and can play an important role in maintaining a rule-based system of multilateral trade," the report continues.

Among the measures that can be applied by governments when they find themselves in economic difficulties are temporary safeguards to respond to increases in certain imports.

The question of safeguards became a glaring issue a year ago, when the United States opposed India's demand for such mechanisms, in order to protect the livelihood of subsistence farmers in developing countries.

In fact, the Doha Round of WTO talks, launched in Qatar in 2001, collapsed over the issue.

Other instruments are anti dumping measures against the export of products at prices deemed artificially low, or increases in import tariffs to the level allowed by WTO trade accords.

The WTO report states that "since flexibility is not costless, exercising restraint is beneficial. Free-flowing information on policies affecting trade is essential in adverse economic circumstances.

"Comprehensive and timely notification of trade contingency measures to the relevant WTO bodies is needed to ensure proper monitoring," the authors add.

Unlike previous annual reports by the WTO, this year's does not make trade projections for 2010.

But it does warn that the growth of trade will be "strongly negative this year. Although this contraction appears to be slowing, the economic situation remains fragile. Continuing downside risks led WTO economists to revise further downward its forecast for 2009 world merchandise trade from a decline in volume of nine percent to a decline of ten percent."

"The worst is still to come," said Jara, who predicted a continued rise in unemployment around the world and warned that the "pressures will be there for some time to come."


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