WTO: Fewer New Trade Restrictions Among G-20 Members, Though Warning Signs Remain
The use of new trade restrictions among the Group of 20 leading economies has slowed down over the past five months, the WTO announced earlier today. However, the continued build-up of protectionist measures put in place since the onset of the economic crisis remains a source of concern, given their potential to worsen global problems. The mixed news comes amid warnings this week from French and German national leaders - as well as the heads of the world’s international finance institutions - that the global economic recovery is still far from being assured.
WTO: Slowdown in new G-20 trade restrictions, but more must be done
Despite growing headwinds, G-20 members appear to be issuing fewer trade restrictions than in previous months, the Geneva-based WTO said today, in a report issued under the responsibility of Director-General Pascal Lamy. The pace of removal of trade restrictions - 21 percent over the past five months - is also faster than the 18 percent noted in May, the global trade body said.
The report comes four months after G-20 leaders, meeting in Los Cabos, Mexico at their annual heads of state summit, extended until 2014 their earlier pledge to refrain from issuing new protectionist policies and to rollback those instituted since the start of the crisis, after months of heightened concern that economies were relying excessively on trade restrictions in an effort to stimulate recovery on a national level. (See Bridges Weekly, 20 June 2012)
However, the long-term build-up of trade restrictions since the start of the crisis - as well as increasing trade frictions “at a time of continuous economic difficulties” - still warrants further action from the world’s major developed and emerging economies, the WTO report said.
“G-20 governments need to redouble their efforts to keep their markets open, and to advance trade opening as a way to counter slowing economic growth,” the WTO urged in its report. Furthermore, “the outlook for the global economy is worse than at the time of release of the previous G-20 monitoring report due, among other things, to budget developments and the persistent debt crises in major economies.”
The report found that 71 new trade restrictive measures have been imposed since mid-May 2012, when the WTO issued its last report on G-20 trade measures. The previous report had recorded 124 new restrictive measures during the seven months between October 2011 and May 2012.
The new policies outlined in Wednesday’s report cover 0.4 percent of G-20 merchandise imports, or 0.3 percent of world imports. The initiation of anti-dumping investigations and increasingly stringent customs procedures were the most prevalent among the new restrictions, the WTO said.
Notably, the WTO found that fewer export restrictions had been introduced over the past five months than during previous periods, which is a topic watched closely by trade observers due to the effects on price levels that such restrictions have. Moreover, trade facilitation measures account for approximately 55 percent of the new measures recorded among G-20 members, the organisation said - outnumbering trade restricting measures, and greater than the 45 percent noted in the May 2012 report.
The WTO also urged G-20 economies, among others, to show “a stronger and renewed commitment” to reinvigorate the multilateral trading system. Even with the Doha Round of trade talks unlikely to come to a full conclusion in the short-term, the report urged that the organisation’s 157 members continue to work toward negotiating progress in small steps. “This possibility should not be lost,” the report stressed.
The report is part of a joint exercise by the WTO, the Organisation for Economic Co-operation and Development (OECD), and the UN Conference on Trade and Development (UNCTAD) on G-20 countries’ adherence to their pledges to resist implementing trade and investment restrictions during the ongoing financial crisis.
Calls for increased competitiveness, reforms as Merkel and Hollande meet with international organisation chiefs
The WTO report comes following weeks of growing attention to how the world’s advanced economies - particularly the EU, US, and Japan - will stave off further problems that many fear will prompt a renewed global economic slowdown. The eurozone crisis has been at the forefront of these concerns, dominating the recent International Monetary Fund (IMF)-World Bank Annual Meetings that were held in Tokyo, Japan just weeks ago amid scaled back economic and trade growth forecasts. (See Bridges Weekly, 17 October 2012)
The recent imposition of new rounds of quantitative easing by the European Central Bank, the US Federal Reserve, and the Bank of Japan have brought the issue further into the limelight, as leaders debate how much additional monetary policy efforts will help and the possibility of adopting fiscal consolidation and structural reforms in the eurozone. Concerns over whether Greece might soon run out of funds have added further urgency to the situation, as have warnings that protectionist pressures remain strong.
In this context, leaders from five of the world’s major international organisations - the IMF, World Bank, International Labour Organisation (ILO), the OECD, and the WTO - met with French President François Hollande on Monday and German Chancellor Angela Merkel on Tuesday to assess ways to boost growth and competitiveness within the eurozone.
“The prospective for economic growth is not as big as we would wish,” German Chancellor Angela Merkel said yesterday. “Because of modest growth prospects and considerable uncertainty, financial markets, investor, and household confidence has not yet returned to pre-crisis levels,” the chancellor said in a joint statement with the heads of the IMF and the OECD on Tuesday.
The international organisation leaders stressed that reforms are necessary for the eurozone to boost growth and become more competitive, while noting that increased trade liberalisation is another key component in stimulating such economic growth.
While Merkel has held regular gatherings with leaders from these five organisations since 2007, this was the first such meeting for France. Hollande said on Monday that he aims for these meetings to become an annual tradition.
“Today’s meeting was an opportunity, first of all, to realise that the world economy is slowing down, even in emerging countries,” Hollande said at a joint press conference following Monday’s meeting. “It’s sluggish in the United States and very weak - if not negative - in Europe,” he continued, noting also the rise in “protectionist temptations.”
Along with calling for changes on the currencies front, and noting the “collective responsibility” of international organisations to spark a reform of the international monetary system, Hollande warned that the crisis could continue for some time should financial markets be left to resolve the crisis on their own.
“We need to put in place regulatory mechanisms; we also need to take a certain number of resolute steps,” the French President said. Despite recent signs that the eurozone could be showing some signs of recovery, “we’re not out of the woods yet,” Hollande told reporters.
“The idea isn’t to make one more splashy announcement, to unveil yet another reform - no. Our task is to give substance to a competitiveness path,… a growth path, and a fiscal path,” Hollande said. France is expected to outline a series of competitiveness measures that it plans to take in early November.
“Competitiveness requires structural reform, which touches upon every aspect of the economy,” the French President continued. “Indeed, as Pascal Lamy was saying earlier, those countries who decided to bet on competitiveness are those countries which have experienced the strongest growth and who have the best employment figures.”
At the same press conference, Lamy stressed the link between growth, competitiveness, and jobs.
“We… understand that unemployment rates are way too high and also, in order to create jobs, there needs to be demand. Ninety percent of the demand will come from outside of Europe - so, let’s be clear about that,” the trade chief said.
“This means that, in the next five years, the way to go out and create jobs is to actually seek out growth where it exists. That means in the developing countries, and in the emerging countries more specifically. This also means that markets remain open, or open up more,” Lamy continued.
The comments come a week after a public back-and-forth in the international press between Lamy and French Industry Minister Arnaud Montebourg over the latter’s push to promote a “Buy France” campaign in an effort to regenerate industry in his country, which the WTO chief warned could lead to “patriotric protectionism.”
The French minister, in turn, argued that France cannot compete with emerging industrial powers such as China, though Lamy has said that France’s competitiveness problem is not limited to Beijing but extends to its relationship with the rest of Europe.
ICTSD reporting; “G20 to urge members to act against economic uncertainty,” REUTERS, 26 October 2012; “IMF chief Lagarde urges further consolidation in major economies despite ‘tepid growth’,” THE WASHINGTON POST, 30 October 2012; “Minister defends ‘Buy French’ push from critical WTO,” REUTERS, 22 October 2012; “France Can’t Compete With Rest of Europe: WTO Chief,” CNBC, 31 October 2012.
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