Bridges Weekly Trade News Digest • Volume 13 • Number 41 • 25th November 2009

WTO Calls for ‘Exit Strategies’ from Crisis Measures

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Countries should begin planning their ‘exit strategies’ from crisis-triggered measures to restrict or distort trade, according to a new report from the WTO.

Global trade volumes suffered their steepest drop in 60 years in the wake of last year’s meltdown on Wall Street. More than a year later, the world economy is showing some signs of good health, but a full recovery is far from guaranteed.

“The balance of forces affecting the global economy appears to be more positive than negative at the moment, but there remain serious risks to the steadiness and strength of economic recovery,” noted the report, which came from the office of WTO Director-General Pascal Lamy. “At this stage in the recovery, trade growth is volatile.”

Still, governments should not shy away from considering how they will remove the props they put up to keep domestic producers afloat, the report concludes. WTO members should “devise and announce exit strategies” to eliminate any protectionist measures that were implemented amid the fallout from the financial crisis, and should also set such strategies in motion “as soon as domestic economic recovery takes hold.”

“The longer trade restricting and distorting measures are left in place, the more deeply entrenched the special economic interests depending on them will become and the more difficult it will be to remove the measures,” the report warned.

Echoing earlier reports, though, the WTO stressed that protectionist measures have not been as widespread or as egregious as many had previously feared. Although there have been “instances of slippage” toward protectionism, the report said, “in general terms the world economy is about as open for trade today as it was before the crisis started.”

Since October of last year, new measures that countries have introduced to restrict or distort trade “have covered collectively, at a maximum, 1 per cent of world merchandise trade,” the report pointed out. Such measures “bore no responsibility for provoking the crisis” and have played “a limited role” in exacerbating it at the global level.

But it is still too early to breathe a sigh of relief. Unemployment may continue to rise even as the crisis abates, and pressures on governments to shield sectors from competitors overseas may grow even more acute. On top of that, there are lingering questions about whether government stimulus packages - many of which included so-called ‘buy local’ provisions - are in line with global trade rules. Assessing the WTO-compliance of billion-dollar bank bailouts and other recovery measures would be a hefty challenge for the global trade body, not least because governments have failed to share many of the details of how the plans are being implemented.

Despite such challenges, “many WTO members” would like to see “more in-depth analysis of the trade effects of these stimulus programmes,” the report said.

Some observers say that increased monitoring represents one way in which the WTO can continue to show its relevance on the global stage even as the organisation’s ill-starred Doha Round negotiations stagger into their ninth year. But to have true impact, WTO monitoring will need to undergo a fundamental shift, the report noted, from looking “through the rear-view mirror only” to identifying trade measures “that could affect trade the trading system tomorrow.”

More information

The report is available online in two parts, at http://www.wto.org/english/news_e/news09_e/ wt_tpr_ov_12_a_e.doc and at http://www.wto.org/english/news_e/news09_e/wt_tpr_ov_12_b_e.doc

ICTSD reporting.