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G20 leaders boost trade finance, resist protectionism
In the face of the steepest drop in world trade in 60 years, leaders from the Group of 20 economic (G20) powers agreed in early April to provide funding for USD 250 billion worth of international trade flows. The heads of state also reiterated the vow they made in November not to establish any new barriers to trade, this time adding a promise to report any such measures to the WTO.
The G20 leaders vowed to resist the kind of tit-for-tat protectionism that exacerbated and prolonged the Great Depression of the 1930s. They extended to the end of 2010 the commitment they made in November 2008 “to refrain from raising new barriers to investment or to trade in goods and services, imposing new export restrictions, or implementing World Trade Organization (WTO) inconsistent measures to stimulate exports.”
The leaders also agreed to “notify promptthe WTO of any such measures,” and calleon the global trade body and other relevainternational institutions “to monitor and report publicly on our adherence to these undertakings on a quarterly basis.”
On Doha, the leaders reiterated a familiar pledge to continue to work towards. “We remain committed to reaching an ambitious and balanced conclusion to theDoha Development Round, which is urgently needed. This could boost the global economy by at least USD150 billion per annum.”
Leaders reportedly agreed to discuss Doha again when the G8 countries gather in July. Emerging economies Brazil, China, India, Mexico, and South Africa will also be represented at the summit.
WTO protectionism warning
The G20 commitment to counter protectionism and boost trade came following a WTO report that warned global commerce is in danger of “an incremental build-up of restrictions that could slowly strangle international trade” and undermine worldwide attempts to restore growth.
In its report the WTO predicted that world merchandise trade will shrink by 9% this year; the OECD estimated a 13.2% “collapse.” This marks a sharp reverse in a decades-long pattern that saw trade volumes outstrip GDP growth, as the development of international production chains meant that many components in a single product crossed borders and thus were counted towards trade figures.
Both the WTO and the OECD put most of the blame for the trade contraction on reduced global demand and shortages of global finance, not on protectionist barriers. Falling commodity prices and a rising US dollar have helped push down the dollar value of trade.
The report, which WTO secretariat officials hope will be discussed by Members in mid-April following its translation into French and Spanish, contained numerous plugs for the troubled Doha Round of trade negotiations.
WTO urges EU to liberalise agriculture, services sectors
The European Union will play a key role in shortening and reversing the current global economic slowdown, according to another WTO report released on 6 April 2009. But Brussels should further liberalise its services and agricultural sectors to stimulate the bloc’s recovery from the losses that it has suffered in the global financial and economic crisis.
The report noted that the EU had already made some progress on this front: common Agricultural Policy (CAP) reforms passed in 2003 increased the market-orientation and competitiveness of the sugar, fruit and vegetables, and wine subsectors and eliminated export subsidies of fruits, vegetables, and wine. Export subsidies for farm goods continue to be one of the EU’s most controversial breaches of WTO principles. In January, the EU, citing the global economic crisis, reinstated export subsidies for some dairy products and increased spending on poultry. The move drew heavy criticism from the WTO Membership.
The WTO also called for further liberalisation of the services sector, which the report called the backbone of the European economy. While the EU has made progress in opening up its telecoms and postal industries, significant regulatory and administrative hurdles continue to obstruct the flow of services trade among the EU’s member states. Many services, including tourism, distribution, construction, and engineering, lack a common market policy within the 27member bloc, the report said.
But the report commended the EU for its active membership in the WTO, calling the bloc “a major force” behind the Doha Round negotiations. The WTO secretariat conducts periodic reviews of all of its Members’ trade policies. This was the ninth such review for the EU.
Notes
This is a modified version of fuller articles originally published as:
- “G20 Leaders Boost Trade Finance, Renew Vow to Resist Protectionism,” Bridges Weekly Trade News Digest, Volume 13, Number 13, 8 April 2009.
- “WTO Urges EU to Liberalise Agriculture, Services Sectors,” Bridges Weekly Trade News Digest, Volume 13, Number 13, 8 April 2009.
- “WTO Warns of ‘Significant Slippage’ toward Protectionism,” Bridges Weekly Trade News Digest, Volume 13, Number 12, 1 April 2009.
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