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WTO mum on protectionist measures ahead of G-20 meet

LiveMint logoLiveMint 30-06-2017 D. Ravi Kanth

Geneva: The World Trade Organization (WTO), which is reckoned as the bastion of global trade liberalization and the custodian of international trade rules, has not explicitly mentioned the need to refrain from taking “protectionist” measures, out of fear of criticism by the Donald Trump administration in the US, according to trade envoys familiar with the development.

In a joint report issued along with the Paris-based Organization for Economic Cooperation and Development (OECD) and the United Nations Conference on Trade and Development (Unctad) on “G-20 Trade and Investment Measures” on Friday, the WTO merely said: “In the face of continuing economic uncertainty, the G-20 should work to continue improving the international trading environment, by keeping markets open and promoting a level playing field.”

Further, “G-20 leaders (who are going to meet in Hamburg on 10 July) must show leadership in reiterating their commitment to open and mutually beneficial trade as a key driver of economic growth and a major engine for prosperity, and work together to strengthen the rules-based trading system and achieve a successful outcome at the 11th WTO ministerial conference in December,” the report said.

It suggested that the estimated trade coverage of trade-facilitating measures implemented by G-20 economies ($163 billion) significantly exceeded the estimated trade coverage of trade restrictive measures ($47 billion). “The moderation and restraint that we have seen in trade policies shows that the trading system is doing its job in keeping global commerce flowing and resisting protectionism,” said Roberto Azevedo, the WTO’s director general.

“Nevertheless, there is a high level of economic uncertainty, and therefore we need to remain vigilant,” he said, suggesting that “efforts should be stepped up to avoid implementing new trade-restrictive measures and to reverse existing measures,” he urged the G-20 leaders.

In contrast, previous reports issued prior to the G-20 leaders’ meetings since 2008 explicitly cautioned about the need to refrain from taking protectionist measures or the dangers posed by protectionism. “G-20 economies must re-double efforts to deliver on the commitment to refrain from taking next protectionist measures and roll back existing ones and G-20 leaders need to work together to ensure that the benefits of trade are spread more widely and are better understood,” Azevedo, along with his OECD and Unctad counterparts, said in the last report, on 10 November 2016.

That report, issued ahead of the G-20 leaders’ meeting in Hangzhou, China, also said that “the overall stock of trade-restrictive measures continues to grow... the number of new trade-restrictive measures being introduced still remains worryingly high.”

The latest report also changed the methodology for assessing trade-restrictive measures as compared to previous reports, said a trade envoy who asked not to be quoted. “Clearly, trade remedy measures (such as anti-dumping actions, which have a chilling effect), which were treated as trade-restrictive in the previous reports, are now treated to address what is perceived by some as a market distortion,” the envoy suggested.

“The report’s failure to explicitly mention the increasing dangers posed by protectionist measures such as (President Trump’s) America First initiatives could have a systemic effect,” the envoy maintained.

Over the past several months, following the Trump administration’s repeated threats to review the ongoing work at the WTO, including the dispute settlement ruling issued by the panels and the appellate body, there is considerable change in the manner in which it is approaching issues of multilateral trade liberalization.

US trade representative Robert Lighthizer, for example, recently warned the WTO director general to the effect that “any decision to label China a ‘market economy’ would have cataclysmic consequences” for the body.

He told the US Senate Finance Committee on 22 June that the US was eager to see changes in the WTO’s dispute resolution system.

Lighthizer singled out a dispute brought last December by China against the European Union on whether it should be deemed a market economy as the “most serious litigation that we have at the WTO right now”.

Nevertheless, the WTO’s latest report has served as a transparency tool in explaining the trade policies that are adopted by the G-20 countries. The report suggested that during the past seven months (mid-October 2016 to mid-May 2017) the G-20 countries applied 42 new trade-restrictive measures, including new or increased tariffs, customs regulations and rules-of-origin restrictions.

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