A new report from the World Trade Organization (WTO) on trade-related developments warns of the longer-term nature of the protectionist, trade-restricting measures nations have introduced during the past seven months.

According to the report, governments are increasingly considering protectionist measures to achieve national economic objectives instead of the temporary measures to protect domestic industries more commonly reported at the start of the global crisis.

The report says: "There has been no slowdown in the imposition of new trade restrictions over the past seven months," despite commitments against protectionism. "The more recent wave of trade restrictions seems no longer to be aimed at combatting the temporary effects of the global crisis, but rather at trying to stimulate recovery through national industrial planning, which is an altogether longer-term affair."

Since mid-October 2011, a total of 182 new measures that restrict or can potentially restrict or distort trade have been recorded, impacting 0.9% of world imports. The main measures are trade remedy actions, tariff increases, import licenses and customs controls. In addition to trade restrictions, many plans envisage the provision of tax concessions and the use of government subsidies, which can distort and inhibit competition between nations.

The report noted that the new measures restricting or potentially restricting trade that were implemented over the past seven months are adding to the trade restrictions put in place in previous periods. The accumulation of trade restrictions is becoming a matter of concern, the report said, and many measures introduced before the global crisis struck, most notably in the agriculture sector, remain in place.

The trade coverage of G20 restrictive measures implemented since October 2008 are estimated to be worth around 3% of world merchandise trade, and almost 4% of G20 trade. This is equivalent to some USD450bn, or close to the annual value of merchandise trade in Africa. Meanwhile only 18% of G20 restrictive measures have been repealed.

The politics of trade in some countries seems to be turning inward-looking, the report says. "Of particular concern are statements by some leaders in favour of import substitution policies as the pillar of economic growth in their countries. This is generating regional and global trade tensions which have largely been absent since the coordinated policy responses to the global financial crisis were launched."

"Some governments are reportedly considering raising import barriers, and in some cases have already done so, to protect their domestic industries from what they may consider to be unfair competition. In certain cases, the barriers seem to take the form of procedural or administrative actions to slow down the clearing of goods at borders rather than new laws or regulations. This can render trade conditions even more difficult since lack of transparency about conditions of entry into a market increases uncertainty for traders and raises the risks and costs of doing business," the WTO says.

"Governments need to redouble their efforts to resist protectionist pressures and take active steps to keep markets open and advance trade opening. Some governments are facing particularly difficult economic conditions domestically; they must resist the temptation to move towards more nationalistic and inward-looking policies. This kind of policy will not solve their problems and they risk generating tit-for-tat reactions by their trading partners," the report continues. "Further trade-opening constitutes a potentially important source of confidence-building in the multilateral trading system. Moreover, increasing trade is critical to stimulating global recovery and to supporting fiscally sustainable growth."

"Stronger global cooperation is needed to rebuild a robust architecture for trade in the 21st century. Greater international cooperation is also needed to make the case for open trade, escape the current economic crisis, and advance the multilateral trade agenda," the report concludes.

July 5, 2012

Source: Tax News

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