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Warning of protectionist dangers from World Trade Organisation

In a recent report by Pascal Lamy, director-general of the World Trade Organisation (WTO), he noted the likely depth of the current recession and its impact on world trade. He said that in such circumstances “a large premium must be attached to avoiding policies that restrict world trade”. Although he could not see any immediate descent into high intensity protectionism he warned that: “The danger today is of an incremental build-up of restrictions that could slowly strangle international trade and undercut the effectiveness of policies to boost aggregate demand and restore sustained growth globally.”

Protectionist measures will restrict the value of world trade

Protectionist measures will restrict the value of world trade

 

It was noted that earlier this year most WTO members had managed to keep protectionist measures under control, and that there was only limited evidence of increases in tariffs and non-tariff barriers. However, Lamy said that since then “there has been significant slippage.  There have been increases in tariffs, new non-tariff measures, and more resort to trade defence measures such as anti-dumping actions.  The financial and fiscal stimulus packages that have been introduced to tackle the crises clearly favour the restoration of trade growth globally and they are to be welcomed, but some of them contain elements – such as state aids, other subsidies and “buy/lend/invest/hire local” conditions – that favour domestic goods and services at the expense of imports.”

He noted that there will be an increasingly negative impact on trade if these measures accumulate. He was also concerned that measures which are taken on a “temporary” basis actually end up remaining in place after the end of the crisis with the result that the world is left with uncompetitive industries and sectoral over-capacity. Any subsidies should be directed not at production but at consumption, allowing consumers the freedom to buy goods internationally.

Finally, he called for a resumption of the Doha Round of trade negotiations which appear to have been permanently halted, pointing out that the deal of tariff reductions which is currently on the table would be equivalent, if agreed, to a new stimulus package for consumers of US$150 billion.

 

 

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Posted in International, Protectionism, World Trade, World Trade Organisation

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