Brussels, 10/02/2009 (Agence Europe) - With global trade contracting as a result of the international economic and financial crisis, the WTO, through its Director General Pascal Lamy, once again, on Monday 9 February, warned of the dangers of a protectionist spiral that could result from increased measures to support the economy announced by several governments across the world.
Financial crisis, fall in demand, dramatic slowdown in economic growth, lack of bank finance, everything is conspiring for a catastrophic scenario for 2009 which will be, according to the World Bank, the IMF and the OECD, a black year for world trade, with the first two predicting contraction in trade of the order of 2.1% to 2/8% this year. The OECD says that no country will be spared, nor any sector. Exports and imports of goods and service within the OECD lost 1.6% and 0.2% respectively of their value in the third quarter of 2008. With the worst still to come, the World Bank says, the fall in the demand for imports to negative levels across the OECD countries could affect exports from high growth developing countries. Nor must one forget that the countries whose reserves in cash are not sufficient will place their hopes on a depreciation of their currency. The consequences for trade balances will be heavy, with the World Bank forecasting, for example, that the United States deficit will rise from $770 billion in 2008 to $830 billion this year.
Lamy, estimating that 90% of international trade is based on short-term loans and calculating the lack of liquidity in trade since the start of the crisis at some $25 billion, continues to urge governments to keep their markets open and to conclude the Doha Round as quickly as possible. It a report on recent developments in trade in the financial crisis, work resulting from a debate he launched with the international financial institutions in November, the WTO Director General calls for trading powers to keep their words and not erect new barriers or restriction on trade because of the crisis in order to avoid aggravating it. His report says that, hitherto, most WTO members seem to have resisted domestic protectionist pressure. There is little proof of increases in customs duties and non-tariff barriers, it goes on. However, it acknowledges that there are gaps in the information provided by member states and delays in states' informing the WTO of any changes of policy. Ahead of the keenly-awaited G20 Summit of the economic powers in London in April, Lamy has called for vigilance.
In its report published on Monday, the WTO expresses concern over collateral damage caused by government aid to certain banks which could distort competition between financial institutions. It is also concerned about public support announced by several countries (Germany, Australia, Canada, China, South Korea, the United States and France) for industries that are under threat, such as car making, as national preference measures for certain products, as illustrated by Russian aid for its car makers through public subsidies and increased import duties. It criticises several examples of recent measures which run counter to free trade, such as India's decision, in November, to increase some tariffs and restrict imports in the steel sector, Ecuador's decision on November to increase duties by 5-20% on 940 products to reduce the impact of the crisis on its revenue, Indonesia's decision to reduce access for a range of goods to a few ports and airports, Argentina's decision to impose licence requests on products deemed sensitive, South Korea's decision to increase its oil import duties, China's decision to reduce export taxes on textiles and also the EU's announcement of the re-introduction of export subsidies for dairy products from January. The WTO notes too, that governments are considering other subsidies, in several sectors, such are aeronautics, building, steel and electronics.
In their discussions of the report with Lamy within the Trade Policy Review Body, several developing countries, led by Argentina, Brazil and India, expressed disquiet on Monday over the impact of the massive recovery plans proposed by developed countries, which, they said, would create serious trade distortions, and they called for more in-depth assessment of these plans. The WTO has promised a new overview of its member countries' trade policies by mid-March, before the G20 summit. (E.H./transl.rt)