Five More Years of the G20 Standstill on Protectionism?

Simon J Evenett 03 September 2013

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“We are deeply concerned about rising instances of protectionism around the world”. So declared G20 Leaders at the end of their last summit in Los Cabos, Mexico.

Well, did performance improve?

Moreover, we are approaching the 5th anniversary of the G20’s standstill on protectionism, how effective has it been? Should alternatives be considered?

Reading the 14th report of the Global Trade Alert, it seems clear that the current G20 approach is not working:

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Topics:  International trade

Tags:  protectionism, Global Trade Alert

Rising protectionism and the subordination of trade policy

Simon J Evenett interviewed by Viv Davies,

Date Published

Fri, 07/20/2012

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See Also

See also:

Débâcle: The 11th GTA report on protectionism (Simon Evenett, 14 June 2012)

Mounting tensions pose a test for world trade (Vox Talk with Simon Evenett, 25 November 2011)

Transcript

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Viv Davies: Hello and welcome to Vox Talks, a series of audio interviews with leading economists from around the world. I’m Viv Davies from the Centre for Economic Policy Research, it’s 17 July 2012 and I’m speaking with Professor Simon Evenett of the University of St Gallen about the recent rise of protectionist measures in the world trading system. We also discuss the implications of the rise in regional trade agreements, the potential effect of Russia joining the WTO, and the impact of slow growth and recession in Europe on the region’s trade with the rest of the world.

I began by asking Simon what the recent rise in protectionism means for world trade. 

Simon Evenett: It means that the world economy is facing a greater risk of more closed markets and a stalled recovery because of protectionism. The recent uptick in protectionism has been mentioned not just by the WTO but by the European Commission, the International Chamber of Commerce and the so-called B20 group of business leaders. The findings of the Global Trade Alert report were discussed by some of the participants at Los Cabos, the G20 summit, and I think the profile of this issue has been raised appropriately by a large range of individuals and organisations.

Viv: What sort of protectionist measures are we seeing most commonly used now?

Simon: Measures being used at the moment are a combination of traditional antidumping, the so-called trade defence measures, some resort to subsidies by countries, especially those who have engaged in industrial policymaking initiatives, and also a number of export restrictions which are limiting the supply of commodities and other items to the world economy.

Viv: And what does this mean for the efficacy of WTO rules? Are they not working?

Simon: WTO rules have been negotiated over time and are still fairly incomplete. Where they are tough they’re very valuable and have probably done a good job in deterring some protectionism, but I would put a greater emphasis on the rules being incomplete and this inducing a switch in the form of protectionism. Overall I think the WTO rules have altered the composition of protectionism more than its level.

Viv: So who’s the biggest offender in terms of implementing protectionist measures? And who’s suffering the most as a consequence of protectionism?

Simon: Global Trade Alert cuts the data up in a number of different ways, and depending on different metrics you come out with different lead offenders. But amongst the top offending countries are Japan, the European Union countries taken together, Brazil, India, and China. Those are perhaps the worst five. Argentina also recurs heavily in the list of offenders.

In terms of the countries which have been hit the most these are the biggest exporters in the world, so obviously China, the United States, the major European nations, have been hit many, many times. We've seen over 500 hits for some of those countries since November 2008.

Viv: We’re also seeing quite a rise in the number of regional trade agreements being made. In 2010, for example, the China-ASEAN Free Trade Area was established; the European Union, too, is making deals with Colombia and Peru, with possible deals in the pipeline with India, Japan and the US. Is the rise of regional trade agreements a good thing for world trade?

Simon: The rise of regional trade agreements is probably mixed for the world trading system. There’s a long-standing concern amongst economists that regional trading agreements divert trade away from more competitive firms towards those which have tariff breaks.

But the other offsetting feature is that regional trading agreements have been fairly effective in introducing rules on behind-the-border policies, regulatory policies which affect domestic and foreign businesses as well. So any balance sheet of the costs and benefits is going to have to weigh up these two factors.

As tariffs come down over time, the trade diversion costs are probably getting smaller and smaller. They’ll probably be concentrated more in agriculture than in manufacturing, whereas the behind-the-border issues just seem to get more and more important over time. So on net I’m cautiously positive about regional trading agreements being a good force in the world economy, but I don’t believe you can argue that they’ve delivered a lot of economic benefits in most cases.

Viv: Okay. So Russia is, at last, just about to join the WTO. What do you think are the likely implications and consequences of that?

Simon: There are few people rejoicing that Russia is joining the WTO. This is partly because the Russian position on negotiations is not likely to be one which is open to further liberalisation. If anything the recent policy moves in Russia have been towards more protectionism and the substitution of imports. Overall, people are concerned about what the impact of Russia’s accession will be on negotiations and on the balance of those negotiations.

Furthermore, Russia will soon be subject to WTO dispute settlement and could well be the target of a number of enforcement actions by other countries, and this could make for some fractious times in Geneva as well. On net this is not the happiest development but, still, it’s better to have Russia inside the World Trade Organisation’s tent and hopefully over time its policy priorities will evolve.

Viv: What impact is the slow growth and recessionary environment having on Europe’s trade with the rest of the world? And what are the likely implications?

Simon: There’s a big knock-on effect of western European slow growth on trade with both eastern Europe and with China, and this is where we’ve seen the most immediate impact. This in turn I think is inducing, in the case of China, further government measures, including indirect subsidisation through their banking system as well as other measures to stimulate domestic demand.

The transatlantic effect of that has been rather limited but that’s because, again, the American and Canadian trade exposure is, while numerically rather large, proportionately not so big as a share of their exports. Not every region is particularly affected.
When it comes to the impact within Europe, again you would expect to see something of a downtick in imports in the periphery countries, which I think we are seeing, whereas Germany and some of the northern countries appear to be exporting plenty to the rest of the world. They seem to have substituted away some of their export dependency on the periphery for other, faster-growing, parts of the world. That realignment I think you’ll see continue.

Viv: Finally, Simon, what sort of future do you see for world trade? Are you optimistic?

Simon: I think world trade has been not a key priority of governments, or at least promoting world trade hasn’t been. I think trade policy has been subordinated below other policy objectives throughout this crisis. For as long as that is the case, one has to be a bit wary and cautious about where the world trading system is heading. I don’t think the current situation is anything to feel happy about. It’s certainly not excessively gloomy or anything like the 1930s, but I do think we need to be cautious and defenders of the world trading system need to be making a case for trade policy and openness as a government priority, instead of being outmanoeuvred by the other key players in the macroeconomic policy debates and debates about financial stabilisation.

 

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Topics

International trade
Tags
Russia, WTO, protectionism, Global Trade Alert, free trade agreements

Related Article(s)

Antidumping as cooperation The shifting geography of global value chains: Implications for developing countries and trade policy The UK economy in a global world
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Débâcle: The 11th GTA report

Simon J Evenett,

Date Published

Thu, 06/14/2012

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Débâcle: The 11th GTA Report

by Simon J Evenett

Published 14 June 2012

 

Download the report from the Global Trade Alert website here.

 

 

Tags
protectionism, Global Trade Alert, GTA

Débâcle: The 11th GTA report on protectionism

Simon J Evenett 14 June 2012

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In recent weeks official bodies such as the World Trade Organisation and the European Commission as well as leading private sector associations – the International Chamber of Commerce (ICC) and the so-called B20 group of business leaders – have made strong statements concerning rising protectionism in the run up to the G20 summit in Los Cabos, Mexico.

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Topics:  Institutions and economics Politics and economics

Tags:  WTO, European Commission, Global Trade Alert, ICC

Trade Tensions Mount: The 10th GTA Report

Simon J Evenett,

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Mon, 11/21/2011

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Trade Tensions Mount: The 10th GTA Report

by Simon J Evenett

Published 21 November 2011

Download the report from the Global Trade Alert website here.

 
Tags
protectionism, Global Trade Alert, GTA

Mounting tensions pose a test for world trade

Simon J Evenett interviewed by Viv Davies,

Date Published

Fri, 11/25/2011

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See Also

Read the transcript of this interview here.

Read the Report here: 10th Global Trade Alert report

Transcript

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<p><a name="ts"></a><b>Viv Davies</b>: &nbsp;Hello and welcome to Vox Talks, a series of audio interviews with leading economists from around the world. I am Viv Davies from the Centre for Economic Policy Research. It's the 24th of November 2011 and I am speaking to Professor Simon Evenett of St. Gallen University about the recently published 10th Global Trade Alert report titled &quot;Trade Tensions Mount&quot;. The report's findings suggest that the protectionist threat to the world trading system is probably now as significant as it was in the first half of 2009, when such concerns were at their height.</p>
<div style="margin-bottom:11.0pt;">Evenett suggests that there has been a significant resort to the use of non‑tariff barriers and more murky forms of protectionism, and that countries continue to circumvent WTO rules. He concludes that policymakers have good reason to be seriously concerned in view of the likelihood of a deteriorating macroeconomic climate.</div>
<div style="margin-bottom:11.0pt;">I began the interview by asking Simon whether we've seen a significant rise in protectionism since the publication of the last GTA report in July 2011, just four months ago.</div>
<div style="margin-bottom:11.0pt;"><b>Simon Evenett</b>: &nbsp;I am afraid we have. The third quarter of 2011 saw no less than 72 protectionist measures implemented and has an early reading on that level of protectionism that's exceptionally high. Normally we revise up our estimates of the protection quarter by quarter, and 72 is a very high initial reading comparable to some of the worst quarters in 2009 when protectionist fears were at the highest.</div>
<div style="margin-bottom:11.0pt;"><b>Viv</b>: &nbsp;And what impact has the slow growth and recessionary environment in Europe generally had on the region's trade with the rest of the world, and what are the likely implications of that?</div>
<div style="margin-bottom:11.0pt;"><b>Simon</b>: &nbsp;Well the European downturn is leading to less exports from the rest of the world to Europe and that of course is making other countries more defensive in terms of their trade policies. We haven't seen any big uptick in European protectionism, certainly not from the European Commission. We are now seeing beginnings of financial protectionism in Europe. Recently, Austria instructed its banks to cut back on the amount of lending to Eastern Europe, and this of course will diminish borrowing opportunities in those countries and will tip those countries' economies down towards a recession as well.</div>
<div style="margin-bottom:11.0pt;"><b>Viv</b>: &nbsp;So wouldn't it be expected, given the current climate of austerity coupled with the sort of domestic pressures that many governments are facing in Europe and around the world, that the natural reaction of those governments is to turn inwards and to protect and support national industries and jobs?</div>
<div style="margin-bottom:11.0pt;"><b>Simon</b>: &nbsp;I think in times like this, governments are more inclined towards protectionism. This is unfortunate because often the short‑term measures which they take aren't particularly effective and end up costing their economies quite a lot of money, but that has been the tendency in the past, and I think it will repeat this time around as well.</div>
<div style="margin-bottom:11.0pt;"><b>Viv</b>: &nbsp;And could you give us a sense of the numbers involved in terms of the increase in trade protectionist measures that have been reported and analyzed through GTA in the last few months?</div>
<div style="margin-bottom:11.0pt;"><b>Simon</b>: &nbsp;Yes, well as I said earlier, the third quarter numbers are very high in terms of reported protectionism, but this follows findings of over 100 new measures since our last report in July, and revisions are upwards for the first quarter of 2011 and the last quarter of last year. So it all points to a picture of a deteriorating climate for protectionism from about the middle of the last year. Formally, I think we found 199 new measures in the GTA database, and as I said last year 100 of them were almost certainly protectionist, and then if you add in the ones which are likely to be protectionist, you get well over the 100 number.</div>
<div style="margin-bottom:11.0pt;"><b>Viv</b>: &nbsp;And what kind of measures are being implemented the most and which countries or regions are most responsible?</div>
<div style="margin-bottom:11.0pt;"><b>Simon</b>: &nbsp;There is a variety of measures being implemented. One thing which is important to note is that only a fraction of the recent protectionist measures are actually anti‑dumping measures or tariff increases, and that's where most researchers unfortunately focus their attentions. Instead, we've seen actually quite a number of non‑tariff barriers be raised, more murkier forms of protectionism resorted to, including different types of widespread industrial policy initiatives.</div>
<div style="margin-bottom:11.0pt;">So, Brazil for example, had a very wide-ranging industrial policy initiative that it announced last month. It also announced new restrictions on foreigners buying and selling different types of land and other assets in Brazil. So we've seen the non‑traditional trade measures or non‑traditional protectionism increase substantially.</div>
<div style="margin-bottom:11.0pt;"><b>Viv</b>: &nbsp;And are we seeing any signs of trade liberalising measures around the world?</div>
<div style="margin-bottom:11.0pt;"><b>Simon</b>: &nbsp;There has been some trade liberalisation and we mustn't discount that. Countries are still trying to compete for foreign direct investment and to encourage parts and components trade. So we do see some liberalisation taking place. Since July of 2011, we've found 55 measures, which were either neutral towards trade or liberalising, and so there is still a fair amount of measures which aren't necessarily protectionist being implemented, but unfortunately the number of protectionist measures are outnumbering the number of liberalising measures between two- to three-to-one.</div>
<div style="margin-bottom:11.0pt;"><b>Viv</b>: &nbsp;And what are the significant trends, if any, in protectionist policies has GTA become aware of?</div>
<div style="margin-bottom:11.0pt;"><b>Simon</b>: &nbsp;Well, I am afraid it is more the continuation of trends we've identified for some time, which is the resort to measures which are not very well disciplined by WTO rules or measures where there are no WTO rules whatsoever. And one of the trends that the GTA has founded in this last crisis, governments have circumvented their WTO obligations. They haven't broken them. They just found ways around WTO rules or they've concentrated their efforts in policies where there are no WTO rules, and I think that's a fundamental lesson for policymakers going forward.</div>
<div style="margin-bottom:11.0pt;">Previous bursts of protectionism, whether it's the 1930s or the 1980s, saw exactly the same phenomenon, and we've seen it this time around as well, which is that international trade rules only go so far in limiting protectionism.</div>
<div style="margin-bottom:11.0pt;"><b>Viv</b>: &nbsp;And how would you describe some of the kind of relations between the world's major trading partners right now, like China and the US for example?</div>
<div style="margin-bottom:11.0pt;"><b>Simon</b>: &nbsp;I think there has been a worrying deterioration in the trade relations between the major players. We've seen very nasty disputes between China and the United States develop in the area of solar power. We've also seen similar concerns raised by the United States and Europe with respect to India's programs in environmentally sensitive sectors. We've also seen America assert that China has nearly 200 subsidy programs employed during the crisis, and the Chinese admit to implementing just under 100 of them, if that was a series of counter submissions to the WTO.</div>
<div style="margin-bottom:11.0pt;">So what we've is actually an escalation in trade tensions between the larger trading powers. In short, the trade concerns are not being as contained as we might have hoped or as was the case at the turn of the last year.</div>
<div style="margin-bottom:11.0pt;"><b>Viv</b>: &nbsp;And so what do you say the policy implications of your findings are, Simon, and how optimistic are you that things can improve?</div>
<div style="margin-bottom:11.0pt;"><b>Simon</b>: &nbsp;The policy implications are several-fold. First, the call for vigilance and for greater tenacity in standing up to protectionism still stands. The risks I think of a downside for the economy are higher, and so I think the risk of a protectionist upswing is higher, and this is where the defenders of free trade really do need to be at their most vigilant. This is going to require support for business associations, the media and academics and the like in order to try and point out the alternatives to protectionist policies.</div>
<div style="margin-bottom:11.0pt;">The second set of implications has to do with how we manage disputes between the big trading partners, and I think they really want to think very hard before they start raising disputes which could spiral out of control and begin to perhaps start a process of unwinding the measures that they put in the crisis rather than trying to litigate directly at the WTO.</div>
<div style="margin-bottom:11.0pt;">And thirdly, we need to start appreciating the limited role that multilateral trade disciplines have played in curbing protectionism and start thinking about what new WTO rules we need in order to prevent this type of outbreak from happening again.</div>
<div style="margin-bottom:11.0pt;"><b>Viv</b>: &nbsp;And you are optimistic for the future, Simon?</div>
<div style="margin-bottom:11.0pt;"><b>Simon</b>: &nbsp;I am not particularly optimistic because I feel the macroeconomic situation in Europe will get a lot worse. Of course, macroeconomics is well beyond GTA's remit, but if the experts in that field are to be believed, then we are looking to a very grim 2012, and the world economy may find itself under considerable strain. For that reason, I am not so optimistic that protectionism will be able to be kept in line over the next 12 months, and all the more reason why policymakers and others need to stand up for an open trading system.</div>
<div style="margin-bottom:11.0pt;"><b>Viv</b>: &nbsp;Simon Evenett, thanks very much for taking the time to talk to us.</div>
<p><span style="font-size: small;"><b>Simon</b>: &nbsp;Thank you. </span></p>
<p>&nbsp;</p>

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Topics

International trade
Tags
protectionism, Global Trade Alert

Related Article(s)

Resolve against protectionism weakens since the Seoul G20 Summit: The 9th Report of the Global Trade Alert Protectionism backfires on FDI Is protectionism dying? Murky protectionism: How big an issue? Crisis protectionism: The observed trade impact Protectionism on the eve of the Seoul G20 summit Tensions Contained... For Now: The 8th GTA Report Managed Exports and the Recovery of World Trade: The 7th GTA Report Africa resists the protectionist temptation: The fifth Global Trade Alert report The unrelenting pressure of protectionism: Global Trade Alert's third report Broken Promises: a G20 Summit Report by Global Trade Alert The collapse of global trade, murky protectionism, and the crisis: Recommendations for the G20
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Trade tensions mount

Simon J Evenett 21 November 2011

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The 10th Global Trade Alert report documents several factors that together imply that the protectionist threat to the world trading system is probably as significant as it was in the first half of 2009, when such concerns were last at their peak. In our last report, published in July 2011, concerns were raised that a deteriorating macroeconomic climate would lead to greater protectionism. This fear has come to pass.

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Topics:  International trade

Tags:  protectionism, Global Trade Alert

Resolve against protectionism weakens since the Seoul G20 Summit

Simon J Evenett 20 July 2011

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In 2011 the world economy has been buffeted by a number of developments that were not foreseen at the time of the Seoul G20 Summit. Growing evidence of a stalled US economic recovery – coupled with the consequences of the Japanese earthquake in early 2011 and stubbornly-high inflation rates in emerging markets leading their governments to slow down growth – have resulted in many forecasters lowering their expectations about global economic growth this year.

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Topics:  International trade

Tags:  G20, protectionism, Global Trade Alert

Argentina’s border emergency-kit in times of global crisis: In case of fire, break the glass

Demián Dalle, Federico Lavopa 11 January 2011

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After the outbreak of the global financial and economic crisis in mid-2008, unilateral and discriminatory trade measures multiplied in number. Developed countries put in place gigantic stimulus packages, some high- and middle-income countries set up catchall tariff and non-tariff measures, while those that had been applying import-duty rates below bound levels raised them up to bound ceilings.

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Topics:  International trade

Tags:  protectionism, Global Trade Alert, Argentina

Crisis protectionism: The observed trade impact

Brad McDonald, Christian Henn 22 December 2010

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The global financial crisis brought with it fear. No small amount of it was focused on the possibility of extreme 1930s-style protectionism. Thanks to an ambitious macroeconomic policy response and strong global trade institutions, the worst fears have been avoided, at least for the time being (Eichengreen and Irwin 2009).

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Topics:  Global crisis International trade

Tags:  international trade, protectionism, Global Trade Alert

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