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Report Finds Pace of New Trade Restrictions Unchanged

Monday, October 31, 2011
Sandler, Travis & Rosenberg Trade Report

A joint report from the World Trade Organization, the Organization for Economic Cooperation and Development and the United Nations Conference on Trade and Development finds that continuing global economic struggles are “testing the political resolve of many governments to abide by the G-20 commitment to resist protectionism.”

The imposition of new trade restrictive measures slackened little over the last six months, the report states, falling only to 108 from 122 during the previous semiannual period. Those imposed most recently affected mainly machinery and mechanical appliances, articles of iron and steel, electrical machinery and equipment, organic chemicals, plastics, and manmade staple fibers. There has also been a continuing upward trend in export restrictions, mainly affecting food products and some minerals. The report repeats an earlier warning that, in the absence of clearer multilateral disciplines, governments may be tempted to use export restrictions to alter to their advantage the relative price of their exports or to expand production by domestic industries.

The report also finds no evidence that efforts have been stepped up to remove existing trade restrictive measures. Out of a total of 674 measures that can be considered as restricting or potentially restricting trade taken since October 2008, only 19% have been eliminated. According to the report, the removal rate continues to be principally determined by the termination of trade remedy actions or the end of temporary tariff increases. As a result, the cumulative share of world trade affected by new trade restrictions since the start of the financial crisis continues to rise, to over 2% today.

Perhaps more worrisome, “there is a growing perception that trade protectionism is gaining ground in some parts of the world as a political reaction to current local economic difficulties – difficulties that trade restrictions are very poorly equipped to resolve, such as the case of currency fluctuations and macroeconomic imbalances.” For example, the report finds “various signs of a revival in the use of industrial policy to promote national champions and of import substitution measures to back up that policy.” However, these types of unilateral actions “will not solve global problems” and in fact “may make things worse by triggering a spiral of tit-for-tat reactions in which every country will lose.”

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