By Roberto Azevêdo
GENEVA, Jun 29 2015 (IPS)

The latest report by the World Trade Organisation (WTO) on G20 trade measures shows a slight deceleration in the application of new trade-restrictive measures by G20 economies, with the average number of such measures applied per month lower than at any time since 2013.

According to the thirteenth such WTO report, issued on Jun. 15, G20 economies had applied 119 new trade-restrictive measures since mid-October 2014, an average of 17 new measures per month over the period.

Roberto Azevêdo

A slight decrease in the number of trade remedy investigations by G20 economies has also contributed to this overall figure.

But it is not yet clear that this deceleration will continue and the WTO calls on G20 leaders to show continued vigilance and reinforced determination towards eliminating existing trade restrictions.

The longer term trend remains one of concern, with the overall stock of trade-restrictive measures introduced by G20 economies since 2008 continuing to rise.

Of the 1,360 restrictions recorded by this exercise since 2008, less than one-quarter have been eliminated, leaving the total number of restrictive measures still in place at 1,031. Therefore, despite the G20 pledge to roll back any new protectionist measures, the stock of these measures has risen by over seven percent since the last report.

The broader international economic context also supports the need for continuing vigilance and action. According to the WTO’s most recent forecast (14 April 2015), growth in the volume of world merchandise trade should increase from 2.8 percent in 2014 to 3.3% percent 2015 and further to four percent in 2016, but remaining below historical averages.“The longer term trend [vis-à-vis protectionism] remains one of concern, with the overall stock of trade-restrictive measures introduced by G20 economies since 2008 continuing to rise”

The overall response to the 2008 financial crisis has been more muted than expected when compared with previous crises. The multilateral trading system has proved an effective backstop against protectionism.

During this period, G20 economies also continued to adopt measures aimed at facilitating trade, both temporary and permanent in nature.

These developments confirm that G20 economies overall have shown a degree of restraint in introducing new trade restrictions. However, it is not yet clear that the deceleration in the number of measures introduced will continue in future reporting periods. It is also relevant that the slow pace of removal of previous restrictions means that the overall stock of restrictive measures is continuing to increase.

The broader international economic context also supports the need for continuing vigilance and action.

Trends in world trade and output have remained mixed since the last monitoring report, as merchandise trade volumes and GDP growth picked up in the second half of 2014 but appear to have slowed in the first quarter of 2015.

Economic activity remained uneven across countries as the United States and China slowed in the first quarter, while growth in the Euro area and Japan picked up.

Plunging oil prices and strong exchange rate fluctuations, including an appreciation of the U.S. dollar and a depreciation of the Euro contributed uncertainty to the economic outlook.

Lower prices for oil and other primary commodities were expected to provide a boost to importing economies, but reduced export revenues weighed heavily on commodity exporters.

In light of these developments, our most recent forecast (14 April 2015) predicted a continued moderate expansion of trade in 2015 and 2016, although the pace of recovery was expected to remain below historical averages.

In the area of government procurement, work from the Organisation for Economic Cooperation and Development (OECD), identifying 65 measures implemented since the financial crisis, suggests that discriminatory government procurement policies have become increasingly popular and potentially affect 423 billion dollars of government procurement in the implementing economies.

This report shows that G20 economies implemented 48 new general economic support measures during the period under review, with the majority targeting the manufacturing and agricultural sectors through various incentive schemes, often, but not exclusively, in the context of exports.

The overall assessment of this thirteenth report on G20 trade measures is that the continuing
increase in the stock of new trade-restrictive measures recorded since 2008 remains of concern in the context of an uncertain global economic outlook.

Individually and collectively, the G20 must show leadership and deliver on the pledge to refrain from implementing new measures taken for protectionist purposes and to remove existing ones. (END/COLUMNIST SERVICE)

Edited by Phil Harris   

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

Excerpt:

President Rafael Correa Delgado of Ecuador does not mince words when it comes to development. ”Neoliberal policies based on so-called competitiveness, efficiency and the labour flexibility framework have helped the empire of capital to prosper at the cost of human labour,” he told a crowded auditorium at the 15th Raul Prebitsch Lecture.

The Raul Prebitsch Lectures, which are named after the first Secretary-General of the U.N. Conference on Trade and Development (UNCTAD) when it was set up in 1964, allow prominent personalities to speak to a wide audience on burning trade and development topics.

This year, President Correa took the floor on Oct. 24 with a lecture on ‘Ecuador: Development as a Political Process’, which covered efforts by his country to build a model of equitable and sustainable development, “Neoliberal policies based on so-called competitiveness, efficiency and the labour flexibility framework have helped the empire of capital to prosper at the cost of human labour” – President Rafael Correa Delgado of Ecuador

Development, he told his audience, “is a political process and not a technical equation that can be solved with capital” and he offered a developmental paradigm that seeks to build on “people-oriented” socio-economic and cultural policies to improve the welfare of millions of poor people instead of catering to the “elites of the empire of capital”.

Proposing a “new regional financial architecture”, he said that “the time has come to pool our resources for establishing a bank and a reserve fund for South American countries to pursue people-oriented developmental policies in our region” and reverse the “elite-based”, “capital-dominated”, “neoliberal” economic order that has wrought havoc over the past three decades.

“We need to reverse the dollarisation of our economies and stop the transfer of our wealth to finance Treasury bills in the United States,” Correa said. “South American economies have transferred over 800 billion dollars to the United States for sustaining U.S. Treasury bills and this is unacceptable.”

According to Correa, people-centric policies in the fields of education, health and employment in Ecuador have improved the country’s Human Development Index (HDI) since 2007. The HDI is published annually by the U.N. Development Programme (UNDP) is a composite statistic of life expectancy, education and income indices used to rank countries into tiers of human development.

Ecuador’s HDI value for 2012 is 0.724 – in the high human development tier – positioning the country at 89 out of 187 countries and territories, according to UNDP’s Human Development Report (HDR) for 2013.

Explaining his country’s achievement, Correa said that public investments involving the creation of roads, bridges, power grids, telecommunications, water works, educational institutions, hospitals and judiciary have all helped the private sector to reap benefits from overall development.

“At a time when Hooverian depression policies based on austerity measures are continuing to impoverish people while the banks which created the world’s worst economic crisis in 2008 are reaping benefits because of the rule of capital,  Ecuador has successfully overcome many hurdles because of its people-oriented policies,”  he said.

Correa argued that by investing public funds in education, which is the “cornerstone of democracy”, particularly in higher education or the “Socrates of education”, including special education projects for indigenous and Afro-Ecuadorian people, it has been shown that society can put an end to capital-dominated policies.

“We need to change international power relations to overcome neocolonial dependency,” Correa told the diplomats present at the lecture.  “Globalisation is the quest for global consumers and it does not serve global citizens.”

The Ecuadorian president argued that developing countries have secured a raw deal from the current international trading system which has helped the industrialised nations to pursue imbalanced policies while selectively maintaining barriers.

He urged developing countries to implement autonomous industrialisation strategies, just as the United States had done over two centuries ago.

Developing countries, he said, must pursue ”protectionist policies as the United States had implemented under the leadership of Alexander Hamilton [U.S Secretary of the Treasury under first president George Washington] when it closed its economy to imports from the United Kingdom.”

Citing the research findings of Cambridge-based economist Ha-Joon Chang in his book ‘Bad Samaritans:  The Myth of Free Trade and the Secret History of Capitalism’, Correa said that protectionist policies are essential for the development of developing countries.

He stressed that developing countries, which are at a comparable of stage of economic development as the United States was in Hamilton’s time, must devise policies that would push their economies into the global economic order.

The strategy of “import-substitution-industrialisation [ISI]” and nascent industry development is needed for developing countries, he said. “However, the developing countries must ensure proper implementation of ISI strategies because governments had committed mistakes in the past while implementing these policies.”

“Free trade and unfettered trade,” continued Correa, is a “fallacy” based on the Washington Consensus and neoliberal economic policies. In fact, while the United States and other countries preach free trade, they have continued to impose barriers on exports from developing countries.

Turning to the global intellectual property rights regime, which he said is not helpful for the development of all countries, Correa said that these rights must serve the greater public good, suggesting that the current rules do not allow equitable development in the sharing of genetic resources, for example.

In this context, he said that governments must not allow faceless international arbitrators to issue rulings that would severely undermine their “sovereignty” in disputes launched by transnational corporations.

President Correa also called for the free movement of labour on a par with capital. “While capital can move without any controls and cause huge volatility and damage to the international economy, movement of labour is criminalised. This is unacceptable and it is absurd that the movement of labour is met with punitive measures while governments have to welcome capital without any barriers.”

He was also severe in his criticism of the financialisation of the global economy which cannot be subjected to the Tobin tax. “Nobel Laureate James Tobin had proposed a tax on financial transactions in 1981 to curb the volatile movement of currencies but it was never implemented because of the power of the financial industry,” he argued.

Concluding with a hint that his government’s social and economic policies are paving the way for the creation of a healthy society, Correa quipped: “The Pope is an Argentinian, God may be a Brazilian, but ‘Paradise’ is in Ecuador.”

(Edited by Phil Harris)

Import restrictions to strengthen national industry have brought the Argentine government problems in international relations. Credit: Marcela Valente/IPS

By Marcela Valente
BUENOS AIRES, Sep 16 2013 (IPS)

To maintain its trade surplus, Argentina continues to control imports – a strategy that has bolstered its national industry but is questioned by importers, partners in the Mercosur trade bloc, and rich countries.

“What we have in Argentina today is a war to protect employment, which is why trade has to be managed,” textile businessman Marco Meloni told IPS by phone from Italy, where he was selling his shirts under the “Premium” trademark.

“It’s not that we aren’t importing; quite the opposite. We’re much better clients for the world than we were 10 years ago. But we have to be careful with Asia’s global super-production,” he said.

He said that in his travels abroad to sell his products, he constantly runs into shirts manufactured at very low cost in Asia.

“My shirts are competitive in the United States, Canada, Mexico, Brazil, Portugal and Spain,” Meloni said.

But in many of those countries he does not compete with local industry but with the flood of low-cost merchandise from China or Bangladesh.

“Shirts made with slave labour cost less than half,” he complained.

Meloni, who is president of the textile association Fundación Pro Tejer, added that a worker in a textile factory in Argentina earns around 1,400 dollars a month and costs the company 1,800 with the payments to social security, etc. In other countries the cost can be 40 times lower, he said.

A lack of access to international financing since the late 2001 massive debt default and the loss of monetary reserves led the centre-left government of Cristina Fernández to adopt measures designed to maintain a favourable balance of trade.

Argentina’s foreign reserves shrank from 52.6 billion dollars in January 2011 – a historical peak – to just over 36 billion today, according to the Central Bank.

When Néstor Kirchner – President Fernández’s husband and predecessor, who died in 2010 – first took office in May 2003, foreign reserves stood at less than 12 billion dollars.

So far Fernández has managed to maintain a positive trade balance by restricting imports and the sale of dollars.

Argentina’s trade surplus reached five billion dollars in the first half of the year, according to Argentina’s Chamber of Commerce. But this was 26 percent below the level reached in the first half of 2012.

For some importers, the alternative accepted by the authorities is to compensate imports with exports. That is how growing agreements between producers were reached to, for example, export wine in exchange for importing motorcycle parts.

Argentina’s efforts to maintain the balance between exports and imports have drawn complaints from the EU. On Sep. 2, the European Commission – the EU executive – issued a report putting Argentina in first place among emerging economies in terms of protectionist policies.

Protests have also come from the United States and from Argentina’s partners in the Mercosur (Southern Common Market) trade bloc, especially Uruguay and Brazil.

In its latest edition of Latin America and the Caribbean in the World Economy, the Economic Commission for Latin America and the Caribbean (ECLAC) also said Argentina was experiencing its most active period in terms of trade disputes with the United States, the EU and Japan.

Argentina has responded to such complaints with similar protests against barriers to its sales of beef and lemons to the United States and hurdles to its biodiesel exports to the EU.

Argentina’s exports have risen sharply over the last decade, as have imports, despite the regulations. Imports increased from 13.8 billion dollars in 2003 to 68.5 billion dollars in 2012.

But the Fernández administration’s trade policies have drawn complaints both within and outside Argentina.

Importers complain about the red tape involved in filling out a mandatory “anticipated sworn declaration of imports”, which must be approved by the government.

“Without access to external finance, and without a significant influx of foreign investment, Argentina needs a strong trade surplus, which translates into strict import controls,” economist Mauricio Claveri, coordinator of foreign trade in the Abeceb consultancy, told IPS.

In the past, trade restrictions focused on sensitive sectors, in order to boost reindustrialisation. But this policy now has “a double role to play,” he said.

On one hand, it protects certain industries. But it regulates imports, above all, he said. This country has to meet debt service payments in dollars and is not allowed to issue new bonds, due to the late 2001 default.

The regulations are good for companies that produce for the domestic market, said Claveri. But they do not help attract investment from multinational corporations, which worry about being unable to import inputs, he added.

This policy, which the Foreign Trade Secretariat itself describes as temporary because of Argentina’s obligations under the World Trade Organisation, generates uncertainty. “A lot of thought goes into any decision to increase scale of production,” Claveri said.

But it also benefits sectors that are protected from cheap imports, such as the toy, footwear, textile, machinery and tool industries, he acknowledged.

Meloni admitted that there were difficulties in purchasing machinery abroad, and said exporters were forced to compensate for the purchases with exports. But he stressed that the number of workers in his textile company has grown from 30 in 2002 to 120 today.

Economist Ariel Schale, an adviser to the Fundación Pro Tejer, explained to IPS that, thanks to Argentina’s trade policies, the local textile industry saw its exports grow fourfold over the past decade.

Schale noted that production doubled in the last 10 years, and that the total number of people employed by the industry rose from 240,000 in 2002 to the current 400,000. “And we have done that by importing fabric and machinery, because the entry of merchandise is not blocked,” he said.

Another sector that has grown in these conditions is the motorcycle industry. In 2002, some 30,000 motorcycles were sold in Argentina, many of them imported, compared to 800,000 sold this year, all manufactured here.

“They are assembled in this country, but they contain only 30 percent nationally-made parts,” the executive director of the Argentine chamber of motorcycles, Daniel Tigani, told IPS.

Tigani, who defends the protective measures, said business representatives meet every three months with authorities from the Foreign Trade Secretariat to establish what can be imported. He added that other government agencies also take part in these decisions, to keep domestic prices from skyrocketing.

“Imports don’t generate jobs; local production does,” he underlined. “And that doesn’t mean we don’t import, because most of the motorcycle parts are purchased abroad. In 2012, more than 650,000 were sold, and this year the number will grow 20 percent.”

Tigani also pointed out that in 2003 there was virtually no local manufacturing of bicycles. But safety standards similar to those of developed countries were adopted, so this aspect can no longer be cited as a hurdle to trade.

“That revived the industry,” he said. “Today one million bicycles are sold in this country, and only two percent of them are imports.”

Some 3,000 direct jobs were created in the bicycle industry, he said. And if the parts market is included, the benefits reach around 15,000 families engaged in small businesses, he added.

The European Union is calling for protectionist measures against strong emerging economies. Credit: Jim Killock/CC-BY-SA-2.0

By Julio Godoy
BERLIN, Sep 28 2012 (IPS)

For many years, the European Union (EU) and its individual member states counted among the strongest advocates for free trade, arguing that it would boost economic growth and welfare both at home and abroad.

But since the global financial crisis in 2007 triggered a severe sovereign debt crisis and a general economic downturn across most European countries, EU institutions, individual governments and representatives of some industrial sectors are calling for protectionist measures, especially against competitors from strong emerging countries such as Brazil, India, the People’s Republic of China, and South Korea.

The European turnabout on international trade became evident this summer, when struggling German solar panel manufacturers and the new, Leftist French government of François Hollande urged the EU to launch protectionist measures against Chinese competitors and to suspend a recent free trade agreement (FTA) with South Korea.

French minister for industrial renewal, Arnaud Montebourg, denounced in early August “the unacceptable dumping (by) Korean auto manufacturers such as Hyundai and Kia, which are disloyal competitors to the French auto industry”.

“Europe may open its markets, but it should not give herself up” to disloyal economic competitors, Montebourg argued.

An assessment of current industrial trends suggests that Europe is indeed lagging.

The legendary French automaker Peugeot accumulated losses of 1.2 billion euros between July 2011 and June 2012, and has announced layoffs of more than 8,000 workers in France, and industrial relocations to Eastern European countries.

Meanwhile, Korean automakers have substantially increased their exports to Europe. According to European Commission figures released on Aug. 29, exports to France by Korean automobile maker Hyundai grew by 48 percent during the first half of 2012.

At the same time, European automobile exports to Korea fell by 13 percent in the same period.

However, these figures alone do not make a strong enough case for Europe’s calls for protectionism. According to the South Korean car maker Hyundai, well over half of the 400,000 automobiles it sold in Europe between January and July this year were actually fabricated in EU countries such as the Czech Republic.

Additionally, the FTA led only to a marginal fall of customs duties for small South Korean autos, from 10 percent before the agreement to 8.3 starting July 2011, and to 6.6 percent since July 2012.

Still, since other French industrial players – from manufacturers of ships and high-speed trains to constructors of nuclear power stations – have recently suffered severe contract losses against South Korean competitors, the latter has become the embodiment of a strong, allegedly disloyal competitor.

Additionally, according to the World Economic Forum’s newest global competitiveness report, South Korea’s economic performance in 2011 surpassed that of France.

But South Korea is not the only formidable threat.

Twenty-five European producers, led by German solar panel manufacturers facing bankruptcy due a strong Sino presence in the market, asked the EU to launch an anti-dumping measure against Chinese competitors, arguing that the government in Beijing gives local manufacturers illegal subsidies and allows them to sell their products below actual costs of production.

Such practices, according to the group EU ProSun – which represents the majority of solar industrial production in the region – constitute “unfair distortions” of international trade.

The World Trade Organisation itself allows governments to act against dumping where there is genuine injury to the competing domestic industry.

In 2011, the Chinese solar panel industry sold 60 percent of its global exports in Europe. On Sept. 6, the EU announced it would respond to ProSun’s demand by launching an official investigation into Chinese subsidies and trade practices.

Protectionism on the rise

The EU has also developed a new international trade concept, which, according to economic experts and analysts, clearly includes new protectionist measures likely to hurt emerging developing countries such as India, Brazil and South Africa (IBSA) as well as China, South Korea, and Vietnam.

In an analysis released last July, ‘The next decade of EU trade policy: Confronting global challenges?’, the London-based Overseas Development Institute (ODI warned, “There is a major concern that the EU is moving towards protectionism.”

The ODI paper analyses the proposals on international trade approved by the European Commission last May. This new agenda, expected to come into force in January 2014, foresees a reform of the EU’s generalised system of preferences (GSP), which has ruled European trade policies towards developing countries since 1971.

According to the new rules, several strong developing countries would be excluded from the GSP. Additionally, the new GSP would establish new standards on environment, labour, and social rules to be respected by developing countries trading with the EU.

In its analysis of this new GSP, the ODI report warns that the number of countries eligible for preferential trade with the EU will fall from 175 at present to about 80 in the near future.

Dirk Willem te Velde, head of the ODI’s International Economic Development Group and coordinator of the ODI report, is concerned that “the EU will retreat into protectionism, especially vis-à-vis the so called BRICS countries (Brazil, Russia, India, China and South Africa) with a range of trade-related economic policies.”

“Clearly, the GSP reform is likely to impose more trade barriers on a range of products and countries when they are not benefiting from a reciprocal Free Trade Agreement (FTA) with the EU,” te Velde added.

“This does not offer the best value for EU consumers or developing country exporters,” he said.

Christopher Stevens, co-author of the study, said the new GSP regime would exclude all so-called Upper Middle Income Countries (UMICs) from the GSP, even for products where these countries are not competitive.

“The justification for the change is that the UMICs are sufficiently well integrated into the world economy (that they) do not need the GSP; and it will ease pressure on less competitive developing countries and hence focus the GSP preferences on the countries most in need,” Stevens added.

But neither claim stands up well to examination, Stevens argued. “UMICs are not a very close proxy for ‘the most competitive developing countries’,” he wrote in the report, concluding with some very telling examples of the coming discriminations: “Under the new regime, China will remain in the GSP but Cuba will be excluded; Indonesia and Thailand will remain in, but Gabon and Namibia will be out.”

(END)