On Global Trade Alert

4 September 2009
Résidence Palace, Brussels.

Simon Evenett: Thank you Joe for this kind introduction. Thanks also to The German Marshall Fund for hosting this event. Let me also thank my two discussants in advance for taking time out of their busy schedules to join us.

Today, I'd like to describe to you the Global Trade Alert, which is an independent trade policy monitoring initiative that has been underway for almost three months now, which seeks to offer a comprehensive view of the trade and commercial implications of state measures taken during the crisis. That is the goal of the Global Trade Alert.

Why do we need another monitoring exercise? I think there are a number of reasons for this, but perhaps the most important motivating reason is a desire not to see a rerun of the 1930s when governments undertook "beggar thy neighbor" policies with great glee it seems. Nowadays, I think we recognize the lessons of the '30s and the need to prevent this from happening, but the forms of protectionism have changed dramatically. And now instead of overt tariff increases, we are seeing many forms of "murky" protectionism and so we need to monitor protection in I think a much more comprehensive manner and see when state measures, sometimes even legitimate state measures are distorted in their implementation. And so what we seek to provide is the information which hopefully others will pick up on, like the media, like business leaders, like political leaders, officials and they can apply the peer pressure to make sure that we don't have a 1930s outcome.

There is another historical precedent which is perhaps less well known and that has to do with the early 1980s when we had a very sharp downturn then and there were at that time exactly the same concerns - the governments would resort to widespread opaque forms of protectionism. And at that time, the GATT Secretariat put together an extremely far reaching monitoring exercise, and in fact actually far more far reaching than the current WTO exercise.

And with that historical precedent in mind, I and others designed an independent monitoring initiative, which we think has a number of desirable characteristics. First, we hope by being independent of government this will add to our credibility. Secondly, we don't confine ourselves to the WTO accords; those accords are important but they don't cover all of the potential areas of discriminatory behavior. Third, we have the processes open to third parties to contribute and this is very important because many of the official processes do not have a direct role for business or for civil society.

And one of the things we found about the Global Trade Alert is - and I will show you how to do this later - the very fact that any person can submit information to us which we will investigate is something that the business community has found particularly valuable. We also give governments a right to reply to any particular evaluation that we happen to make. And so that's another feature which was there in the 1980s and isn't there necessarily today.

Also, this is a web-based era. There is a no reason why we should wait three months for reports on protectionism. As news is found or as measures are investigated and found not to be protectionist, we can and should post that information on the web and make it instantly available for others to think about and digest. And so we have much shorter reporting cycles and in fact, we have a website which I think is fairly easy to use.

We also go to great lengths to try and intelligently compare across countries in terms of the use of different types of trade measures and in the impact of those trade measures. One of the things Global Trade Alert does, which no other monitoring exercise does, is identify which trading partners have been adversely affected by a state measure.

We try and identify those measures and we report on the website that information so that you can check not just what measures a country has taken, but what measures other countries are taking which are affecting your sector or your industry or your country. So, one can look at both sides, both the implementers and what you might call pejoratively the victims in the case of discriminatory measures.

Furthermore, the other feature which we have in the Global Trade Alert, which we think is desirable, is that there are many state policies which are announced, but have not yet been implemented, so these are pending measures which governments intend on taking, which could have implications for foreign commercial interests and we document those and put those on the website too. So you have a sense not only of what measures have been implemented, but what's in the pipeline. And I think I will show you some numbers which suggest that what's in the pipeline is actually rather significant at the moment compared to what has actually happened.

So, these are features of the Global Trade Alert, which I think distinguish it from other initiatives and I would argue complement other initiatives which have been underway.

The Global Trade Alert itself has been underway for less than three months. We have partners in every region of the world economy. We are about 25 to 30 part-time people working on the project. The initiative is coordinated by the Centre for Economic Policy Research in London and its Chief Executive Officer Stephen Yeo is here with us today and you will hear from him at the end of this event. CEPR, the Centre for Economy Policy Research, is the coordinator of this. The European monitoring is done actually in a research institute in Switzerland where I am based and so we have a multi-language team there working on monitoring what the European governments are up to and of course what goes on in Brussels.

We have a user-friendly website which I will show you soon, the Global Trade Alert - and here is a typo on this particular slide: it should say by the 3rd of September of this year we have investigated 311 state measures just to give you a sense of how that compares to the last WTO report investigated 87 measures over a three-month period. We have done 311 in a shorter period of time.

Each investigation is color coded using a traffic-light system. What we look for in the Global Trade Alert is not whether or not a measure is protectionist or not: no one could agree on what the definition of protectionism is. We also don't look at whether or not a measure is WTO legal or not because there is a separate process and a legitimate process for that. Instead, what we examine is whether or not a measure is discriminatory or is likely to discriminate against foreign commercial interests. So, for us, it is a discrimination test that we use and we look at foreign commercial interests broadly to include not just trade, investment, intellectual property and migrant workers as well.

And so we color code our measures green, amber and red. If it is red, it means that we believe the measure has been implemented and is almost certainly discriminatory. If it is green, we think it is a liberalizing measure or it has no adverse effects. If we give it an amber measure, it means one of two things, either it has been implemented and there is something suspicious about it, but we can't be absolutely sure; or the measure has been announced, hasn't been implemented yet, but when it is implemented, we are very worried that it will be discriminatory. So, that's how we cope with the measures which are in the pipeline which we think are worrying.

The website is updated every week or once or twice a week as new measures come in. Before the G20 Summit, you will see another 100 to 150 measures put on the website, mainly we will be incorporating the state aids and bailout cases into the website and this will I think further round out the database's utility.

This initiative will result in a number of reports. The next one will be before the G20 meeting in Pittsburgh. In that report, we will go through each G20 member to show what they have and have not been doing, whether they have been living up to that pledge, which you can remember from last November by governments committed not to engage in protectionist measures. The initiative initially will last 12 months and in next June we will decide whether or not to carry on doing it.

So, that tells you what the Global Trade Alert is and its main features. Let me summarize some of the main findings and then show you how to use the website and move on to my colleagues.

This next slide shows you two important sets of findings. In our database of the 311 measures that we have there, 160 measures which have been implemented. And of those 160, we think 99 are troubling; that is they are classified as red, we think they are discriminatory. They cover 1102 tariff lines. These are four-digit tariff lines, so that's almost the entirety of set of four-digit tariff lines, half of the sectors of the world economy have been affected by some form of discriminatory measure and 186 trading partners we think have been hit by these 99 red measures.

We also report the results with and without the trade defense measures - anti-dumping, countervailing duties, and the safeguards - because some people believe that they are ... There's a difference of opinion about whether or not they constitute discrimination or not. We put the results with and without, just in case you have a different view, or you have a view on this particular matter.

We have 99 measures that we have found which have been implemented which we believe are discriminatory. Then we also track the pending measures in the database.

The pending measures in the database - there are about 150 of them. And of those 150 we believe that 130 of them are potentially suspicious and, when implemented, could well be discriminatory. Those 150 measures in total which are pending, affect 150 trading partners in two-thirds of the sectors of the world economy.

So one of the big lessons just from this first table is that even if governments stopped announcing any discriminatory measures as of today, there are still a huge number of measures which are working through the pipeline which can affect foreign commercial interests around the globe over the next year or so. So we have to remember it's not just a matter of measures which have been implemented but also what is in the pipeline. As I'll show you, as far as European countries are concerned, what's in the pipeline is very, very large in terms of its potential impact.

One of the key lessons here is the Global Trade Alert is providing a forward-looking early warning system here and suggesting that the future may be as protectionist or discriminatory as the last nine to ten months have been.

On table three, what we have done here is to report for the 27 member states - this covers two pages - the number of measures which affect each member state and the classification of those measures, and how many foreign trading partners are responsible for those discriminatory measures where they apply, and also what pending measures are in the works. What we have found on this particular table is that, on average, there are about five times as many discriminatory measures which are harming EU member states' commercial interests than liberalizing measures, the green measures. So, the ratio of harmful measures to beneficial measures which foreign trading partners have taken is of the order of five to one, which really gives you a sense of just what a dangerous time this is in terms of attacking European commercial interests.

That five to one ratio varies a little bit across member states, but not much. In terms of the number of harmful measures which have been implemented against European member states - that's the red measures - they vary between eight for Malta, that's the lowest, up to 41 for Germany, pretty much in line with the country's size, and many of the large member states have at least 30 harmful measures taken against them. You can also identify how many trading partners are responsible for those harmful measures. It's roughly 20 in most cases; around 20 is the number.

When it comes to pending measures, the big lesson here is - and this is really where the last column of this table comes in - the number of pending measures which we are not convinced are green or non-harmful, that is liberalizing measures, the measures which are in the pipeline which are not liberalizing and potentially harmful for most member states, that number of measures which are in the pipeline represents between half and two-thirds of the harmful measures which they've already been hurt by.

In the case of Austria, Austria has already been hit by 27 measures against its foreign commercial interests. We believe that of the 21 pending measures facing Austria, 19 of them are worrying. In the case of Austria, if those 19 measures are actually implemented, we will see the number of times their commercial interests have been compromised rise to 46, which is more than a 50 percent increase, almost a two-thirds increase.

This gives you a sense that what is in the pipeline for most of the European Union member states is an increase in the number of measures which could harm their interests by 50 percent to 66 percent, one-half to two-thirds, which I think is a major finding of the work that we've done so far. I think this calls for a certain degree of vigilance on the part of European Union member states and the Commission as well.

We also include, by the way, information on the bottom of table three on some of the other groups of countries which are in the database. I've listed China here for the reason that it is the country which has faced the most measures which have hurt its commercial interests. China has faced 55 red measures, that is, 55 discriminatory measures against its exporters, investors, overseas workers, and the like. If you look, in the case of the Chinese, the pipeline for China is particularly grim. There are 79 measures which are underway, 75 of which we think are likely to be discriminatory. China may actually see a doubling of the number of discriminatory measures which are affecting its exports over the next year or so.

In the case of the United States, the United States is the second most hit country, 44 harmful measures implemented by 48 of its trading partners, and 23 additional measures in the works; so quite a substantial number of measures which are in the pipeline for the U.S. as well.

But, China really stands out as the target for a lot of these discriminatory measures.

We also report the results by jurisdiction responsible. Here, it's important for me to stress that as far as the EU is concerned, any measure taken by the Commission we also attribute to each member state. This is a consistent way that we try to count across member states. So, if we say for a country, like France here has taken 14 measures, that is the sum of the measures that France has taken plus the sum that the Commission has taken as well. So, that's how we count them here.

These numbers are rather lower in terms of measures mainly because the Commission has taken relatively few, and we're in the process of adding in all the national state aids and bailout cases. In the next week or so, this particular table will transform dramatically as we add in 100 or so state aid cases. So, these numbers for measures taken by the EU member states will rise dramatically.

I don't want to put too much emphasis on what the findings are here, but one big finding that we have found is that the reintroduction of export subsidies for dairy products is the one red case which the EC has reintroduced. These we believe have affected the 41 trading partners adversely, so this is a big measure in terms of impact on a number of trading partners.

In terms of measures reported, we've also compared them to other groups of countries, and on the second part of table four, we've reported the total number of measures taken by the G 8 and the G 20.

You may remember that the G-20 signed this pledge in November of last year not to introduce protectionist measures. In fact, since November of last year, which is the starting point for our work, we have found that the G-8 has introduced 68 discriminatory measures. You only have to wait on average five days and a G-20 country introduces a discriminatory measure, or to put it differently, someone breaks the pledge on average every five days, is our finding. These 68 measures have affected 176 of the G-20 trading partners and affected almost half of the tariff lines at the four-digit level. This gives you a sense of the degree of breach of this particular commitment, which was made last November. That type of information can be extracted from the database as well, and I'm sure there will be some attention given to that in the run-up to Pittsburgh.

Last table to share with you. You might be interested in what are the types of protection which are being undertaken over the last year, and this table summarizes all the different types of measures which have been taken by countries and the classification of them in our database.

Essentially, we see a large number of trade defense measures. We've just added a large number of them to the database to bring it up to date. As I've said to you, there will be another 120 or 130 bailout and state aid measures. Numerically speaking, those two measures stand out in terms of usage.

Tariff measures stand out especially for developing countries as areas of usage. But, I would like to point out that there are other ways of thinking about effect, all right? Not just counting the number of measures. You might be interested in how many trading partners were affected by different types of measures, how many tariff lines were affected and how many sectors were affected by all the different top forms of protection. And this is what is provided in the last three columns of this table and you can see that there are some measures, which have been introduced very rarely like export subsidies, which affect a large number of trading partners and tariff lines even though they affect a small number of sectors.

So, I think when one is thinking about the impact on trade, just counting the number of measures is too limiting, instead you can look at what's the impact on the number of trading partners, which are likely to be affected and the number of tariff lines and sectors affected as well. And we provide that information in a way which I think is comparable and potentially of interest. I think this particular table is of interest because it might make you ask the question what are the next set of trade disciplines we should be negotiating and are we sure that the current negotiating priorities of the EU are tackling the new forms of "murky" protectionism. And I think that value of table five is it might help for a rethink in this regard.

The next two slides I have just summarize most of the policy recommendations that I have put to you. I produced these slides after we produced the handout, which you have there. If you want the summary of policy recommendations, we are more than happy to send you the list, but essentially I've taken you through them orally.

The first finding, the number of times the EU member states have been hit by adverse measures outweighs the number of beneficial measures five to one. Most countries face a lot of adverse measures in the pipeline; that is the unimplemented state measures facing the EU member states are a real worry and this calls for I think vigilance in the period ahead.

We should not allow any views about green shoots or nascent economic recoveries to dissuade us from the importance of keeping protectionism under control in the next year or so. There is a lot of protectionism in the pipeline. All of this calls for lots of I think vigilance on the part of the EU, the Commission and the members of the EU, and also members of clubs like the G-20, but there are of course major international meetings and regional meetings where the EU could make its determination to hold the line on protectionism well known.

There are some other measures which will be added more into the database, principally bailouts and the like and this is going to add to the number of European cases where Europe has been taking discriminatory measures.

When it comes to thinking about the priorities for action, I think in the near-term it is stopping the protectionism which has been announced and is in the pipeline, and there a number of steps we could undertake there, I've described a few of them.

As we move into the near-term, the key question is how we are going to unwind or remove all of this protectionism, which has been put in place. I think the Global Trade Alert will be useful as a database for monitoring the unwinding of this protectionism as well. So, it's not just its implementation, but its unwinding which I think we can play our role in. But, of course, the more important policy question is getting governments to see the need for unwinding and to do it in an orderly manner.

And then over the longer term, this potentially could be for the new European Commission, one wonders whether or not the priorities of the EU's negotiators in RTAs and at the WTO may need to be amended a little in the light of the different forms of protectionism that we've seen. I think these are the three current policy takeaways.

Over time of course, the database is going to be updated and the picture might change. And so there might be other lessons which we can draw over time from this work and initiative.

The last thing I would like to do is to show you how to use the database because it's particularly user friendly, and then I will turn to our discussants. The website address is www.globaltradealert.org. The website is put together in a particularly user friendly manner. Every time we investigate a measure, we produce a report on it. And if you were to click on this report, you can find out a description of the measure, which countries are potentially involved in its implementation, who the affected trading partners are, our evaluation of the measure and the source of the measure.

One of the things we do, we take very seriously in the Global Trade Alert is to try and verify from official sources all of the measures that we post and we report the sources as well so that if you are interested in tracking down or following up on a measure, you know which sources to go to. And if there is a link, an Internet link we can provide to that source, we will often do that as well. So, you can just click through. And you may find that useful in tracking measures over time.

You can also search the database by affected trading partner, implementing jurisdictional type of measure. So you could take any particular country you like. We have colleagues from the Russian Federation here, so let's click on that to take a non-EU example. What measures have we found in the database which affect the Russian Federation, the database will search through, we find 47 measures that affected the Russian Federation. We list them with the country that is implementing the measure first.

So, Japan has implemented a measure here, the Japanese in this particular measure, the government has been encouraging NGOs to encourage the Japanese people to buy only Japanese food. So, anybody who ships agricultural products to Japan is likely to be adversely affected by this particular measure. But, this is only one of 47 measures which were affecting Russia in this particular case; and you can search by any jurisdiction that you like. And you can also search by the type of trading partner, the implementing jurisdiction and the type of measures. So, if you are interested in what are all the public procurement cases you could pull all those up and examine them as well.

So, the database is very easy to search for the information that you need. You can also report measures to the database. I want to make one thing very clear here. We have set up the database in such a way that if you submit a report to the Global Trade Alert, the researcher who examines the measure and then looks into seeing whether or not there is anything to report on the website does not know who the reporter is. So, there is guaranteed anonymity to the reporter. So, we've set up a system so that the researcher never knows who the reporter is. And so, in that way, if we put anything up on the website, no one could ever find out who has reported the measure to us.

Now, of course, we go to great lengths to check the veracity of the information which is provided to us, but this does provide I think a certain degree of assurance to the business community and the like that any measures they report will be taken in confidence and that a government would never be able to find out what measures have been reported to us at the Global Trade Alert.

I should say that, over time, we are getting more measures reported through this, interestingly from national governments and a number of European governments in particular reporting measures to us through this. So, this is an option that you have.

Finally, let me just say that the statistics page of the website enables you to generate all of the tables which I've just shown you here. So, you can generate them in real time whenever you need them. So, if you need to write a briefing note, a speech or you need to discuss this issue, you can track down the results of the database and you can cut up the results in any way you like. You can look at which countries are been harmed, which countries have been putting measures in place, what types of measures. You might be interested in what's going on in a particular sector. So, you might be an industry association and be interested in following that and you can also track pending versus implemented measures as well.

The final thing I should say is that the initiative has been supported generously by five sponsors; all of whom recognize the importance of maintaining the independence of the initiative and so we have kept at arms length, but I should acknowledge who they are. There are two government agencies in the United Kingdom. We have a Crown Corporation of Canada, International Development Research Center. CIGI is a private Canadian foundation interested in global governance, the German Marshall Fund of the United States, our hosts here are also very, very generous and support and the World Bank is also supporting this initiative as well. Thank you very much, Joe.