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Protectionism is alive, well and growing fast
There was a discussion on BBC Two's Newsnight on Thursday night in which two of the panel of "experts" on the world economy, Jim O'Neill, chairman of Goldman Sachs asset mananagement, and the Economist's Zanny Minton Beddoes, expressed some satisfaction in the supposed fact that the economic crisis of the last four years hadn't resulted in a steep rise in protectionism. This they took as evidence that despite the crisis, the building blocks for global growth based on increased trade were still intact.
According to Global Trade Alert, which monitors trade tensions, protectionism is actually at its highest level since the immediate aftermath of the Lehman crisis in 2009. The reason it has gone largely unnoticed is that protectionist measures tend to take new and ever more subtle forms, many of which are not caught by existing World Trade Organisation prohibitions. In any case, take a look at this article from the University of St Gallen's Professor Simon Evenett.
Protectionism isn't dead at all. It's merely been reincarnated in different form that circumvents the established rules.
Read the full article here.
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Brazil probes Chinese mobile phone imports
The ministry of development, trade and industry is investigating claims by Brazilian cellphone producers that their Chinese counterparts are dumping cheap handsets on the market.The move follows other measures by Brazil to curb cheap imports from China as one of the world’s newest and most important trading partnerships becomes more adversarial.
Brazil’s economic growth over the past decade has been fuelled by Chinese imports of its major commodities, including soymeal complex, iron ore and other products.
But Brazilian industry complains that it is being swamped by imports of Chinese manufactured goods, which have become even cheaper with the strengthening of the Latin American country’s currency, the real, against the dollar.
Read the full article here
Website: http://www.ft.com/cms/s/0/5be26bc6-3bad-11e1-bb39-00144feabdc0.html#axzz1jFDCCBTQ
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Free trade dream meets biggest challenge
Switzerland’s strategy of brokering individual free trade agreements (FTAs) may not be enough to crack open the booming economies of China, India and Russia.
And if the World Trade Organization (WTO) fails to make progress on the most pressing problems this month, Switzerland may join forces with powerful economies to tackle issues which it cannot hope to solve alone.
While Switzerland has successfully developed a web of FTAs, with many like-minded countries around the world, the biggest developing economies present a new set of challenges that threaten to seriously limit the scope of any new deals.
Some observers believe Switzerland is too lightweight to overcome such hurdles as human rights issues, intellectual property disputes, opaque governance structures and protectionism.
“Switzerland is negotiating with very big trading partners who will feel no compulsion to make substantial concessions to Swiss interests,” Simon Evenett, professor of international trade and economic development at St Gallen University, told swissinfo.ch.
“I can’t imagine India or China giving Switzerland a particularly innovative deal. It might look good on paper, but I can hardly see them creating many jobs in Switzerland.”
Bar raised
Swiss exports to FTA partners grow twice as fast as with other countries while companies save SFr420 million ($443 million) in customs duties a year, according to the State Secretariat for Economic Affairs (Seco).
Switzerland has recently raised the bar by opening negotiations with the world’s most dynamic economies – China, India and the customs union of Russia, Belarus and Kazakhstan.
But as the rewards start to rise, so do the problems. The dream of securing an FTA with India before state elections are held there in 2012 are fading fast.
One of the main sticking points is the demand of Swiss pharmaceutical companies for patent protection against India’s generic drugs firms. Opponents have argued this would make medicines too expensive for poorer Indian patients.
Union opposition
On the other side of the bargaining table, India wants Switzerland to grant more work visas for service sector professionals, particularly in the IT industry. Swiss trade unions are afraid this could lead to an influx of cheaper workers.
“We cannot accept workers from other countries undercutting wages here,” Travail Suisse’s Denis Torche told swissinfo.ch. “We have already seen examples of wage dumping since Switzerland opened its borders to EU workers, and we do not want that to increase.”
Swiss negotiators are also compelled to demand that partner countries adhere to minimum human rights and environmental standards – a particular problem for doing business in China.
At the 2011 World Economic Forum in Davos, Chinese Trade Minister Chen Deming warned of a “delay in the negotiation process” if Switzerland pushed too hard on human rights.
Russia’s recent accession to the WTO - aided in part by Swiss sponsorship – has raised hopes of economic reform in the country, but with a degree of scepticism.
Russia has enacted more protectionist trade measures than any other country since 2008, according to the economic monitoring body Global Trade Alert (GTA).
Plurilateral path
Observers, including GTA leading light Simon Evenett, believe the WTO will have a tough task making Russia eliminate trade barriers, let alone Switzerland. “It is unclear whether Russia will stick to the rules,” he told swissinfo.ch. “I expect them to be a tough partner in terms of compliance.”
While FTAs benefit certain exporters - such as machine builders, watch makers and the pharmaceutical sector – Evenett believes that multilateral WTO trade negotiations would pack a far heavier punch if progress could be made.
But the 153 WTO members have failed to reach consensus on many issues, bogging down the Doha round of negotiations ten years after it was launched.
The impasse has led to talk of a group of frustrated nations breaking away from the Doha talks to launch fast track plurilateral negotiations. This new process promises faster and further-reaching progress on such issues as government procurement and coordination of customs regulation.
“The bilateral approach is good for a few select industries but if you want to advance serious Swiss commercial interests the plurilateral approach is the best route open,” Evenett told swissinfo.ch.
Ambassador Luzius Wasescha, Switzerland’s permanent representative to the WTO, said he was keeping an open mind about joining a plurilateral fast track. A decision would only be taken after WTO ministerial talks in January, he told swissinfo.ch.
“Switzerland’s preferred option is to proceed in talks with all WTO members,” he said. “But if there is little appetite to change the current agenda and move ahead then we would consider taking the less popular option.”
“Plurilateral talks are not a panacea for all things, but they might solve problems in one or two areas,” he added.
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WTO Meeting Fails to Make Progress on Global Trade Negotiations
Bloomberg
By Jennifer M. Freedman
December 17th, 2011
"The World Trde Organization wrapped up its ministerial meeting without deciding how to revive global commerce talks, focusing instead on welcoming Russia to the fold and securing a government-procurement accord.
Efforts to reach an agreement during the Doha Round of trade talks have been blocked for years as the countries fail to make concessions on lowering agriculture subsidies and industrial tariffs. Ministers including U.S. Trade Representative Ron Kirk have said the round needs a new approach after a decade of unsuccessful attempts to bridge gaps among 153 nations.
The highlights of the three-day ministerial meeting that began in Geneva on Dec. 15 were the accessions of Russia, Samoa and Montenegro and a 42-nation agreement that opens up government-procurement contracts valued at as much as $100 billion to more foreign competition..."
Website: WTO Meeting Fails to Make Progress on Global Trade Negotiations
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Wauquiez veut un protectionnisme européen
Le Figaro
By Guillaume Guichart
December 17th, 2011
Il ne faut pas être naïf, prévient le ministre de la recherche qui met l'accent sur la défense des marchés locaux, après les appels à produire en France et à acheter français lancés par Nicolas Sarkozy et François Bayrou.
Sur le plan du commerce international, Laurent Wauquiez, ministre de la Recherche et leader du collectif UMP "la droite sociale", veut que l'Europe «accepte le bras de fer avec ses principaux rivaux», notamment les États-Unis et la Chine. Dans une interview au Monde publiée ce samedi, il appelle à un «protectionnisme européen» et regrette la «naïveté» avec laquelle l'Union européenne aborde la question des échanges internationaux, alors que les autres puissances «défendent fortement leurs intérêts».
«Il y a un espace pour un protectionnisme moderne, qui n'enferme pas mais protège», a-t-il plaidé. Pas question de revenir aux droits de douane, reconnaît Laurent Wauquiez. «Il est indispensable de donner une prime aux produits européens», défend-t-il. Car le constat est accablant, d'après lui: «Toute l'Europe est globalement en déficit. Elle perd des parts de marché, et l'emploi dans l'industrie baisse.»
Il faudrait par exemple revoir l'ouverture des marchés publics à la concurrence étrangère, demande-t-il. «Les marchés publics européens sont ouverts à 84 %. Aux Etats-Unis, ils le sont à 12 % et en Chine à 0 %, rappelle-t-il. Je propose que nous n'ouvrions nos marchés publics qu'à la condition que, en face, ils soient aussi ouverts..."
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Trade Minister: Indonesia Isn't Turning Protectionist
The Economist
By Eric Bellman
December 9th, 2011
"JAKARTA—Indonesia's moves to restrict some imports and exports do not represent a shift toward protectionism, said the country's new minister of trade, Gita Wirjawan.
Appointed in October and still moving into his office, Mr. Wirjawan has already sparked concern in business and diplomatic circles by limiting rattan exports—meant to help the struggling local furniture industry—and unveiling plans for tighter safety and labeling requirements on imports.
Low tariffs and a booming economy have attracted a sudden flood of imports, and Indonesia is just catching up with regulating them as other countries do, said the former chairman of Indonesia's Investment Coordinating Board and head of J.P. Morgan's Indonesian arm.
"My posture is not protectionist," he told the Wall Street Journal in an interview. "The fact is that there are thousands of products out there that are not in compliance with the rules and regulations in terms of environmental concerns, safely measures and labeling."
Indonesia has no plans to raise import tariff rates, he said, which average around 6%, among the lowest in Asia. It is planning non-tariff barriers connected to safety and health, he said, but only after getting approval from the World Trade Organization..."
Website: Trade Minister: Indonesia Isn't Turning Protectionist
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Ten years of China in the WTO. Shades of grey
The Economist
December 10th, 2011
"CHINA’S efforts to join the World Trade Organisation (WTO) dragged on for 15 years, long enough to “turn black hair white”, as Zhu Rongji, China’s former prime minister, put it. (His own hair remained Politburo-black throughout.) Even after membership was granted, ten years ago this week, Mr Zhu expected many “headaches”, including the loss of customs duties and the distress of farmers exposed to foreign competition.
Yet the bet paid off for China. It has blossomed into the world’s greatest exporter and second-biggest importer. The marriage of foreign know-how, Chinese labour and the open, global market has succeeded beyond anyone’s predictions..."
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China’s 10-Year Ascent to Trading Powerhouse
The New York Times
By Keith Bradsher
December 8th, 2011
"HONG KONG — As China heads into a weekend of speeches celebrating its 10 years as an official member of the global trade community, the rest of the world may want to contemplate the exported $49 microwave oven and the imported $85,000 Jeep Grand Cherokee.
Sunday is the 10th anniversary of China’s joining the World Trade Organization — a membership that helped turn China into the world’s biggest economy after the United States. Companies and consumers worldwide have benefited from China’s emergence as a top trading partner. And yet, because of special breaks and loopholes for China when it joined the W.T.O., it still shields its domestic markets from foreign competition much more than any other big nation..."
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Remaking Doha for China
Wall Street Journal
by Bob Davis
December 8th, 2011
"Trade economists would agree the Doha global trade round is dying, if it isn’t dead already. A new World Bank paper argues the way to revive the round is to refocus the negotiations on China.
The authors of the report (pdf), World Bank trade economist Aaditya Mattoo and Arvind Subramanian of the Peterson Institute for International Economics, say the reason that negotiators are having such trouble completing a deal is because the subject matter is largely irrelevant. What World Trade Organization members really want, they say, is a way to deal with China, which looms ever larger in global trading..."
Website: Remaking Doha for China
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Did the WTO Restrain Protectionism During The Recent Systemic Crisis?
In early December 2011 the CEPR issued a Discussion Paper titled "Did the WTO Restrain Protectionism During the Recent Systemic Crisis." The paper was written by Simon Evenett and can be downloaded from below. In addition to answering the question posed, this paper contains a discussion of the appropriate modern conception of "protectionism" as well as providing a detailed overview of the three years of protectionism witnessed since the first G20 crisis-related summit in November 2008.
Find a publicly available copy of this Discussion Paper here.
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