Trade protectionism among G20 members

The Group of 20 heads of state met in France in early November launching an annual group meeting of the heads of State. The G20 is made up of Argentina, Australia, Brazil, Canada, China, the EU, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, UK and the US.

While emphasis was on the European debt crisis, the meeting was also watched for indications on whether action would be taken on growing trade protectionism among the members.

A report jointly produced by the WTO, OECD and the UNCTAD immediately prior to the  G20 meeting found that trade protectionism continues to rise among G20 members. The WTO report is part of a joint exercise by the WTO, the Organisation for Economic Co-operation and Development (OECD), and the UN Conference on Trade and Development (UNCTAD) to monitor the leading economies’ adherence to their promises not to engage in trade and investment protectionism during the financial crisis.

Short cuts not working out

The three organisations have issued reports approximately every six months monitoring both types of protectionism - and any moves toward liberalisation - since September 2009. The report found that “disappointingly weak growth in some G-20 countries and continuing macroeconomic imbalances globally are testing the political resolve of many governments to abide by the G-20 commitment to resist protectionism.”

According to the latest figures from the WTO which is the global trade body, the number of restricting - or potentially restricting - trade measures introduced by G-20 economies since the beginning of May 2011 has fallen slightly to 108 from the 122 recorded during the preceding six months.

Although all  G20 members had not introduced protectionist measures and some had even  taken  a few trade facilitation measures, the report found  “no indication that, over the past six months, recourse to new trade restricting measures by the G-20 as a group has slackened nor that efforts have been stepped up to remove existing restrictions.”  WTO cautioned that unilateral protectionist measures, while attractive in the short term, are no solution to global problems.

“On the contrary [these actions] may turn the situation worse by triggering a spiral of tit-for-tat reactions in which every country loses.”

In addition to the WTO’s call for less trade protectionism, business leaders who met in France for their own B20 summit also issued a call for less trade protectionism. One business leader had told the media that “we don’t understand [this increased protectionism] because governments are always ready to make clear statements against protectionism and then through the back door they take measures that are actually protectionist.”

The current food crisis was also an issue up for discussion at the G20 meeting, Export restrictions in the agriculture sector was also a cause for concern as it had adverse impact, particularly  among the developing countries. The World Bank’s latest issue of  its Food Price Watch  observed that   grain prices rose 30 per cent between September 2010 and September 2011; the price of maize increased by 43 per cent in that period, rice by 26 per cent, and wheat by 16 per cent.

Warning signs

Agricultural export restrictions - a common issue in the food security discussion - also featured in the WTO report. Those measures have often come under scrutiny for exacerbating price increases and food shortages, adversely affecting consumers in developing countries.

The WTO noted that the May monitoring report’s finding of an upward trend in G-20 use of export restrictions, mainly with regard to food products and some minerals, has now been confirmed. In addition, more new measures were set in place between May to mid-October than in the past.

“Although the majority of these actions were justified on the grounds of national responses to rising food prices, to secure domestic supply, or to address resource depletion, they nevertheless go against the G20 standstill pledge in this respect and have the potential to seriously affect trading partners,” cautioned the WTO.

Although rising trade protectionism in G20 countries, food price increases were also to feature prominently, at the end of the Summit, all reports dealt with the inability of the Summit to settle the euro zone debt crisis that not much attention appears to have been paid to the issues concerning protectionism.

(Manel de Silva holds an Honours Degree in Political Science from the University of Ceylon, Peradeniya and has engaged in professional training in Commercial Diplomacy at ITC and GATT. She has served as a trade diplomat in several Sri Lankan Missions overseas and was the first female Head of the Department of Commerce as Director General of Commerce.)