WTO warns of rising protectionism globally

(Reuters) - The world’s trading nations are succumbing to protectionism in the wake of the global financial crisis, limiting exports of food and raw materials and installing new import barriers, the WTO warned on Friday.

Commodities export restrictions from Indian cotton and Ukrainian wheat to Chinese rare earths and coal are “not without hazards”, the World Trade Organisation said in the report that assesses the protectionist behaviour of more than 180 nations.

The report, scheduled to be released on 21 June, was obtained by Reuters in advance of publication.

The rising protectionist trend, studied by the reports authors between October 2010 and April 2011, contradicts the promises made by the world’s leading and industrialised economies to resist protectionism and its negative fallout.

“Trade restrictions taken by WTO members and observer governments over the past six months have become more pronounced than in previous periods,” the report said.

“New measures aimed at restricting exports, in particular of certain raw materials and agricultural commodities, have been introduced for various reasons ... including (by) G20 countries, which is in contradiction with the G20 standstill pledge.”

A lack of global rules on export breaks has seen at least 30 new restrictions imposed between October 2010 and April 2011— by China, India, Ukraine and Vietnam, among others — up from 25 similar measures imposed during the 12 months before that, the report found. These include export taxes and quotas.

“These measures were reportedly taken on the grounds of environmental protection or to ensure domestic supply of food products at affordable prices. …The use of this type of trade measures to address these problems is, however, not without hazards,” the report warned.

“Governments may be tempted to use export restrictions to alter to their advantage the relative price of their exports or to expand production ... at the expense of foreign production.”

The findings are likely to stoke tensions over rising food and commodity prices and speculation that is heading the agenda of upcoming G20 meetings, including an agriculture meeting on 22-23 June and a finance ministers’ meeting on 14-15 October.

China in particular has been under pressure over export limits on rare earth minerals, which are key ingredients in high-tech goods from fibreoptics to mobile phones. China, which controls 97 percent of world supply, has cited environmental concerns and resource depletion in trimming back exports.

A legal challenge against Chinese restrictions on raw materials’ exports is coming to a head at the WTO in the coming months.

“Some WTO members may raise strong objections over a spotlight on export restrictions, which is politically extremely sensitive,” said one trade official familiar with the report.

World trade rules allow export restrictions if they alleviate food shortages or environmental risks, “even though these restrictions can hurt net-food-importing countries and even cause serious food shortages”, the report said.

Aside from limiting exports, trading nations are increasingly resorting to unconventional import barriers such as lengthy customs procedures and food and health requirements.

Some nations have freed up trade in recent months, and world merchandise trade is expected to grow 6.5 percent in 2011.

WTO members will discuss the report on 21 June.