WTO Report Warns of Threat of Protectionist Measures

JOHN W. MILLER

BRUSSELS -- A steady buildup of protectionist measures could "slowly strangle" international trade and undercut the effectiveness of national stimulus plans, according to a report the World Trade Organization sent its 153 members Thursday.

However, the WTO added, the world will be spared "an imminent descent into high intensity protectionism" such as occurred during the Great Depression of the 1930s, thanks to existing trade treaties that cap tariffs on imports.

Pascal Lamy, the director of the WTO, has been frustrated by countries' unwillingness to sign a new global trade deal since the eight-year-old Doha round of talks collapsed last summer. Since the beginning of 2009, there has been "significant slippage" in the global commitment to free trade due to the global economc crisis, the WTO said Thursday. "There have been increases in tariffs, new non-tariff measures, and more resort to trade defense measures such as anti-dumping actions."

Mr. Lamy believes he can shame countries into cutting back on protectionist measures, aides say. The report repeats the agency's recent analysis of trade trends, such as the WTO's prediction that global trade will shrink 9% this year.

The report also lists examples of the measures countries are undertaking to protect their companies and economies -- everything from European import tariffs on Asian plastic bags to a ban on Chinese toys in India.

In March alone, South Korea raised import tariffs on oil, Mexico raised tariffs on 89 U.S. goods, Ukraine slapped an extra 13% tariff on all imports, the U.S. raised duties on imports of Chinese steel pipes and Argentina mandated a special license for toy imports.

"Country after country are establishing trade barriers to protect parochial domestic interests," says Richard Weiner, a trade lawyer with Chicago-based Sidley Austin LLP. "The end result will be to deepen the crisis and prolong the pain."

Certain sectors are more vulnerable than others to protectionism, the WTO said. It mentions shoes, cars and steel.

Argentina, Brazil, Canada, Russia, Ecuador, Ukraine have recently raised import duties on shoes, mostly from China and Vietnam. Twelve countries have acted to help their automobile industries. The U.S., Brazil and France have handed out generous loans. India has required licenses and Argentina has set prices for importation of foreign car parts. Ten countries, and the EU, have raised tariffs on imported steel.

The WTO praised some nations for explicitly promoting trade. Argentina has eliminated export taxes on 35 dairy products. Brazil has expanded a program to give loans to exporters. China has scrapped imports tariffs on steel plates. The Philippines has cut tariffs on wheat and cement. "More trade policy initiatives of this kind, particularly if they were to be taken collectively by the major trading countries, would make an impact on a global scale," the WTO said.

Some poorer WTO members oppose Mr. Lamy's reports because they say it neglects to blame the culprits. Angelica Navarro, Bolivia's ambassador to the WTO, says the U.S. and EU should shoulder blame for the rise of protectionism. "The financial crisis started with them," she says.

After hearing out the concerns of Ms. Navarro and others, WTO officials agreed to give members more say in drafting the report. They also softened the language. Thursday's paper includes a disclaimer, which underscores the limits of the WTO's power: "The inclusion of any measure in this table implies no judgment by the WTO Secretariat on whether or not such measure, or its intent, is protectionist in nature."