WTO warns against protectionist steps

Written by Sanjay Jog | Mumbai | Updated: Mar 5 2009, 04:48am hrs
World Trade Organisation (WTO) in its stern advisory has said that the domino effect of protectionist measures by some countries would be devastating. Resisting protectionism and avoiding an aggravation of the current crisis is an imperative today. The reality is that protectionist measures by individual countries are unlikely to help in the recovery efforts. Instead, what is necessary is to coordinate the domestic stimulus packages, to cooperate in addressing global challenges and to think of using the least harmful trade policy instruments.

According to WTO, concluding the Doha Round is quite essential to advance the multilateral trading system when world trade will contract by some 3% in 2009, the first decline in trade growth since 1982.

WTO has expressed its disagreement with those who say that the current economic crisis requires a shift in the WTOs priorities, that we need to concentrate on fighting protectionism and that therefore we should de-emphasise or even abandon the Doha Round.

In fact, WTO argued that trade and the Doha Round have a place of their own in global efforts to revive the economy. Open trade flows have a role in maximising the G20s efforts to stimulate the global economy. At the same time, the Doha Round is the most effective way to further constrain protectionist pressures by reducing the gap between bound commitments and applied policies. Incidentally, India has received a major boost as it has already taken serious objection against protectionist measures adopted by US in particular.

Indeed, if all WTO members raised their currently applied tariffs to todays WTO ceilings, tariffs worldwide would double. A recent study estimates that world trade could then shrink by up to 8%, reducing global welfare by up to $350 billion. Conversely, with what is currently on the table in the Doha negotiations, tariff ceilings would be halved and the savings for economic operators could amount to over $150 billion annually, WTO said.

Moreover, WTO has also opposed to a demand for scrapping of Doha Round by a new round of Bretton Woods talks as fluctuating commodity prices, cartelisation of oil exports, currency undervaluation, sovereign wealth funds, financial instability and environmental insecurity have significant global implications. This seems, at best, a classic example of trying to bite off more than you can chew! At worst, it is a disingenuous appreciation of the politics of trade negotiations, with two-thirds of its active participants nowadays being developing countries, WTO noted.