A G-20 protection standstill

When they meet in April in London, the Group of Twenty largest economies will face evidence of a big fall in global production, tumbling world trade volumes and rising unemployment around the world. No-doubt they will be asked to make a more solid pledge on protectionism than they adopted when they last met in Washington last November.

"We underscore the critical importance of rejecting protectionism and not turning inward in times of financial uncertainty. In this regard, within the next 12 months, we will refrain from raising new barriers to investment or to trade in goods and services, imposing new export restrictions, or implementing World Trade Organization (WTO) inconsistent measures to stimulate exports…"  from the NYTimes text of the statement.

So far the G-20 have complied with this promise. But it is a narrowly crafted undertaking, as we saw when the EC raised dairy subsidies. It could easily accommodate still more weasely actions such as safeguard action (compliant with WTO), or; buy-local policies that fit within the many exceptions of the Government Procurement code, or; a rash of anti-dumping actions that would massively hike duties for manufactures such as steel. All of these 'WTO-compliant' measures are still a live possibility, undermining the global benefits of the trillions of dollars of 'stimulus' spending now in the pipeline.

What would the G-20 pledge to do if the really meant to hold back protection to allow their concerted stimulus to have its greatest effect on demand? It would have to be drafted in a way that minimized the 'wiggle room'…

Governments of the G-20 could agree that until at least, say, December 2010 they would pledge:

• No increases in any MFN applied rate of duty other than for technical adjustments (completion of HS transpositions, for example).
• No increases in any Customs fees, excise duties applying to imports, consumption taxes applying to imports.
• No preliminary determinations of anti-dumping duties (and therefore, no new final duties either) or acceptance of new undertakings (if you want to stimulate consumption...).
• No safeguard action will be renewed, no new safeguard action will be available for more than 3 months
• No new export subsidies in any form (as defined by the Hong Kong Ministerial declaration).
• No new buy-local preferences at any level of government for goods or services contracts. Existing Government Procurement Code provisions (including exceptions) apply but Non-Members to be treated as Members (MFN provision).
• No new export restrictions (measures now in force—mainly security based—may remain in force)

Would this work? Yes, I think so. Should they do it? Yes, absolutely.

Would they sign it? Given that the G-20 includes governments such as India that apparently hold the right to take safeguard action as sacred, and the United States (and Australia) that hold nearly the same view on anti-dumping, and Russia that is not yet a member of the WTO, the question is, at best, open.

Tags for this entry: trade g20 protection transparency surveillance standstill