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WTO Warns Protectionism on the Rise

Textiles, apparel, motor vehicles, parts, iron, steel, and chemical products, have been the manufactured goods most affected by new protectionist measures.

GENEVA — Textiles and apparel, along with motor vehicles and parts, iron and steel, and chemical products, have been the manufactured goods most affected by new protectionist measures, such as tariff hikes and antidumping investigations, during the second quarter.

This story first appeared in the July 7, 2009 issue of WWD.  Subscribe Today.

A report compiled by World Trade Organization director-general Pascal Lamy said the number of trade-restricting or -distorting measures announced from March 1 through June 19 “exceeds” the number of trade-opening measures “by a factor of more than two.”

Lamy said the leading trading powers, or G20, which includes the U.S., China, India, Argentina, Brazil, Germany, the U.K. and Japan, have failed to live up to commitments not to impose restrictive measures that distort global trade.

“To date, the WTO has not been informed by any G20 member that it has rectified any measure,” said Lamy, adding there is no indication of governments “unwinding or removing the measures that were taken early on in the crisis.”

The list of measures identified in the textiles and apparel sector included the initiation of antidumping investigations by Argentina on imports of denim from China, by Brazil on imports of synthetic fibers from China, by Turkey on imports of polyester staple fiber from China and on imports of woven fabrics of synthetic yarn from Malaysia.

Other measures initiated in the last few months include the increase in value-added tax rebates on exports of textiles and apparel and new export subsidies by India to cotton farmers, the report said. India has also initiated an antidumping investigation on circular weaving machines from China.

The WTO said the impact of the economic crisis on world cotton-mill use is expected to cause a 27 percent drop in cotton trade to 6.1 million tons and production to dip 10 percent to 23.7 million tons.

Lamy attended the G20 crisis summit in London this year during which political leaders, including President Obama, said they would “refrain from raising new barriers to investment or to trade in goods and services, imposing new restrictions or implementing WTO-inconsistent measures to stimulate exports.”

World Bank president Robert Zoellick, in a letter to G8 leaders ahead of their annual summit that begins in L’Aquila, Italy, on Wednesday, warned that imposing restrictive trade measures “could easily spin out of control as unemployment rises and national officials react defensively to the ‘beggar thy neighbor’ policies of another country.”

The best antidote is a strong “offense” of lowering and limiting barriers, Zoellick said.

Dominique Strauss-Kahn, managing director of the International Monetary Fund, told a WTO forum here on Monday “financial protectionism,” such as imposing mandatory domestic lending conditions on banks that have received government assistance, also is a growing problem.

Lamy projected global trade volume would decline 10 percent this year, compared with a 9 percent decline the WTO forecast in March.

“Exports of developed economies are now forecast to fall this year by roughly 14 percent,” Lamy said. “The decline for developing economies is expected to be about 7 percent.”

Lamy said the longer domestic banking subsidies remain in place “the more they will distort market-based production and investment decisions globally, the greater will be the threat of chronic trade distortions developing, and the more difficult it will be to correct those distortions.”