MercoPress. South Atlantic News Agency

WTO debate to assess protectionism and trade barriers

World Trade Organisation (WTO) members met on Monday to assess how far the financial crisis has encouraged protectionism. Diplomats representing rich and poor countries discussed WTO Director-General Pascal Lamy's January report showing countries had ignored the Group of 20 nations' plea in November against raising trade barriers.

"The extreme vulnerability of the global economy to trade developments illustrates clearly the perils of trade protectionism in current circumstances" said Lamy in the report. There are growing fears trade barriers aiming to defend jobs may deepen the global recession if they make it harder for other countries to sell their goods abroad, as occurred when nations closed their markets during the 1930s Depression, indicated the report. Lamy said that, while the 2009 slowdown would affect all WTO members, developing countries were particularly at risk because their growth depended heavily on trade, whose deceleration was the main downward pressure on world economic growth. Brazil has proposed that the WTO "monitor" the emergency aid package currently under Congressional debate in the US, because according to President Lula da Silva administration is could entail "protectionist tendencies" and be detrimental for the South American country exports. "There's a spiralling of protectionism and this scenario could worsen if something is not done", said Roberto Azevedo, Brazilian ambassador before WTO, adding that "those condemned to loose the most are developing countries". In its latest forecasts, the International Monetary Fund projects world trade will contract by 2.8 % this year after growing by 4.1% in 2008 and 7.2% in 2007. The WTO report looks at tariff rises, mainly by developing countries which have scope under existing rules to raise duties. Rich countries' tariffs are already at or near agreed ceilings. It details stimulus packages, such as for the car industry, which many developing countries see as a more insidious form of protectionism because they favour domestic producers and poor countries cannot afford the cash. In the latest such move, France announced plans to aid its ailing carmakers which are likely to provoke complaints of protectionism from its EU partners. The WTO report lists financial bailouts, saying they, too, could result in distortions to competition between financial institutions by providing state aid or subsidies. India's WTO ambassador, Ujay Singh Bhatia, said about 3 trillion US dollars in different packages had been announced. "Now all that means that this amount of capital is being sucked out of the global system... so there is a certain impact on capital flows to developing countries," he told reporters. Brazil's WTO ambassador, Roberto Azevedo, said the subsidies in such packages were doubly damaging, because they displaced imports and dumped exports, and noted the report covered only measures from the last quarter of 2008. "Governments are still beginning to respond, the private sector is beginning to react, so this could get a lot worse before it gets better," he told reporters. One issue under discussion on Monday was the slow speed at which WTO members reported their new trade measures, making it difficult to have a complete and up-to-date picture of the state of international commerce. "One of the problems dealing with services is the information deficit that we have about what governments are doing, what regulators are doing, what measures are being taken," Hamid Mamdouh, director of the trade in services division, told a news briefing.