Eliminating trade-restrictive measures: further progress needed

Legislation | | MIC Customs Solutions |

A new report from the World Trade Organization has indicated that the G20 nations are not making the hoped-for progress on eliminating trade restrictions.

One of the most important trends in the growth of the global market over the last few decades has been an increasingly widespread acceptance of the need to reduce the number of legislative barriers to trade between different countries.

In the past, protectionist instincts prevailed among many larger countries, but by and large these policies have been rethought extensively, with most economies seeking to minimize tariffs and encourage import and export activity, in order to add to their own economic prosperity.

However, the path of progress has not been free of pitfalls, and a new report from the World Trade Organization (WTO) has indicated that the last few months have seen an unwelcome resurgence in the number of trade-restrictive measures implemented by G20 nations. As the global economy continues to perform sluggishly, businesses will be hoping this trend can be reversed sooner rather than later.

Trade restrictions reach a new peak

The WTO's fifteenth trade monitoring report on G20 trade measures indicated that between October 2015 and May 2016, G20 economies applied 145 new trade-restrictive measures, or an average of almost 21 new measures a month. This represented a significant increase compared to the rate of 17 a month seen during the previous reporting period, and represents the highest monthly average registered since the beginning of the monitoring exercise in 2009.

In the same period, G20 economies implemented only 100 measures aimed at facilitating trade, averaging just over 14 per month. This means that since 2009, a total of 1,583 trade restrictive measures have been imposed by the G20, with only 387 - around one-quarter of the total - having been removed. The restrictions cover more than six per cent of all G20 imports and five per cent of global imports, showing that this represents a significant issue with international implications.

Analyzing the reasons behind this, the WTO cited a rise in the number of trade remedy investigations by G20 economies as a key cause, with anti-dumping actions accounting for the majority of restrictive measures, while government support for sectors such as infrastructure, agriculture and export-specific activities is also distorting the picture.

A bad economic omen

Although some G20 economies have been eliminating trade restrictions, the rate at which this is being done remains too low to make an impact on the existing stockpile, and the WTO believes the lack of activity is having a negative impact on world trade.

The volume of world merchandise trade grew 2.8 per cent last year, with trade falling sharply in the first half of the year before recovering later, but the outlook for 2016 remains somewhat uncertain, with WTO data for the first quarter of the year marking a 1.1 per cent decline compared with the previous quarter and a 1.0 per cent decline compared to Q1 2015.

This performance was weaker than anticipated and has intensified concerns about the volatility of the global trade landscape.

The need for further progress

Despite the negative trends highlighted, the WTO report noted a number of reasons for positivity, including the fact that more and more WTO members are choosing to use the forums provided by the organization to address potential trade disputes in a constructive and transparent manner, rather than resorting to dispute settlement or other unilateral measures.

Nevertheless, the need to eliminate barriers to trade is likely to become more pressing than ever as the global economy continues to face challenges such as the UK's vote to leave the European Union - a development that has rocked the world's markets and could lead to complex discussions over new trade laws.

WTO director-general Roberto Azevedo said: "Trade-restrictive measures, combined with a notable rise in anti-trade rhetoric, could have a further chilling effect on trade flows, with knock-on effects for economic growth and job creation.

"If we are serious about addressing slow economic growth, then we need to get trade moving again, not put up barriers between economies. The G20 economies have made a commitment to lead in this endeavor as the world's largest traders; I urge them to act on this commitment."