Peter Gallagher

The nature of the pro­tec­tion could be dif­fer­ent this time. But my guess is that the old forms will still pre­vail. It’s true that mem­bers of WTO (almost all gov­ern­ments) have less room to manip­u­late entry to mar­kets today than they had dur­ing the 1980s downturns.This could see them adopt more sophis­ti­cated pro­tec­tion, in the sense of being harder to see, not based on tra­di­tional bor­der reg­u­la­tions and highly dis­cre­tionary so the bar­ri­ers can be raised or low­ered as needed.

But there is still suf­fi­cient wiggle-roomin the WTO oblig­a­tions of many gov­ern­ments to allow them to rely on some of the old stand-by meth­ods. In this post and the next, I will out­line five easy options, in ascend­ing order of like­li­hood, for ‘wiggle-room’ protection.

1. Tar­iffs and ser­vices barriers

Tar­iff increases and new ser­vices bar­ri­ers are still on the cards for the devel­op­ing coun­tries that make up three-quarters of the WTO mem­ber­ship. Gov­ern­ments in India, Africa and Latin Amer­ica, espe­cially (less in East Asia; not at all in China) have ample room to raise tar­iff pro­tec­tion on goods with­out con­sul­ta­tion or retal­i­a­tion under their WTO con­tracts. This wiggle-room—known as ‘water in the tar­iff’ or some­times ‘bind­ing overhang’—is avail­able because the rates of duty these gov­ern­ments bound in their WTO con­tracts are much higher than the rates of duty they cur­rently apply. They can increase pro­tec­tion with­out breach­ing the con­tract. But sev­eral of these coun­tries (India, not so much) also have ‘free trade agree­ments’ (FTAs) out­side of WTO that restrain them from rais­ing applied lev­els of duty on imports from their most impor­tant trad­ing partners.

Few devel­op­ing coun­tries have broad oblig­a­tions to main­tain open ser­vices mar­kets under the GATS. Indus­tri­al­ized coun­tries have more exten­sive oblig­a­tions; although, mostly, they have agreed not to cut back on ser­vices mar­ket access that they already per­mit­ted in the mid-1990s. Many of the oblig­a­tions have, in any case, been made redun­dant by tech­ni­cal and com­mer­cial changes in fast evolv­ing mar­kets such as telecom­mu­ni­ca­tions and bank­ing. No coun­try has accepted mean­ing­ful oblig­a­tions to free-up the move­ment of work­ers. Some indus­tri­al­ized coun­tries have wide-ranging and effec­tive FTAs in ser­vices; but almost no devel­op­ing coun­try does.

Bot­tom line: tar­iff increases are an option for devel­op­ing coun­tries, but offer lim­ited flex­i­bil­ity. All gov­ern­ments have some flex­i­bil­ity to cut back on entry to ser­vices mar­kets, but it is ques­tion­able whether there is much demand for restric­tions on finance, or telecomms, or trans­port flows.

2. Sub­si­dies

Sub­si­dies to pro­duc­tion of man­u­fac­tures or sub­si­dies on export for agri­cul­ture remain an option for the rich­est coun­tries, as the EC showed recently when it restored the sub­si­dies on milk-products. Most of the world, how­ever, can­not afford this. Those gov­ern­ments that are throw­ing around buck­ets of cash in the name of macro-economic ‘stim­u­lus’ will be try­ing to keep con­sump­tion hum­ming along, not inflat­ing market-prices to higher lev­els, as the EC does in agriculture.

EC Agri­cul­ture Com­mis­sioner, Mar­ion Fis­cher Boel, <a href=“http://blogs.ec.europa.eu/fischer-boel/dairy-export-refunds/” title=“Mariann Fis­cher Boel