The next round of trade protection

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.

Table: Agri­cul­ture tar­iffs: appar­ent bound rate overhang
Coun­tryAvg. MFN tariffAvg. bound dutyBound duty ‘over­hang’
Aus­tralia1.23.3 2.1
Unit­ed States10.78.2 -2.5
Bangladesh25.1188.3 163.2
Bolivia10.040.0 30
Egypt64.984.1 19.2
Indone­sia8.647.3 38.7
Kenya16.7100.0 83.3
Peru17.831.1 13.3
Sin­ga­pore0.09.6 9.6
Trinidad and Tobago19.1100 80.9
Thai­land32.132.0 -0.1
Uruguay13.035.2 22.2
Extract from WTO Mar­ket Access: Unfin­ished Busi­ness Spe­cial Stud­ies #6, table III.5

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. 


p>EC Agri­cul­ture Com­mis­sion­er, Mar­i­on Fis­ch­er Boel, <a href=“” title=“Mariann Fis­ch­er Boel

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