This weekend’s WTO Ministerial meeting in Geneva was unable to agree on how to keep goods and services markets open to trade and competition. That’s no surprise, after ten years of repeated failure to agree. Nor is it a catastrophe given that formal barriers are being held in check (more or less), for now, despite the global recession. But in a world teetering on the brink of a second recession, the stalemate in WTO gives plenty of reason for concern.
The nearly-twenty-year-old treaties that currently govern world trade allow a lot of room for governments to hike trade barriers by a long way (50 — 80 percent in many goods and services sectors) any time they want. The legal limits — the trade “bindings” — in the treaties on trade in agriculture, some industrial products and services, were cut only half way in 1994.
Now, the longer the miserable state of non-collaboration on trade extends, the bigger the risk that some government will take advantage of the “manoeuvre room” to kick off a round of retaliatory, but perfectly legal, trade restrictions, freezing global economic recovery.
An outbreak of “legal” protectionism is far from fanciful. All it would take would be, for example, electoral victory in Europe or the Americas for a political party that draws its support from the millions of disaffected and unemployed who are suffering most from global recession. A defiant act, securely within the limits of WTO treaty “bindings,” that hiked border barrier to isolate and protect domestic markets; a plausible spark for a trade conflagration.
You can find a brief account of the Chairman’s summary of the Ministerial meeting here.