Analysis of last week’s G-20 Summit has—quite understandably—focused on attempts to rescue the eurozone. But those, ourselves included, who find themselves worried by what appears to be a growing trade crisis, will have found their eyes drawn to three short paragraphs at the end of Friday’s Communiqué entitled “Avoiding protectionism and reinforcing the Multilateral Trading System”.
In the run-up to Cannes, ICC UK had lobbied governments to agree on a two-pronged strategy to support world trade: first, a so-called “standstill” on protectionism—that is, an agreement not to introduce any trade-restrictive measures; and second, a comprehensive package to strengthen the World Trade Organization. And on the face of Friday’s Communiqué, we have both.
The problem, however, is one of credibility. We’ve seen impressive commitments to resist protectionism at every Summit since 2008, but many of the G-20 countries are now world leaders when it comes to taking subtle steps to close their markets. Likewise, lofty pledges to conclude the Doha trade round have given little, if any, momentum to global trade talks—so much so that the negotiating positions of many key players are now more distant than they were three years ago.
It’s clear though that this time must be different if we are to avoid a 1930s-style trade crisis. With protectionist sentiment on the rise—in part due to a poisonous concoction of weak growth and imminent elections in many major markets—we are now approaching a tipping point for the system. In this context, our message to policy-makers is simple: action must finally match (and in some instances go further than) words.
So what are the chances? On protectionism, the absolute key is to ensure that steps are taken to address the growing use of product standards and technical regulations to block imports. It’s a disappointment that this issue wasn’t tackled head-on in the Cannes Communiqué—but that can’t be used as a pretext for inaction. We’d suggest that the EU should take a lead here in reviewing—and where appropriate repealing—any trade distorting regulations that have been introduced in recent months. The hope would be that where the EU leads others might follow.
WTO reform – an opportunity out of the crisis?
The agenda around beefing-up the role of the WTO is inevitably more complex, and will take longer to implement. But December’s Ministerial—wrongly characterised in recent months by some commentators as a waste of time and effort—could provide a unique opportunity to set in train reforms to restore the centrality of the WTO as a forum for liberalising world trade.
For months we’ve been championing a three-step plan for WTO-reform, involving both enhanced monitoring of national trade policies and new talks on issues outside the scope of the Doha Round. We were delighted to see this thinking reflected in the Prime Minister’s report to the G-20 on global governance. The key, in our view, is now to get trade ministers focused on this agenda in the run-up to December’s Ministerial.