The Financial Crisis and Trade Protectionism: WTO s s work on monitoring

Transcription

1 The Financial Crisis and Trade Protectionism: WTO s s work on monitoring Maika Oshikawa WTO Institute for Training and Technical Cooperation October 2010

2 Outline Background on the global crisis Impact on trade flows Policy responses by Governments Monitoring of trade protectionism Challenges ahead

3 Background From financial crisis ( Subprime( Subprime housing- related asset markets) into a global crisis affecting the real economy, following the Lehman collapse in September 2008 Unprecedented nature and no economy immune to its impact Trade became a key transmission mechanism of the crisis

4 The great trade collapse? World GDP fell by 2.2% in 2009 (compared with growth of 1.6% in 2008 and 3.8% in 2007) Trade flows plummeted, falling even more dramatically than GDP Volume of trade in 2009 fell by more than 12% (compared to positive growth of 2% in 2008 and 6% in 2007)

5 GDP and trade growth GDP Exports

6 The great trade collapse Characteristics Severe: 12.2% vs 5-11% drops during past post-war recessions Sudden: 9 months vs 24 months During the 1930s Great Depression Synchronised: all countries and all product categories affected Causes: mostly a demand shock, due to the fear of unknown leading to postponement of purchases and investment; but also supply shock (lack of trade finance)

7 Quarterly world merchandise trade by region (y-o-y percentage change in current US dollars) World a North America b South and Central America Europe Asia a Others c Q1 2006Q2 2006Q3 2006Q4 2007Q1 2007Q2 2007Q3 2007Q4 2008Q1 2008Q2 2008Q3 2008Q4 2009Q1 2009Q2

8 Drop in trade between January 2008 and January 2009 by SITC activity (current prices) Food and live animals Beverages and tobacco Animal and vegetable oils, fats and waxes Miscellaneous manufactured articles Chemicals and related products, n.e.s Commodities and transactions, n.e.c Machinery and transport equipment Manufactured goods Crude materials, inedible, except fuels Mineral fuels, lubricants and related materials 40% 35% 30% 25% 20% 15% 10% 5% 0%

9 Quarterly growth of world trade in manufactures by product, 2008Q1-2009Q2 (y-o-y percentage change in current US dollars) 2008Q1 2008Q2 2008Q3 2008Q4 2009Q1 2009Q2 Manufactures Iron and steel Automotive products Office and telecom equipment Chemicals Clothing and textiles Source: WTO Secretariat estimates.

10 Other indicators FDI flows also fell abruptly by around 40% in Impact also on tourism receipts and remittances. ILO estimated that about 27 million people lost their jobs in 2009 bringing the total number of unemployed to over 200 million. IMF estimated that 64 millions more people have fallen into extreme poverty than without the crisis

11 Policy responses Quick responses, sometimes coordinated (G20) Central Banks cut interest rates nearly to zero, and expanded their balance sheets Governments rescued banks, financial institutions and other industries (bail- outs) Large fiscal stimulus to avoid massive drop-offs offs in aggregate demand Specific support to selected sectors (car and steel)

12 Trade policy responses Fear of the rise of protectionism persisted from the beginning of the crisis Lessons from the 1930s Great Depression G20 in Nov underscored the importance of rejecting protectionism & committed to refrain from raising new barriers to trade and investments, imposing new trade restrictions and implementing WTO-inconsistency measures to stimulate exports for next 12 months The commitment renewed at subsequent G20 meetings

13 Monitoring of trade protectionism Started as a home-grown exercise in early 2009 based on publicly available information Since then, it has become a regular mechanism within the Trade Policy Review Body to monitor trade protectionism To date, four/five reports have been issued January 2009 April 2009 July 2009 [November 2009: Annual Overview of Developments in the International Trading System] June 2010 Next report - November 2010: Annual Overview In addition, separate reports prepared for G20, with OECD and UNCTAD, covering trade and investment measures, in pursuant to the monitoring request from the London meeting

14 Monitoring of trade protectionism: Features Purpose: transparency on trade measures taken during the crisis Member-driven exercise - information provided/verified by members and through improved notifications Broad coverage and countries Factual: cover implemented measures Debate on possible analysis of trade impact

15 Monitoring of trade protectionism: Main points from the reports Protectionist war has been avoided; no tit- for-tat trade restrictions BUT, some slippages occurred Developing countries used traditional measures (tariff increases, import licences & trade remedies) Developed countries used other forms of support (sectoral( aid, fiscal stimulus) and trade remedies Many implemented trade opening and facilitation measures

16 Monitoring of trade protectionism: Evolution of measures October 2008 October 2009 Increase in tariffs and NTBs (import bans and licensing) on certain imports Increased initiations of trade remedy investigations (e.g. 15% increase in AD initiations between July 2008 and June 2009) Concerns about possible trade impact of financial support provided to financial institutions and certain sector (cars), as well as the buy local requirements Nov 2009 May 2010 Increased in tariffs and NTBs Reduced initiations of trade remedy investigations (e.g. 35% down in Q compared to Q1 2009) Increased use of export restrictions (duties, prohibitions and quotas) for food products and raw materials Also, stricter SPS/TBT applications, slower customs procedures & additional procedural requirements in import licensing administration

17 Monitoring of trade protectionism: Trade coverage of measures Share of trade covered by newly introduced import-restricting restricting measures October 2008 October 2009: 1.01% of total world imports November 2009 May 2010: 0.4% of total world imports Targeted products Iron and steel, followed by agricultural products, footwear, textiles & clothing, consumer electronics, chemical & plastic products, motor vehicles and parts

18 Monitoring of trade protectionism Reasons for the restrain in protectionism: Existence of a MTS with rules and enforcement mechanism Increased interconnection between countries (globalization of business) Lessons from the 1930s learnt Monitoring helped... Keeping trade open has helped countries to emerge from the crisis

19 Projections for 2010 Table 1: Merchandise exports and GDP by region, Annual % change a Volume of merchandise exports World Developed economies Developing economies and CIS Real GDP at market exchange rates (2005) World Developed economies Developing economies and CIS a Projections Source: WTO Secretariat.

20 Challenges ahead Despite a strong recovery of trade, sustainability of global economic recovery still uncertain As long as unemployment rates remain high, protectionist pressures will still be around With fewer new restrictions, the question is how and when to exist current restricting measures Fear of currency war? Conclusion of DDA negotiations Can help governments resist protectionist pressures i.e. gaps between bound and applied rates, tighten disciplines on agriculture subsides The best stimulus package, with at least US150 billons tariff cuts, plus services and trade facilitation But, so far, not much movement.

21 Thank you!