G20 versus the rest of the world  

Wasi Ahmed   | Published: December 04, 2018 22:17:27

Navigating the rough waters of trade-impeding practices of the stronger economies is more than challenging for those lagging behind, in that the ball in the tight grip of the former has first to be released for any game plan by the latter. The World Trade Organisation's (WTO) report on G20 Trade Measures (mid-May 2018 to mid-October 2018) clearly points out that the protectionist policies of the stronger economies are a potential threat to global trade-least expected under a multilateral regime governed by rules to ensure trade as a universal, fundamental human activity, free from undesirable hindrances. The report that came just prior to the G20 Summit-2018 held in the Argentine capital Buenos Aires last week provides a factual insight into the trade-restrictive measures which have been introduced over the recent months, and which now cover over $480 billion worth of trade.

Leaders of the G20 in their Summit Declaration, however, noted that multilateral trading system was falling short and needed fixing. There is no denying this, but the key issue remains: who are responsible to infringe multilateralism? Obviously, not the countries outside G20. 

The Summit fell short of reaching agreement on the two biggest challenges facing the globe: the future of world trade and climate change. In fact, there is nothing in categorical terms in the Declaration likely to prompt decisive inclusive actions for a harmonious global order.

Clear enough, G20 is busy with the welfare of the members of the bloc, and so when there is talk of inclusiveness in any G20 discourse, it refers to inclusiveness within the bloc. Similarly, multilateralism may also be deemed as an issue within the bloc. The unabated trade-impeding practices mentioned in the WTO report do reflect this collective mindset.              

G20 is a mighty coalition of the developed and the advanced developing economies. These are: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Republic of Korea, Japan, Mexico, the Russian Federation, Saudi Arabia, South Africa, Turkey, UK and the United States, as well as the European Union. Together, these countries are the most decisive not only in matters of trade but in other areas of the world order as well. So, when the WTO secretariat's report termed G20 trade practices restrictive, it clearly implied that besides the harms such practices bring for the rest of the world, these also constitute a well-devised protectionist agenda in defiance of the multilateral spirit.  

A total of 40 new trade-restrictive measures were applied by G20 economies during the review period, including tariff increases, import bans and export duties. This represents an average of eight restrictive measures per month, which is higher than the almost six measures recorded during the previous review period (mid-October 2017 to mid-May 2018). During the review period, the estimated trade coverage of the import-restrictive measures (US$ 481 billion) was more than six times larger than that recorded in the previous period and is the largest since it was first calculated in 2012.

The proliferation of trade restrictive actions and the uncertainty created by such actions could place economic recovery of many countries in jeopardy. "Further escalation would carry potentially large risks for global trade, with knock-on effects for economic growth, jobs and consumer prices around the world", says WTO director general.

The report confirms that the G20 economies have been initiating a higher number of new trade remedy investigations compared to the number of trade remedy actions they terminated. However, the gap between the number of initiations and the number of terminations narrowed compared to previous years.

The report also mentions that the G20 economies implemented 33 new measures aimed at facilitating trade during the review period, including eliminating or reducing import tariffs and export duties. At close to seven trade-facilitating measures per month, this is in line with the 2012-17 trend. In addition, liberalisation associated with the 2015 expansion of the WTO's Information Technology Agreement (ITA) continued to feature as an important contributor to trade facilitation. The trade coverage of import-facilitating measures (US$ 216 billion) has also risen during this period but is just half that of trade-restrictive measures.

However, what this year's WTO report says echoing the observations of the previous two years' does suggest that trade restrictive measures of the G20 bloc have been consistently on the rise since 2008 despite pledges to roll back any new protectionist measures that may have arisen.

Observers while examining the situation over the past years have found that there is also a serious lack of transparency as regards what is known as 'behind-the-border measures'. These behind-the-border measures include regulatory measures and subsidies. Non-tariff measures, the key constituent of the regulatory measures applied by a number of G20 economies have been the subject of debate in various WTO bodies. Some consider that these types of measures have become more prominent in recent years compared to conventional border measures.

What is indeed important here is that while there may be strong disagreements on many issues between the USA and the European Union, or between the USA and China in particular, the curious case one must not miss is the off the record understanding in straying away or even infringing multilateral principles enunciated by the WTO. With the US President calling most of the shots, the wishes and designs of the other members of the bloc appear to be realised without their being a visible party to his calling. Hoping to break free of the string is implausible given the overwhelming dominance of the G20 economies in determining the shape and direction of the world order. What is there for the weaker economies to look up to?


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