WTO negotiations: Trade restrictive measures or policy tools?

Asjadul Kibria | Published: April 27, 2016 20:28:18 | Updated: October 22, 2017 19:53:33


The debate over identifying any trade-related measure as trade restrictive or valid trade policy tool is not a new phenomenon. In mid-April, members of the World Trade Organisation (WTO) engaged in such a debate. Some member countries raised the question of the validity of several recent trade-related steps taken by some of their trading partners. Countries taking the measures, mostly developing ones, defended those as valid trade policy tools compatible with WTO rules.

A meeting of the WTO's Council for Trade in Goods (CTG) or Goods Council was held in Geneva on April 15, 2016. It was the first such meeting after the Nairobi ministerial conference which had taken place in December last.

The meeting provided an indication of future trends of negotiations. The Goods Council, responsible for the workings of the WTO agreements dealing with trade in goods, is represented by all the 162 member-countries.

Analysing the official press statement of the WTO and a few other reports on the meeting, the Third World Network (TWN) noted some interesting observations. It was mostly the developed countries which raised concerns and made criticisms on the measures taken by the developing countries. These have also some policy implications for Bangladesh.

RESTRICTING TRADE: Trade restrictive measures started to pick up pace since the global financial crisis, originating in the United States (US) in 2008.  According to WTO estimation, about 1,244 trade restrictive measures were recorded during 2008-2014 period. Most of the measures were taken or triggered by G-20, the club of 20 rich countries.

Only 282 of those were removed. The situation, however, improved later. The WTO Director-General's Annual Report on trade-related developments, released before the 10th Ministerial Conference (MC10), showed that on average 15 trade restrictive measures were taken between October 2014 and October 2015.

At the same time, 222 new trade-facilitating measures were taken -- on average almost 19 measures per month. So, the stockpile of restrictions increased to 2,557 as of October 2015, up 17 per cent from the previous period.

Trade-restrictive measures comprise trade remedial measures along with export- and import-restrictive measures. Both tariffs and Non-Tariff Barriers (NTBs) are there. Nevertheless, identifying trade-restrictive measures required contextualisation and intention which is some what tricky.

DEVELOPING COUNTRIES UNDER FIRE: In the Goods Council meeting, developing countries, like India, came under criticism for adopting some trade-restrictive measures. Last February, Indian government imposed minimum import prices (MIPs) on more than 170 iron and steel products.

Earlier in December, India notified the WTO that it initiated a safeguard investigation on Hot-rolled flat sheets and plates. Japan, along with Taipei, Canada, Australia, the EU and South Korea, raised concern on these two steps. Japan, a major exporterof iron and steel products to India, also termed the imposition of minimum import prices as inconsistent with relevant rules of the WTO.

India's latest budgetary decision to raise tariffs on 96 products irked the US as these products cover industrial solar heaters and solar-tempered glass and medical devices. Moreover, India also withdrew a duty exemption on some 70 life-saving drugs.  The US also expressed its concern on obligatory re-testing of certain electronic products in an Indian laboratory to check their compliance with Indian standards.

Geo-political consideration in global trade also came into discussion. Ukraine raised concern on restriction in transit facility imposed by Russia. Ukraine informed the meeting that Russia had imposed ban on all international transit cargoes by road and rail through Russian territory to Kazakhstan. The ban came into effect on January 01, 2016.

The Russian authorities allow goods to be transported from Ukraine to Kazakhstan only through Belarus and carried on transport vehicles equipped with 'devices supporting Russia's Glonass navigation system'. As a result, Ukraine has to bear additional 30 per cent transit cost for using Belarus territory with some 900 km additional transit routes.

Ukraine claimed that restricting the land transit facility went against the WTO rules of 'freedom of transit.' The European Union, Turkey, Canada, Australia, Japan, the United States and Switzerland backed the Ukrainian concern.

Again, some developed countries expressed concern on continued restrictions on imports of agricultural, horticultural and fisheries products by Indonesia. Nigeria also came under question for barring imports of fishery products. The country's 'non-transparent import licensing requirements' and local content requirements in the oil and gas sectors also drew criticism.  Continued import restrictions on mobile phones and automobiles in Ecuador were also tabled by a few countries.

VALID POLICY TOOLS: Developing countries responded to some of the criticisms and concerns arguing that they applied valid policy tools for creating a level playing field. India defended its measures as valid policy instruments. It argued that minimum import prices for iron and steel products were yet to be implemented. Moreover, the measure was taken to contain the huge increase in imports as well as dumping from a few other countries. It also stressed that the safeguard issue should be raised in the meeting of the Committee on Safeguards, not in the Goods Council. In a similar vein, India raised counter-questions on the US's intention to drag the issue of tariff hikes in the Goods Council instead of the Committee on Market Access.

Indonesia responded that the measures in question were actually 'intended to address safety, health, environmental, cultural and other concerns' and were not trade-restrictive. It said that it had recently unveiled 11 economic policy packages. These covered 180 regulations for harmonising various technical requirements, simplifying licensing and business permits and eliminating some inspection requirements.

Ecuador argued that quantitative restrictions on auto imports were neither a non-compliance of WTO requirement, nor had it any negative impact on demand.

BANGLADESH: India's tariff hike on several products in the budget needs to be reviewed by Bangladesh. The way India has raised duties is nothing wrong as long as it keeps the hike within the bound rates. It doesn't mean that Bangladesh has to raise tariff rates of different products without proper analysis.

Moreover, Bangladesh needs to strengthen its capacity to logically raise questions on any trade-restrictive measure imposed by any trading partner at the WTO. As the country's trade linkage with the rest of the world is growing, so is the possibility of trade disputes. Thus balancing the imposition of apparent trade-restrictive measures with policy tools may become critical in the near future.

author's e-mail address: asjadulk@gmail.com
 

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