TPT September 2009

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arketplace

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eptember

2009

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Trade

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If mounting job losses do lie ahead for France, even as the

country successfully works itself out of its slump [See “French

economic stimulus,” above], this should not be dismissed as a

lagging indicator.

According to the independent strategic-consulting firm Oxford

Analytica, rising unemployment is in fact a strong sign of social

pressures that can drive governments to restrict or distort trade.

(“Trade Protectionism Shadows Recession,” Forbes, 16 July.)

Oxford Analytica, which draws on a 1,000-strong network of

experts at leading universities and research institutions worldwide,

considers it “probably inevitable” that the economic crisis would

drive governments to use loopholes in trade rules to introduce

measures in restraint of trade.

While “so far” there have been no blatant breaches of the rules,

it warns of severe testing in conditions of rising unemployment.

Similarly alert to the dangers of unemployment, World Trade

Organisation (WTO) Director General Pascal Lamy warned that “the

stress test of the multilateral trading system is still to come”.

The WTO now produces quarterly reports that track tariff increases,

new non-tariff and anti-dumping measures, and financial measures

that favour the member-nations’ domestic goods and services over

imports. The Oxford Analytica report issued in April found that

governments had been keeping protectionist pressures under fairly

good control but that “significant slippage” had occurred since the

beginning of this year.

While the latest report, issued in July, found no outright violations of

WTO rules, it also discerned no improvement in the general picture.

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The Oxford group also considered the stalled Doha

Development Round of WTO trade negotiations, taking note

of Director General Lamy’s belief that its successful completion

would help the world economy emerge from recession by boosting

confidence, narrowing the scope for trade restrictions, and

stimulating consumption.

The recent summit of the Group of Eight industrialised nations in

the Italian city of L’Aquila was seen as effectively endorsing this

view, both in the official communiqué and in a statement, supported

by 10 major non-G8 countries, calling for urgent resumption

of the negotiations in Qatar and a “realistic” conclusion date

of 2010.

While no agreement on key issues is currently is in sight, prospects

for the Doha Round would appear to have improved slightly. Notably,

the US and India appear ready to engage in serious discussion of

crucial differences over protection of industry, and President Barack

Obama is expected to make a major statement soon on US trade

policy.

Also helpful, in the view of Oxford Analytica, the Indian general

election is over, and both India and the US have new trade

ministers.