World Bank urges tougher G20 stand on protectionism

Tue Mar 17, 2009 6:38pm EDT
By Doug Palmer
WASHINGTON (Reuters) - The World Bank urged the group of 20 leading developed and developing nations on Tuesday to toughen their stance against protectionism by agreeing to report any new subsidies or trade-restricting measures to the World Trade Organization every three months.
"Leaders must not heed the siren-song of protectionist fixes, whether for trade, stimulus packages or bailouts," World Bank Group President Robert Zoellick said in a statement."Economic isolationism can lead to a negative spiral of events such as those we saw in the 1930s, which made a bad situation much, much worse."
G20 leaders, meeting in Washington in November amid the growing global financial crisis, promised not to impose any new trade-restricting measures for 12 months.
But since then, 17 members of the G20 and additional other countries have implemented a total of 47 measures that restrict trade, the bank said its research showed.
Increased tariffs account for about one-third of the new measures and include Russia hiking duties on used autos and Ecuador boosting duties on more than 600 items, the bank said.
Argentina has imposed new "nontariff barriers" on imports of auto parts, textiles, TVs, toys, shoes and leather goods and Indonesia has said certain foreign goods -- including garments, footwear, toys, electronics, food and beverage -- would be only permitted in five ports and airports, the bank said.
"Subsidies proposed for the auto industry have proliferated and total some $48 billion worldwide, mostly ($42.7 billion) in high-income countries," the bank said.
That includes a U.S. direct subsidy of $17.4 billion to its big three automakers and other subsidies provided by Canada, France, Germany, United Kingdom, China, Argentina, Brazil, Sweden and Italy, the bank said.
At next G20 leaders meeting in London in early April, countries should commit to providing the World Trade Organization with quarterly reports on new trade restrictions and industrial and agricultural subsidies, the bank said.
Countries should also provide a mandatory analysis of the impact of the new measures on employment.
Even though the overall effect of the new trade restrictions has been minor, they could have significant negative effect on certain exporters, it said.
G20 should agree to press forward with technical discussions on the Doha round of world trade talks, even while formal negotiations are in abeyance, the bank said.
The cost of failing to complete the Doha round is rising as the economic crisis continues and countries are tempted to raise agricultural subsidies and tariffs to maximum levels now allowed under global rules, the bank said.
The World Bank report also noted China had banned Irish pork and rejected some Belgian chocolate, Italian brandy, British sauce, Dutch eggs and Spanish dairy products.
It said India has banned imports of Chinese toys and the European Union has provided new export subsidies for butter, cheese and milk powder, a "particularly egregious" move since countries have tentatively committed in world trade talks to eliminate that form of support.
Both China and India have also increased rebates under their duty drawback system for exporters. "The timing of these measures raises questions," although the amount of subsidies involved is less clear, the bank said.
(Reporting by Doug Palmer; editing by Jackie Frank and Cynthia Osterman)