WTO Seeks to Curtail Protectionist Measures

Pascal Lamy, director-general of the World Trade Organization, warned against the
Pascal Lamy, director-general of the World Trade Organization, warned against the "dangers of sliding into isolationism . . .'' (By Adrian Moser -- Bloomberg News)
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By Steven Mufson
Washington Post Staff Writer
Saturday, February 7, 2009

Two weeks ago, Pascal Lamy, director-general of the World Trade Organization, said in a report that the group's members "appear to have successfully kept domestic protectionist pressures under control."

But in a speech Wednesday, he sounded less sanguine, warning against the "dangers of sliding into isolationism and tit-for-tat measures, which have proven so devastating in the past."

On Monday, the WTO meets in Geneva amid rapidly rising concern over protectionist measures, export subsidies and economic nationalism that is spreading around the world as governments seek to boost their ailing companies and shield workers.

The group, which enforces the rules of free trade worldwide, isn't expected to take any action; for one thing, U.S. trade representative nominee Ron Kirk hasn't been confirmed by the Senate yet. But the meeting offers a chance for governments to try to persuade one another to slow the rush to protectionism.

Many of the steps countries are taking to shore up their industries do not violate WTO accords, which leaves countries some leeway, experts say.

"The WTO rules are very porous," said C. Fred Bergsten, director of the Peterson Institute for International Economics, a Washington think tank. "If you simply say live up to your rules, you still have massive scope for what I call legal protectionism."

Several examples were singled out by Lamy in his Jan. 23 report. India raised tariffs on some steel products and issued notifications restricting imports of some steel products last November. The European Commission announced that it was reintroducing export subsidies for butter, cheese, and whole and skim milk powder starting in late January.

China increased value-added tax rebates on its exports of some textiles, clothing, bamboo products, plastics and furniture Nov. 1, and it increased tax rebates on exports of about 3,770 items Dec. 1. Starting Feb. 1, it eased taxes on 1,730 items bound for export.

Since issuing his report, Lamy also has urged U.S. lawmakers to reconsider a "Buy American" clause in stimulus legislation under consideration by Congress.

Since many of the recent protectionist steps are legal or not covered under the WTO agreements, Jeffrey Schott, a senior fellow at the Peterson Institute, said he hoped Lamy's report would discourage such steps through "naming and shaming." On Monday, WTO members may or may not encourage Lamy to continue that strategy.

Schott said he worried about the "glass house syndrome: a disinclination about doing shaming and naming for fear that it's going to come back and haunt you."

Many experts also worry that countries will try to keep their currencies undervalued to prop up exports and bolster foreign exchange reserves.

"Countries will emulate China to run big surpluses and pile up big reserves intended to self insure against the crisis we're now in," Bergsten said. "It goes way beyond anything being discussed in Geneva." He said the currency issue should be on the agenda of the Group of 20 large economic powers, scheduled to meet April 2.

Global trade grew 4 percent last year, according to Lamy's Jan. 26 report. The World Bank estimates that it will decline 2.1 percent this year.

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