Study: No "widespread" trade restrictions in recent months (1st Lead)

Sep 14, 2009, 11:36 GMT

Geneva - Since April there have been no 'widespread' trade or investment restrictions as a reaction to the global financial and economic crisis, but there have been smaller-scale moves against open commerce, according to a report released Monday by international trade organizations.

The 'main risk' was that major economies would 'continue to cede ground to protectionist pressures, even if only gradually, particularly as unemployment continues to rise,' further impacting trade volumes even after the economy begins to recover.

The report was jointly issued by the World Trade Organization (WTO), the Organization for Economic Cooperation and Development (OECD) and the United Nations Conference on Trade and Development (UNCTAD) ahead of the Group of 20 (G20) meeting in Pittsburgh later this month.

The grouping in April had requested the agencies monitor trade at its last meeting in London.

'In some cases, G20 members have raised tariffs and introduced new non-tariff measures, and most of them have continued to use trade defence mechanisms. Two have re-introduced agricultural export subsidies,' the report said, calling the moves 'sand in the gears' of international commerce.

Trade financing appeared to have loosened up from the start of the year, though there were still shortages of credit.

In regards to governmental policy to cope with the crisis, stimulus packages and bailouts in some cases contained elements that 'favoured domestic goods and services at the expense of imports' and 'some support schemes can discriminate against foreign-based institutions or act as barriers to outward investment flows.'

Governments needed an 'exit strategy' from these macroeconomic policies, the report urged, saying that protectionist measures stood the chance of increasing as the labour market continued to suffer.

The International Labour Organization and other think-tanks believe economies will continue to shed jobs even after financial markets begin their recovery.

'Trade and investment policy risks remain and are likely to continue to do so until economic recovery is well-rooted and job and business opportunities have started to grow again,' the trade report said.

Overall, the agencies said governmental policy had been 'reassuring,' but warned that the global crisis had not yet ended.

The report kept previous estimates that the volume of world merchandise trade will contract this year by 10 per cent.

The study also noted that June was the first month since the crisis hit in which most major traders recorded positive month-on-month export growth, which was 'a good indication that international trade flows are beginning to normalize.'

The growth skipped over much of Africa and the Middle East, however.

Foreign direct investment flows, which dropped 14 per cent last year, are projected to fall by 30-40 per cent in 2009.