The World Trade Report is an annual publication that aims to deepen understanding about trends in trade, trade policy issues and the multilateral trading system.

The World Trade Report 2009 examines the range of measures that governments may call upon in trade agreements and the role that these measures can play when governments face an economic crisis. The Report provides an economic, legal and political economy analysis of the key features of different types of measures and illustrates the benefits and costs associated with such measures.

The Report also analyses whether WTO provisions provide a balance between giving governments the necessary flexibility to face difficult economic situations and at the same time limiting the use of these provisions for protectionist purposes.

One of the conclusions of the Report is that transparency and effective monitoring make a decisive contribution to managing trade policy, especially in adverse economic circumstances.

Key elements of the Report:

❏Trade agreements foresee a range of measures, commonly referred to as contingency measures or safety valves, that countries may use to manage adverse circumstances. The Report adopts a broad defi nition of contingency measures, which can take many forms. These include anything that modifies or reverses a commitment under a trade agreement. They can also include actions that take advantage of a gap between commitments and policies actually applied, or simply involve measures not covered by an agreement but which have trade implications.

❏ The design of contingency measures is frequently a central element of negotiations and is instrumental to the achievement of deeper commitments. Contingency measures provide a trade agreement with a certain degree of flexibility that is essential to allow parties to make long-term commitments while preserving their ability to adapt to a changing environment. Therefore, they are essential instruments to allow countries to make greater liberalization commitments.

❏ Contingency measures are essential for the effectiveness and stability of a trade agreement, but they need to be well balanced. Contingency measures preserve the credibility of an agreement. An agreement that foresees the possibility to use certain measures to manage unforeseen circumstances of economic or non-economic difficulties has a better chance of remaining robust than an agreement that results in regular non-compliance. But contingency measures need to strike a balance between flexibility and commitments. Too much flexibility may undermine the value of commitments but too little may render the rules unsustainable.

❏ Trade contingency measures adopted by members can involve both benefits and costs. Therefore, the design of such measures should aim at limiting the circumstances when they can be used as a protectionist device. It is important to distinguish between the motivation for having flexibilities in trade agreements and their effects. Flexibilities allow governments to commit to deeper liberalization in a trade agreement while reducing the economic and political opposition to the agreement. However, the fact that trade contingency measures are necessary to ensure further liberalization does not mean that there are no negative consequences. In the absence of market failures, trade restrictions will cause losses in economic welfare.

❏ The design of contingency measures should not undermine the role of trade agreements. Contingency measures should not be designed in a way that upsets the balance of concessions that parties commit to in a trade agreement, and they should not be so flexible to undermine the government’s objective of making a binding commitment to the private sector.

❏ Some features of the multilateral rules that apply to trade contingency measures have an important bearing on how the balance between flexibility and commitments is struck. These features include the standards for testing injury to domestic industry and causality, whether compensation is required, and whether a measure is temporary. Despite some differences, the legal provisions on safeguards, anti-dumping actions and countervailing duties ensure that these measures can be used when domestic industry is injured. No consideration is taken of how the economy as a whole is affected – a feature of the system regarded as a weakness by some.

❏ Differences in legal frameworks and political economy factors help to explain how governments choose among contingency measures. This decision depends on how easy it is to invoke a measure, the possibility to discriminate among sources of imports, the possibility to extend the period of applicability of a measure, reputation costs, and whether the government may be required to provide compensation. While multilateral agreements have increased uniformity among countries in respect of trade remedy practices, significant differences nevertheless remain in terms of procedural and substantive issues.

❏ In times of economic difficulties governments are often under pressure to adopt measures to restrict trade. Contingency measures play an important role in maintaining a rule-based system of multilateral trade. In the last few months trade has contracted more than at any time since the 1930s, as a consequence of the dramatic downturn provoked in the first instance by a fi nancial crisis. In the 1930s the contraction in trade was accompanied by a strong wave of protectionism. But resorting to protectionist measures appears to have prolonged and deepened the crisis. Evidence to date shows a certain increase in the use of measures that restrict trade in 2008 compared with 2007, but so far against a background of general restraint.

❏ Transparency and effective monitoring make a decisive contribution to managing trade policy, especially in adverse economic circumstances. Free-flowing information on policies affecting trade is essential for cooperation among countries seeking to manage the crisis. Comprehensive and timely notifi cation of trade contingency measures to the relevant WTO bodies is needed to ensure proper monitoring.

Visit World Trade Report 2009 Download Page

You can download World Trade Report 2009 in PDF format.

CONTENTS
ABBREVIATIONS AND SYMBOLS ................................vii
ACKNOWLEDGEMENTS ....................................ix
DISCLAIMER .............................................x
FOREWORD BY THE DIRECTOR-GENERAL ................xi
EXECUTIVE SUMMARY ...........xiii
I THE TRADE SITUATION IN 2008-09 ................. 1
A INTRODUCTION .............................. 1
B OVERVIEW OF TRADE AND PRODUCTION DEVELOPMENTS IN 2008-09 ... 3
C MERCHANDISE TRADE, VOLUME (REAL) TERMS, 2008 ............ 5
D MERCHANDISE AND SERVICES TRADE, VALUE (NOMINAL) TERMS, 2008 ...... 7
II TRADE POLICY COMMITMENTS AND CONTINGENCY MEASURES .... 19
A INTRODUCTION ................ 19
B FLEXIBILITY IN TRADE AGREEMENTS ............ 21
1. Economic theories of trade agreements and the role of flexibilities ................ 21
2. Circumstances for suspension of commitments and flexibility measures
built into the WTO agreements ..........................30
3. Conclusions .................................39
C ECONOMICS, DISCIPLINES AND PRACTICES ........ 47
1. Safeguards ............ 47
2. Dumping and anti-dumping measures ................65
3. Subsidies and countervailing duties ...............84
4. Other selected measures of contingency protection ..........102
5. Choosing among different measures .................. 114
6. Conclusions ........................ 117
D EMPIRICAL EVIDENCE .........................127
1. Patterns and trends in the use of contingency measures .....................127
2. Contingency measures and the multilateral trading system ..........................142
3. Factors explaining the use of trade contingency measures ............147
4. The economic impact of contingency measures ....................152
5. Conclusions ..................156
E CONCLUSIONS ..............159
BIBLIOGRAPHY ................................161
TECHNICAL NOTES ..............................169

Comments (0)

Name

Email

Comment

smaller | bigger

Add Comment