Crisis hits leaderless WTO

News Analysis: Protectionism haunts free trade as the world's watchdog fails to bite

AN OLD and familiar spectre has begun to haunt the world economy again in recent months - the spectre of protectionism.

In the US, the number of "anti-dumping" measures against foreign imports is strongly on the rise, while in many other parts of the world, reducing imports and maximising exports has become a public policy priority.

Rudderless and leaderless, the international organisation which is meant to act as a standard bearer for free trade, as well as arbitrate in trade disputes, the World Trade Organisation, seems powerless to halt the tide.

Increasingly its rulings are flouted while it seems to lack both the gravitas and the power to impose its authority.

The first visible cracks began to appear last year. Half a century ago a banana was a rare and exotic fruit; during the war and for some while afterwards, it was impossible to get them in Britain at all. Now Britons eat tens of millions of them each year. Thanks to the blossoming of world trade in the post-war era, it has become the nation's favourite fruit.

Bananas have also become the cause of one of the most bitter trade rows between Europe and the US of the post-war period. The US threatened steep tariffs on a range of European imports, including cashmere from Scotland, unless the EU ended its favouritism towards West Indian rather than Latin American bananas.

The Europeans retorted that it was opening up its banana import regime, and the unilateral US action was illegal. The World Trade Organisation found in favour of the US, allowing it to impose sanctions amounting to $191m in the first ever judgment of this kind.

No sooner had this dispute faded from the headlines than a new one has emerged. This time it concerns beef. The European Union has banned imports of US beef from cattle treated with the artificial hormone BST, on health grounds. The US plans $300m in further sanctions as a result, and so far the EU has not blinked.

These two examples are likely to be followed by other, similar battles - for example, over genetically modified foods. After years of uninterrupted progress towards ever-freer trade, tensions appear to be rising alarmingly.

One simple explanation is the economic crisis of the past two years. World trade growth has slowed sharply in value, from 3.5 per cent for both goods and services in 1997 to minus 2 per cent last year. Nor has it picked up in the first few months of 1999.

The US economy has borne much of the burden of this slowdown. Figures last week showed its balance of trade in goods and services in the red by a record $19.7bn in March, suggesting the full year figure will easily outstrip 1998's $169.3bn hole. Meanwhile, Japan has recorded a record trade surplus. And while the EU surplus has fallen slightly, this reflects weaker exports by European companies rather than higher imports of American and other goods.

Members of the US administration insist that, although the trade deficit is larger than they would like, it does not point to mounting protectionism in the US.

Robert Shapiro, Under-Secretary at the US Department of Commerce, says: "I don't believe there is any real national constituency for protectionism. Unemployment is the lowest it has been for 30 years. Protectionism needs an environment of distress, and that's not the American environment."

However, trade experts show more concern. Since 1995 the Administration has had no "fast track" authority to reach trade deals without having to refer them to Congress for specific approval - and that means new negotiations have been virtually impossible as no trading partners want to rely on the vagaries of Congressional politics.

Ironically, President Clinton lost fast-track authority thanks to an attempt to make minimum labour and environmental standards a requirement of new trade deals. Free-traders in Congress voted it down as protectionism in disguise. They were probably right: new research by Kym Anderson and Bernard Hoekman of the Centre for Economic Policy Research shows that developing countries can find markets closing when rich countries apply their own standards on the rest of the world.

There is little chance of reviving fast-track authority, according to experts, despite the current buoyancy of the American economy and jobs market. And, as a recent report from Washington's Brookings Institute observes: "If not now, when?" This casts a shadow over prospects for a new "Millennium Round" of negotiations to liberalise trade in controversial areas such as agriculture. The foundations for the most recent agreements under the WTO - on information technology in 1996, basic telecommunications in early 1997 and financial services in December 1997 - had all been laid under the prior General Agreement on Tariffs and Trade (Gatt).

What's more, the areas of trade tension are becoming increasingly controversial. Alan Winters, Professor of Economics at Sussex University, says what makes trade tensions more severe now is the fact that disputes centre on matters of scientific opinion and consumer preferences. He says: "It is going to be difficult to settle some of these disputes. They start to look very intractable."

Many observers also argue that the creation of the WTO has itself made disputes more legalistic, because the WTO has the power to judge and arbitrate them - in contrast to Gatt, which simply tried to negotiate solutions.

"Gatt was extremely pragmatic, essentially political ... It was about keeping the show on the road," says Professor Winters. To make matters worse, the WTO is leaderless at the moment. A battle to take over at the helm between Mike Moore, a former New Zealand prime minister, and Supachai Panitchpakdi, Thailand's deputy prime minister, is in a state of stalemate.

The US favours Mr Moore, an abrasive, no-nonsense politician who adopted an uncompromisingly free market approach to policy while prime minister of New Zealand. Japan wants Mr Panitchpakdi. His appointment is supported by many developing countries, who believe he might adopt a more sympathetic approach to the plight of the Third World.

The struggle for the leadership might not be settled in time for the annual ministerial meeting of the WTO in Seattle at the end of November if, as some fear, the process has to start all over again. Nor is there any leadership from the EU, whose affairs are in a state of flux after the Commission's dramatic resignation over allegations of negligence.

The trade portfolio held by Sir Leon Brittan will go to a new Commissioner some time after the 10 June European elections. The US is meanwhile pressing ahead, in this vacuum, with its own unilateral actions. As the presidential election campaign starts to grind into gear, trade has become a political football with some aggressive attempts to force open new markets.

Some politicians have come to see barriers to trade as the root cause of the burgeoning United States trade deficit, and there is growing pressure for tit-for-tat retaliation.

Professor Winters concludes: "I think good sense will prevail. But if the politicians are asleep, the trade system could be pushed so hard it cracks."

Suggested Topics
Sport
There were mass celebrations across Argentina as the country's national team reached their first World Cup final for 24 years
transfersOne of the men to suffer cardiac arrest was 16 years old
Life and Style
life“What is it like being a girl?” was the question on the lips of one inquisitive Reddit user this week
News
peopleDave Legeno, the actor who played werewolf Fenrir Greyback in the Harry Potter films, has died
Sport
Mario Balotelli, Divock Origi, Loic Remy, Wilfried Bony and Karim Benzema
transfersBony, Benzema and the other transfer targets
PROMOTED VIDEO
Arts and Entertainment
Armando Iannucci, the creator of 'The Thick of It' says he has
tvArmando Iannucci to concentrate on US show Veep
Life and Style
beauty
Sport
Luis Suarez looks towards the crowd during the 2-1 victory over England
transfers
Life and Style
Swimsuit, £245, by Agent Provocateur
fashion

Diving in at the deep end is no excuse for shirking the style stakes

News
Detail of the dress made entirely of loom bands
news
Sport
German supporters (left) and Argentina fans
world cup 2014Final gives England fans a choice between to old enemies
Arts and Entertainment
A still from the worldwide Dawn of the Planet of the Apes trailer debut
film
News
peopleMario Balotelli poses with 'shotgun' in controversial Instagram pic
News
A mugshot of Ian Watkins released by South Wales Police following his guilty pleas
peopleBandmates open up about abuse
Sport
Basketball superstar LeBron James gets into his stride for the Cleveland Cavaliers
sportNBA superstar announces decision to return to Cleveland Cavaliers
Sport
Javier Mascherano of Argentina tackles Arjen Robben of the Netherlands as he attempts a shot
world cup 2014
Arts and Entertainment
The successful ITV drama Broadchurch starring David Tenant and Olivia Coleman came to an end tonight
tv
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Sport
Four ski officials in Slovenia have been suspended following allegations of results rigging
sportFour Slovenian officials suspended after allegations they helped violinist get slalom place
News
14 March 2011: George Clooney testifies before the Senate Foreign Relations Committee during a hearing titled 'Sudan and South Sudan: Independence and Insecurity.' Clooney is co-founder of the Satellite Sentinel Project which uses private satellites to collect evidence of crimes against civilian populations in Sudan
people
Arts and Entertainment
Balaban is indirectly responsible for the existence of Downton Abbey, having first discovered Julian Fellowes' talents as a screenwriter
tvCast members told to lose weight after snacking on set
Life and Style
More than half of young adults have engaged in 'unwanted but consensual sexting with a committed partner,' according to research
tech
Life and Style
A binge is classed as four or more alcoholic drinks for women and five or more for men, consumed over a roughly two-hour period
tech
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Biztalk - outstanding opportunity

£75000 - £85000 per annum + ex bens: Deerfoot IT Resources Limited: Biztalk Te...

Trade Desk Specialist (FIX, Linux, Windows, Network Security)

£60000 per annum: Harrington Starr: Trade Desk Specialist (FIX, Linux, Windows...

Service Desk Analyst (Windows, Active Directory, ITIL, Reuter)

£35000 per annum: Harrington Starr: Service Desk Analyst (Windows, Active Dire...

Network Engineer (CCNA, CCNP, Linux, OSPF, BGP, Multicast, WAN)

£40000 per annum: Harrington Starr: Network Engineer (CCNA, CCNP, Linux, OSPF,...

Day In a Page

A History of the First World War in 100 Moments: Peace without magnanimity - the summit in a railway siding that ended the fighting

A History of the First World War in 100 Moments

Peace without magnanimity - the summit in a railway siding that ended the fighting
Scottish independence: How the Commonwealth Games could swing the vote

Scottish independence: How the Commonwealth Games could swing the vote

In the final part of our series, Chris Green arrives in Glasgow - a host city struggling to keep the politics out of its celebration of sport
Out in the cold: A writer spends a night on the streets and hears the stories of the homeless

A writer spends a night on the streets

Rough sleepers - the homeless, the destitute and the drunk - exist in every city. Will Nicoll meets those whose luck has run out
Striking new stations, high-speed links and (whisper it) better services - the UK's railways are entering a new golden age

UK's railways are entering a new golden age

New stations are opening across the country and our railways appear to be entering an era not seen in Britain since the early 1950s
Conchita Wurst becomes a 'bride' on the Paris catwalk - and proves there is life after Eurovision

Conchita becomes a 'bride' on Paris catwalk

Alexander Fury salutes the Eurovision Song Contest winner's latest triumph
Pétanque World Championship in Marseilles hit by

Pétanque 'world cup' hit by death threats

This year's most acrimonious sporting event took place in France, not Brazil. How did pétanque get so passionate?
Whelks are healthy, versatile and sustainable - so why did we stop eating them in the UK?

Why did we stop eating whelks?

Whelks were the Victorian equivalent of the donor kebab and our stocks are abundant. So why do we now export them all to the Far East?
10 best women's sunglasses

In the shade: 10 best women's sunglasses

From luxury bespoke eyewear to fun festival sunnies, we round up the shades to be seen in this summer
Germany vs Argentina World Cup 2014: Lionel Messi? Javier Mascherano is key for Argentina...

World Cup final: Messi? Mascherano is key for Argentina...

No 10 is always centre of attention but Barça team-mate is just as crucial to finalists’ hopes
Siobhan-Marie O’Connor: Swimmer knows she needs Glasgow joy on road to Rio

Siobhan-Marie O’Connor: Swimmer needs Glasgow joy on road to Rio

18-year-old says this month’s Commonwealth Games are a key staging post in her career before time slips away
The true Gaza back-story that the Israelis aren’t telling this week

The true Gaza back-story that the Israelis aren’t telling this week

A future Palestine state will have no borders and be an enclave within Israel, surrounded on all sides by Israeli-held territory, says Robert Fisk
A History of the First World War in 100 Moments: The German people demand an end to the fighting

A History of the First World War in 100 Moments

The German people demand an end to the fighting
New play by Oscar Wilde's grandson reveals what the Irish wit said at his trials

New play reveals what Oscar Wilde said at trials

For a century, what Wilde actually said at his trials was a mystery. But the recent discovery of shorthand notes changed that. Now his grandson Merlin Holland has turned them into a play
Can scientists save the world's sea life from

Can scientists save our sea life?

By the end of the century, the only living things left in our oceans could be plankton and jellyfish. Alex Renton meets the scientists who are trying to turn the tide
Richard III, Trafalgar Studios, review: Martin Freeman gives highly intelligent performance

Richard III review

Martin Freeman’s psychotic monarch is big on mockery but wanting in malice