Fears rise of global protectionism

Renewed global economic weakness is threatening a fresh wave of protectionism, compounding government restraints on international commerce introduced earlier in the worldwide financial crisis, according to the EU’s top trade official.

Karel De Gucht, the EU trade commissioner, also sounded a downbeat note about the forthcoming meeting of ministers from the World Trade Organisation’s member countries, saying they had no real plan to strengthen the WTO given the stasis in the so-called “Doha round” of trade talks.

Mr De Gucht was speaking on the sidelines of the US-EU summit in Washington on Monday, which was dominated by discussions of the eurozone sovereign debt crisis. Jose Manuel Barroso, president of the European Commission, said on Friday that the EU had yet to find a definitive solution to the crisis. “As long as that does not happen we will have very serious problems”, Mr Barroso said.

Mr De Gucht, in an interview with the FT on Monday, said only 17 per cent of the worldwide total of supposedly short-term protectionist measures put in place in the first phase of the global financial crisis had been reversed. “It is true that in the 2008-2009 crisis there was not a significant rise in protectionism,” he said in an interview. “But … the protectionist measures taken during that time and were supposed to disappear – most of them are still in force … Now you see a second wave of protectionism that is more structural.”

China has recently been criticised for imposing new export restrictions and trying to force foreign investors to share intellectual property. Mr De Gucht added that Russia, which is on the brink of joining the WTO after 18 years of negotiations, had tried to maintain so-called “local content” rules for foreign investors to stipulate a minimum amount of domestic input, and that Brazil was also asking for technology transfer agreements.

Mr De Gucht said the WTO needed to be strengthened to restrain such actions. Trade ministers from all the organisation’s 153 member countries meet in Geneva next month, the first general summit since 2005. But “not much of what we have been doing recently makes the WTO stronger – I would say rather the contrary,” he said. The meeting will attempt to update the WTO’s government procurement agreement, which opens public contracts to international bidding, but the EU is currently unhappy with the limited offers of liberalisation made by Japan and the US.

The US has sought to extend trade rules and put pressure on China by proposing a deal with a group of Asia-Pacific nations including Australia, Vietnam and Malaysia. Mr De Gucht said that he wished the US well with the deal, which seeks to introduce new rules constraining the actions of state-owned enterprises. The EU has been seeking similarly tough rules in its negotiations with India and other countries.

But the commissioner added that EU’s attempts to negotiate with the Association of South-East Asian Nations (Asean) – which have in effect stalled –showed that such agreements were “very difficult to do”.

“The regional integration among these countries compared to, say, the regional integration of the EU is quite different,” Mr De Gucht said. “It is not that easy to make agreements with a region. Probably that is what the US is going to witness – that it has its own difficulties, its own intricacies.”