By Pradeep S Mehta
IT is high time the World Trade Organization used its whip, instead of its whistle, against unfair use of trade defence measures before the onslaught of protectionism escalates into fully-fledged trade wars.
In the face of the enduring economic crisis, virtually every country, other than poor ones, is backtracking to protectionism.
Given the perception that trade defence measures built into its rule-based system are increasingly being misused as an excuse for protectionist measures, it may be unfair to blame the multilateral trade body for not acting.
Many of these policies are technically not violations of binding commitments made by its members.
For instance, “buy local” campaigns and work visa regulations may not be challenged on grounds of breach of commitments per se, though they are unfair trade practices by any means.
Practitioners of protectionism circumvent the legal reach of the WTO by taking advantage of flexibilities allowed by the system for dealing with contingencies or by circumventing the rules.
Little can be done to lock in flexibilities, elegantly known as measures of administered protection and commonly referred to as WTO-compliant trade measures.
In fact, the furore for more and more flexibility is only gaining currency in the Doha Round negotiations.
Out of the agreements on safeguards, antidumping and countervailing duties – the central provisions for administered protection – antidumping is by far the most popular instrument, simply because invoking it is a lot easier.
Economist TN Srinivasan has, however, christened it as a toxin. An antidumping initiation requires only a low threshold level of injury, has no compensation clause for wrong indictment and cannot be retaliated by the aggrieved parties.
The annual tally of antidumping initiations in 2008 jumped up by more than a quarter compared to the previous year. While all this might not necessarily have occurred as a reaction to the economic crisis, that the most frequently used instrument is the most painless one is not a coincidence.
Freely choosing between antidumping and safeguards as contingency trade blocking measures according to convenience is a deplorable situation, since they are meant for two distinct types of contingencies respectively, though the former should only be applied as a punitive action against below-cost pricing and the latter as a safety valve.
More often than not, the cases eligible (and not eligible) for both measures are almost indistinguishable, giving a choice to the applying country.
As far as evading rules is concerned, the WTO is apparently even more helpless seeing that today’s tradeaucrats are exceptionally innovative and often comically imaginative when it comes to cooking up “legitimate” reasons for meddling with free trade.
In May 2009, the US Customs and Border Protection introduced import restrictions on switchblade knives citing “health and public safety.” The admission that knives with spring-assisted opening mechanisms are suddenly life-threatening in a country with the most liberal gun laws in the world is touching.
More often than not, it is the affected domestic industry which eggs the government to take up trade defence measures against imports because they cannot stand competition.
In order to make headway in stopping protectionism from escalating into trade wars, instruments for administered protection must be reclaimed for the purpose they are designed.
Reforming these instruments to squeeze out casual users in the near future may not be practical, though this agenda should not be left off from the plans for the long term.
One way out of this predicament could be that of diplomacy. Publicising trade distortive measures adopted worldwide would tease away defaulters to some extent.
The author is the Secretary General of CUTS International and can be reached at email@example.com. Atul Kaushik and Joseph George of CUTS contributed to this article. The views expressed are their own