WTO METING TO MONITOR ACTION IN RESPONSE TO THE GLOBAL

UNCLAS GENEVA 000459


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E.O. 12958: N/A
TAGS: ETRD WTRO USTR
SUBJECT: WTO METING TO MONITOR ACTION IN RESPONSE TO THE GLOBAL
ECONOMIC SITUATION


1. Summary - On April 14 the WTO held a meeting of the WTO's Trade
Policy Review Body (TPRB) for the purposes of monitoring actions
taken by WTO Members and observers in response to the global
economic situation. The meeting was relatively low key and
non-contentious. Members refrained from finger pointing, though
China complained that the Secretariat's report for the meeting went
too easy on the United States on one issue. In introducing the
written report to the meeting, DG Lamy noted that the economic
situation has deteriorated since the WTO's last meeting on the issue
in February. He reported that the pressure for protectionist
measures was increasing and while there was no widespread resort to
protectionism, he saw some slippage and danger of an incremental
buildup. Delegations that spoke were generally of one mind in
welcoming the DG's report, stressing the importance of avoiding
protectionism and in declaring their support for concluding the DDA
negotiations to strengthen the WTO as a bulwark against
protectionism. Many speakers welcomed the G20's pledge on avoiding
protectionism and a number of Members mentioned that they were
working on their own "standstill" commitment. Several Members
expressed concern that the number of trade remedy actions was
increasing while others attempted to introduce this issue of
compliance with WTO dispute settlement rulings as germane to the
monitoring process. Some Members also suggested that the financial
crisis highlighted the need for serious work in the WTO on subsidies
for services industries. DG Lamy announced that the Secretariat's
next monitoring report will be issued in mid-June and the next
meeting of the TPRB in this monitoring mode will take place at the
end of June. End Summary


2. Members were generally happier with the Secretariat's report for
this meeting than the one that was prepared for the TPRB meeting on
this same subject in February. This stemmed largely from the fact
that the Secretariat invited input from Members and gave each Member
that was mentioned in the report and opportunity to comment on
anything that was said about them. However, there were grumblings
from a few Members. China complained that the Secretariat had gone
easy on the United States in mentioning a Congressional ban
affecting poultry imports from China - by contrast he stated that
the report's characterization of the Chinese ban on Irish pork had
not received commensurate kid glove treatment. Their complaint was
about language in the listing saying that the action was taken for
health reasons - a view they contest. . Mexico was also unhappy
with a reference to the temporary suspension of tariff privileges
for the United States that had been put in place because of the
trucking issue, noting that these measures had been necessitated by
U.S. failure to meet its NAFTA commitments. Ecuador complained that
the Secretariat had not taken its advice to include non-compliance
with dispute settlement rulings (e.g., bananas) in its report. Cuba
seconded them. Russia said that 20 percent (6 individual items) of
the listings in the Secretariat report dealing with them were
incorrect.


3. Most statements by delegations were limited to the general
points in the summary above but a few interventions stood out.
India said that the G20 recognized that the pledge to avoid
protectionism could fall on deaf ears, and therefore included new
language calling for rollback of transgressions. India noted that
doomsday predictions of a return to Smoot/Hawley had proven to be
misplaced. The India rep said it was wrong to think that the
current situation was the result of some bad decisions by U.S.
banks. There are structural issues that need to be addressed. No
country can expect that its debts will perpetually be financed by
others. A new equilibrium will also require changes regarding
currencies. He said that we need to pay particular attention to
trade distorting subsidies since they put developing countries at a
serious disadvantage and can be hard to reverse. He expressed
particular concern about countercyclical agriculture subsidies since
they forestall adjustment and leveled a similar criticism of
subsidies to the automotive and steel industries. He called for
more serious attention to the issue of subsidies for services
industries. The Indian rep said he was intrigued by the WTO's
estimate that a successful DDA would be worth $150 billion to the
global economy, citing various estimates by others that had ranged
from $40 billion to $400 billion. He recalled that a former U.S.
Ambassador to India had said that the role of economic forecasters
was to make astrologers look reputable. He expressed interest in
seeing details on the WTO's forecast, including an indication of who
the beneficiaries would be. The U.S. rep joined him in expressing
interest in further details.


4. Brazil expressed concern that efforts to resist protectionism
are slipping and, as in the past, laid the blame at the feet of the
developed countries. The Brazilian rep expressed concern that
subsidies for cotton and dairy were already increasing and said that
the continuation of cotton subsidies in the face of adverse dispute
settlement ruling raised questions about the credibility of the
system. He recognized that stimulus measures are needed, but argued
that best practice was subsidies aimed at consumption. He further
noted that measures aimed at "buy national", while possibly
consistent with WTO rules, are unhelpful and send all the wrong
signals at this time.


5. The EU rep noted that the EU has refrained from raising tariffs
and continued to meet its commitments. Its dairy subsidies are
within WTO rules and are of limited scope and duration. He insisted
that trade remedy measures are legitimate, noting that while the
EC's use of them has not increased much, the same cannot be said for
some of the emerging economies.


6. The U.S. rep said that our current assessment is that the system
is working pretty well to ward off protectionism. However, the
system is being sorely tested and continuing vigilance is important.
In this regard, he noted the importance of the WTO's standing
committees and called for Members to provide renewed energy to this
day- to-day work.


7. The Australian rep expressed concern with statements suggesting
that protectionism was not a great threat. He noted that
unemployment was still on the rise and that protectionist pressure
will increase. He also noted that claims that trade distortive
measures (e.g., EC dairy subsidies) are WTO consistent miss the
point.


8. Hong Kong China welcomed the G20's commitment on protectionism
and said that it was working with several other countries on their
own "standstill" commitment. Switzerland, Turkey, Chile, Singapore
and New Zealand mentioned in their statements that they support this
effort.


9. Ecuador made a strong plea for understanding of trade measures
it has implemented for balance of payments reasons. The Ecuadoran
rep noted that its options are limited since Ecuador uses the
dollar as its currency and therefore cannot have a monetary policy
and that Ecuador has lost 2 million people to emigration.


10. In one of the more remarkable interventions of the day, the
Indonesian rep called on other Members to follow its example of
restraint, notwithstanding the lengthy list of new Indonesian trade
restrictions in the Secretariat's report.


11. Another point made by several Members, in particular Turkey,
Singapore, Colombia, and New Zealand, was the interdependent nature
of the global economy made it difficult to adopt certain forms of
protectionism, i.e., high tariffs on inputs. Instead, these Members
viewed creeping incremental protectionism (e.g., non-tariff
barriers) as measures to monitor and prevent.


12. Brazil, India, and Hong Kong China also noted with skepticism
those measures that are designed to help a domestic industry and are
to be temporary in nature. They posit that these measures are more
likely to become permanent, and that domestic support for certain
industries (autos, chemicals, steel, textiles, footwear) only delays
the need to vastly overhaul and restructure and relocate these
industries. Hong Kong China pointed to the Multi-Fiber Arrangement
as an example of a short-term solution to a particular issue that
has taken over thirty years to take apart.


13. In his closing statement, DG Lamy said the purpose of this
process was becoming clearer - monitoring creates transparency,
transparency promotes public scrutiny, and public scrutiny creates
pressure which helps discourage protectionism. He urged Members not
to fall into the trap of arguing over the definition of
protectionism. On services subsidies, he noted that it was already
within the negotiating mandate so it is up to Members to reignite
work on it. He took on board the various suggestions for
improvements to the Secretariat's monitoring reports but did not
respond on the specifics. On the $150 billion figure, he said it
was a simple calculation based on duties foregone assuming trade
flows remain the same. He said it would be a reduction from the
$250 billion in duties that are currently collected now and compares
to the $500 billion in duties that would be collected if Members
applied tariffs at their legal limits under WTO commitments. He
offered to arrange a further briefing for any Members that were
interested.


14. The next report from the DG will be issued in mid-June with a
follow-up meeting toward the end of June.


SHARK