The darkening world trade picture

It’s been a turbulent several days in the world of international trade. In the face of complaints to the World Trade Organization about its recent trade policy, Argentina is announcing….more trade restrictions:

Argentina slapped new import tariffs on capital goods on Wednesday as President Cristina Fernandez works to shore up slowing local industry with protectionist measures that are riling some trade partners.

The center-left Fernandez has imposed tough and sometimes unorthodox controls on imports this year in a bid to keep factories open and prop up the trade surplus in Latin America’s third-biggest economy.

Such steps led the European Union to file a suit against Argentina at the World Trade Organization in May.

Meanwhile, the European Union has suggested that Russia has still not complied with the obligations it made as a condition for joining the WTO:

Russia will probably be in breach of global trade rules when it joins the World Trade Organisation this year, the EU executive said on Wednesday, signalling Brussels would feel justified in filing a case against the club’s newest member.

Russia is set to join the WTO once its parliament rubber-stamps its application. But the European Commission said in a report that Moscow will be in breach of its obligations in several areas if it does not take steps to dismantle the trade barriers it has put up.

And in the United States, business groups are warning that a bill in Congress to hold Russian officials accountable for human rights abuses may prevent U.S. companies from enjoying the trade liberalization that has occurred in Russia:

Congressional sponsors want the bill linked with or incorporated into another bill granting Russia permanent normal trade relations (PNTR) status, something the United States wants to do by August, when Russia is to join the World Trade Organization. Unless trade relations are normalized by then, U.S. exports to Russia would face higher tariffs than those from other nations.

For their part, Russian officials have insisted that passage of the proposed legislation would lead to retaliatory action.

These events come against the backdrop of the stalled Doha trade negotiations and what WTO chief Pascal Lamy has described as a post-2008 pattern of increasing protectionism. In a speech last week in Bangkok, Lamy reached for a medical analogy to describe the dynamic: "Protectionism is like cholesterol: the slow accumulation of trade restrictive measures since 2008 — now covering almost 3 per cent of world merchandise trade, and almost 4 per cent of G20 trade — can lead to the clogging of trade flows." A new WTO report, prepared for the upcoming G20 summit, gathers the evidence:

The past seven months have not witnessed any slowdown in the imposition of new trade restricting measures by G-20 economies.  These are adding to the stock of restrictions put in place since the outbreak of the global crisis.  At the same time, the promised removal of existing restrictions is very slow.  G-20 governments need to redouble their efforts to resist protectionist pressures and take active steps to keep markets open and advance trade liberalization.