BOFIT Viikkokatsaus / BOFIT Weekly Review 2019/26
On Monday (Jun. 24), the World Trade Organization released its 21st Monitoring Report on G20 trade measures. New measures to restrict imports have been introduced at a record pace in recent year. In the latest monitoring period (October 16, 2018–May 15, 2019), the WTO estimates that the coverage of new restrictions targeting imports amounts to around 336 billion dollars a year, an amount that corresponds to some 2.5 % of the imports of G20 countries.
Shifts in trade policy can be seen in the increase in trade coverage of import-restrictive measures, which was only larger in the immediately preceding monitoring period in 2018, when new restrictive measured covered 3.5 % of G20 imports. The WTO has made estimates of the coverage of import restrictions since 2012. Before 2018, however, the coverage of new imports subject to restrictions was only 0.1–0.6 %. Most of the recent increase reflects tariff hikes. The number of new import restrictions, however, were fewer than in the previous monitoring periods. The value of new measures to facilitate imports also hit a record level.
While the monitoring report technically catalogues trade policy measures implemented by G20 countries during the period, it also reveals simmering tensions within the WTO and in global trade. The WTO Secretariat hopes that the G20 countries will provide, among other things, clear rules on reporting of government subsidies. The report also notes that in services trade, while most new measures have facilitated trade, policies in several branches such as telecommunications and online services as well as investment in strategic fields have become more restrictive.
The WTO report avoids naming specific countries. It is not hard to guess, however, that a significant part of the reported new import restrictions is due to the trade war between China and the US. The report also shows that imports from China have overwhelmingly been the most usual target of antidumping and countervailing initiations by other G20 members (including Russia). Overall, the product groups hit hardest by these retaliatory measures have been metals, chemical products and plastics.
The WTO should be reformed in order to make its rules and operations to reflect changes in the global economy. However, the trade dispute between the United States and China will again overshadow the G20 summit in Japan on June 28–29, as well as any progress in reforming the WTO. Besides tariffs, the opening up of China’s markets and the controversies surrounding Huawei, a new stumbling block to trade negotiations is posed by US allegations concerning the involvement of three Chinese banks in a scheme to circumvent sanctions against North Korea. Revelations this week in the Washington Post have only added to uncertainty surrounding the trade negotiations between the US and China.