The G20 leaders' good intentions on trade rules are not always put into practice

While the G20 leaders pressed forward on financial reform, tasking their officials to deal with financial reform in the light of the global financial meltdown, G20 leaders were quick to commit to an open global economy recognizing, as they stated in their first statement, "that these reforms will only be successful if grounded in a commitment to free market principles, including the rule of law, respect for private property, open trade and investment, competitive markets, and efficient, effectively regulated financial systems."

The G20 leaders further declared it of critical importance to reject protectionism and not to turn inward. At their Washington meeting they committed to the following: "In this regard, within the next 12 months, we will refrain from raising new barriers to investment or to trade in goods and services, imposing new export restrictions, or implementing WTO inconsistent measures to stimulate exports." This strong collective statement has become known as the "standstill provision."

For extra emphasis on the importance of trade to global economic health and the need to avoid raising barriers to trade, G20 leaders tasked their trade ministers to achieve the following: "Further, we shall strive to reach agreement this year on modalities that leads to the successful conclusion to the WTO's Doha development agenda with an ambitious and balanced outcome."

So two strong commitments were undertaken in the first G20 leaders' summit. What has been the followup? Certainly from the rhetorical level, the G20 leaders have pressed their commitments. In London, they noted that for the first time in 50 years global trade growth was falling. The G20 leaders recommitted to the standstill provision and, in fact, extended the standstill provision to the end of 2010. Finally, and with respect to the Doha development round, the G20 committed to "reaching an ambitious and balanced conclusion to the round."

However, what have the practical effects been? Though the Doha round was launched to great success, by the Doha midterm ministerial held at Cancun in September 2003, the Doha round ended in deadlock. A new geography appeared. New coalitions strongly supporting development and intent on undoing aspects of the Uruguay round that had proved unfair to developing countries were created. These coalitions of southern countries -- the G20 trade coalition (under various guises) included the Big Three -- the newly emerging powers -- Brazil, China and India -- and a number of developing countries. The "new geography" and the rise particularly of China and India have led not to a successful conclusion of the Doha round but to grinding stalemate.

Thus, notwithstanding the muscular trade statements at the G20 leadership summits, the results have been disappointing. Senior officials met in Geneva in December following the G20 leaders' summit, but failed to make progress in the critical four areas identified by WTO director-general Pascal Lamy. As a result, Lamy called off the hoped-for December ministerial to mark negotiator progress. While advocates hope that a series of high-level meetings this summer will mark progress, few expect any progress until the fall at least. And while the United States has put in place Ron Kirk as the new Office of the United States Trade Representative, it is still not clear that the new U.S. administration will feel the need to offer major concessions to help move the round.

As for the threat of new barriers to investment and trade in goods and services, countries are reacting to recent deteriorating trade export statistics with measures that appear to raise the spectre of trade protectionism. In November, China, for instance, began offering partial rebates of value-added taxes for thousands of goods produced for export though it had scaled back such measures in 2007. Many countries, including Canada, raised the trade protectionist spectre with the Obama administration's, or, more correctly, the U.S. Congress's inclusion of various "buy America" provisions in the U.S. administration's almost $800-billion stimulus package.

In February, Elisa Gamberoni and Richard Newfarmer, both affiliated with the World Bank, released an article that reflected efforts at the bank to identify and list possible trade protectionist measures. The article identified that 17 of the G20 had implemented 47 measures, "whose effect is to restrict trade at the expense of other countries." The authors acknowledged, however, that the listed measures that had been identified from October through February 2009 "had only marginal effects on trade."

Notwithstanding the G20 fillip, precious little has appeared at the WTO that would suggest successful movement on the Doha round. As for protectionist trade measures, G20 countries have, notwithstanding the standstill pledges, to feel the pressure to favour domestic initiatives even at the cost of free trade.

To date these measures have not had a dramatic impact, but rising unemployment and falling growth could prove irresistible to current governments.

In an effort to expose empty country rhetoric, foundations and think tanks, including the Centre for International Government Innovation (CIGI), are working to hold these countries to their no-protectionist standard. CIGI and others are working to identify trade protectionist measures through a G20 network of experts and have these measures placed on a designated website portal.

Alan S. Alexandroff is a senior fellow at the Centre for International Governance Innovation in Waterloo.

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The opinions expressed in this article/multimedia are those of the author(s) and do not necessarily reflect the views of CIGI or its Board of Directors.