Growth in world trade is expected to remain below four per cent in 2012, according to World Trade Organisation (WTO) Director General Pascal Lamy. In 2013, growth in global trade is expected to touch 5.6 per cent, which would be close to the six per cent average growth that we have been seeing over the past 15 years.
Lamy, therefore, urged governments across the world to go slow on protectionist measures that are hurting global trade and “make no sense”. This, then, brings us to the World Trade Report 2012 that has been published by the WTO and focuses on non-tariff measures that impinge on free trade flows across markets.
The report is also a clear pointer to the fact that tariffs are slowly becoming less important and non-tariff barriers, or NTBs, have become more significant for negotiators who want global trade to remain free and transparent.
Importantly, countries do have the right to adopt some of these measures including sanitary and phytosanitary (SPS) measures and technical barriers to trade (TBT) as long as they meet the criteria set for such imposing barriers.
The biggest challenge for negotiators would be to identify and address non-tariff measures that hurt services export. This is because the services sector is one of the most regulated sectors across countries.
As the report points out, the principal concern, among member countries, is that common rules at the multilateral level will result in a loss of regulatory freedom to pursue non-trade objectives for services. One way, according to the WTO, to overcome concerns regarding regulatory autonomy would be to focus the discipline on the necessity of the measure used to achieve its stated purpose. Another, the multilateral agency says, would be to foster greater awareness of the trade and investment implications of regulatory practices.
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The report goes on to point out that the WTO has the experience of successfully developing a text that supports competition in the telecom sector. Such experience could be used in other sectors in which there might be potential for the use of similar instruments. Identifying possible areas for the use of trade instruments for pro-competitive regulation, according to the WTO, would require action by a wide range of national, regional and international agencies in order to expand regulatory dialogue and cooperation.
The WTO recognises that some domestic regulations are outside the scope of market access negotiations, but nevertheless have an impact on trade. The challenge, the multilateral body says, will be to find ways to ensure that they fulfill their stated objectives in a manner that is not more burdensome than necessary.
Thus, the focus of work in the General Agreement on Trade in Services, or GATS, has been on negotiating a set of disciplines on domestic regulation to ensure that these measures are based on transparent and objective criteria, are not more burdensome than necessary to ensure the quality of the service and, in the case of licensing procedures, are not in themselves a restriction on the supply of services. The experience of the SPS and TBT agreements points towards the need for a similar set of disciplines in services to eliminate or reduce requirements that are not necessary for the objective sought, the WTO said.
This brings us to the point that Lamy is making in his recommendation to member governments that there is a need for countries to look at their regulations and estimate if they are transparent and provide a level playing field to other countries. Given the rising trend in investments across the globe by several companies in most sectors of manufacturing and services, it will be important for governments to understand that the need for transparency will remain high if they want to remain an attractive investment destination.
Sudden rise of non-tariff barriers aimed at particular countries from where there is a surge of imports has been observed across nations. These knee-jerk responses by governments to protect local industry against fair but competitive imports have to be checked if global trade has to rise to levels witnessed before.
The writer is Principal Adviser with APJ-SLG Law Offices