State of global trade assessed

State of global trade assessed

AT a time when the U.S. Department of Agriculture forecasts booming exports for American agriculture, what happens on the international trade front becomes increasingly important to the sector.

In November, USDA projected that foreign sales will reach $145 billion next year, generating an economically important trade surplus in agricultural products of $30 billion.

World Trade Organization director general Pascal Lamy recently made three important observations on the state of trade around the world.

First, global trade is growing at a slower-than-normal rate -- just 2.5% this year and a projected 4.5% next year. Second, despite tough economic conditions, governments have mainly managed to reject protectionist pressures. Third, although farm subsidies remain high despite good prices, governments in the richest countries are converting many farm subsidies into the least-trade-distorting, or "green box," format.

Lamy's assessment came in his last annual report to the WTO General Council, which met Dec. 11. The former French and EU official steps down from his WTO post next September.

"The global economy has encountered increasingly strong headwinds over the past few months that have set back world trade and output growth," Lamy reported, noting that conditions were worsened by government budget and debt problems in some of the world's richest economies.

Many governments have responded to the 2008-09 economic downturn by rejecting calls from some domestic industries for the most protectionist measures, such as import bans. Yet, many governments have applied the brakes -- slowing without stopping trade.

"On the whole, governments have continued to resist domestic pressures to erect trade barriers, although some of them have put in place trade-restrictive measures," Lamy said.

The number of sanitary and phytosanitary (SPS) measures and technical barriers to trade reported to WTO are rising. These are the devices most often used to restrict trade in agricultural products. The good news is that countries are making better use of the WTO framework to negotiate solutions to their differences over these measures.

All of this means that there is less free trade overall in agricultural products and other goods now than prior to the 2008-09 economic downturn.

Beyond import restrictions for food products, some governments have also put measures in place over the past year restricting exports.

On farm subsidies, Lamy said government support for the agriculture sector continues to trend higher, as it has for a decade. The good news is that more of that support today comes through programs that have the smallest impact on trade.

"Structural reforms have been taking place in some developed countries as they move away from market price support toward, according to the OECD (Organization for Economic Cooperation & Development), less trade-distorting trade support," Lamy reported.

"On the other hand, OECD and WTO data show that, at least in the years up to 2010, the trend in market price support in some OECD countries and some developing countries has been increasing despite higher world prices," he added.

With the global round of trade talks stalled, governments continue to press ahead with regional trade agreements, which now number more than 330.


Volume:84 Issue:51

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