Features
China’s Rush for FTAs
China seems to be in rush to go in for more FTAs, possibly because of snail progress that WTO is making on Doha Round. It is poised to make great progress in establishing multilateral free trade areas (FTA) in the next few years, after a decade's efforts to promote bilateral FTAs since the nation entered the World Trade Organization (WTO) in 2001.
During the first China-Eurasia Expo held in Urumqi in the Xinjiang Uygur autonomous region, in September, high-level officials from member nations of the Shanghai Cooperation Organization (SCO) and experts called for the establishment of a massive regional FTA to expand trade among one-fourth of the world's population. "China believes that relevant parties should make full use of the current mechanism to discuss the feasibility of setting up an FTA among SCO member nations," Vice-Minister of Commerce Zhong Shan said during the SCO Business Day in Urumqi on Sept 2.
Founded in 2001 in Shanghai, the SCO includes China, Kazakhstan, Kyrgyzstan, Russia, Tajikistan and Uzbekistan, while Mongolia, Pakistan, Iran and India are observer states.
"China has made significant achievements in the establishment of free trade zones during the past 10 years," said Fan Ying, a professor at the China Foreign Affairs University. Since China entered the WTO, it has stepped up efforts to expand its free trade system. China has signed 16 FTAs with 28 economies across the world.
"With the Doha (Round of the WTO talks) stalled, FTAs are an alternative way of effectively liberalizing trade," Ganeshan Wignaraja, Principal Economist of the Asian Development Bank, said. The FTA between China and the Association of Southeast Asian Nations (ASEAN) has become a model for other regional economies.
One way Asia plans to deal with the abundance of FTAs - the so-called Asian Noodle Bowl - is through consolidation, Wignaraja said. "Two processes, an ASEAN plus three or plus six, and the Trans-Pacific Strategic Economic Partnership, are moving forward in parallel." Similar discussions between Beijing, Tokyo and Seoul have also progressed. Negotiations for the establishment of a three-party FTA involving China, Japan and the Republic of Korea (ROK) will open next year, it was announced at the sixth trilateral business summit in Changchun, Jilin province, in August.
"We should act in light of the situation, further open markets to each other, reduce tariff and non-tariff barriers and comprehensively expand cooperation in customs, quality inspection, transport, movement of people and other fields to improve the environment for tripartite trade," Wen said.
Elsewhere in the world, the FTA between China and Chile has promoted bilateral trade. China replaced the United States as Chile's biggest trade partner in 2009. Chile has become China's second-largest trade partner in Latin America. China's FTA negotiations with the Gulf Cooperation Council, South Africa and Australia are also under way.
"Although China is a latecomer in global economic integration, the country has developed a comprehensive model, not only involving commodity trade liberalization but also on promoting free service and investment fields," Fan said.
Europe 2020 Strategy Aimed at Identifying and Monitoring Training Needs Set in Motion
A first sectoral initiative fully in line with the Europe 2020 Strategy to bridge the skills gaps and to create more and better jobs in textile clothing and leather industries throughout the EU was launched in Bruseels on 6 December with a high level of involvement: a network steered by the EU Social partners and covering more than 27 countries and with more than 400 entities involved.
In his opening speech Jean-François Lebrun, Head of Unit, DG Employment and Social Affairs, European Commission, stressed “Today is an important day for the implementation of the EU Commission strategy on sectors skills councils launched on and that fits nicely/completely into the EUROPE 2020 Strategy. We are committed through the “Agenda for new skills and jobs” flagship to support concrete actions that will equip with the right skills for the jobs of today and tomorrow. We as Commission have and will support such approach that is part of the answer to the solving of the important need for skilled people by important and innovative industrial sectors. We do hope and we count on the fact that the social partners and observatories will engage fully in making such tool a success not only for such industries but also for other sectors.”
The European Council on Education Training and Employment for Textile Clothing Leather is an initiative from the European Social partners ETUF: TCL (The European Federation of Textile Clothing Leather and Footwear), EURATEX (the European Apparel and Textile Confederation) and COTANCE (The European Confederation of Leather and Tanning), with the financial support of the European Commission- Directorate General for Employment and Social Affairs.
Triangle commented the event underlining that “The time has come for the European textile, clothing and leather industries to embrace change in the labour market and to have opportunities to demonstrate that these industries are to turn Europe into a social sustainable driven knowledge-based economy to the service of a competitive based EU industry”.
Marchi stressed that “the presence today of several European industries representatives as well as BusinessEurope and ETUC is the proof that our industries are opening the main avenue to what might become the missing link to really foster and support our skills to maintain a competitive industry in the EU across all the Member States” and continued highlighting the fact that “the commitment taken by key players of these industries in France, Belgium, United Kingdom, Italy and Spain, would encourage other Member States to foster similar approaches and would join soon a network that in the end should become self-supporting. The exchange of good practices and the networking effect should unlock the need for our numerous SME’s to find and to help talented workers to improve their skills”.
Based on a networking of several existing national observatories dedicated to education training and employment (FORTHAC (FR), COBOT (BE), IVOC (BE), SKILLSET(UK)) and other key players from these industries (National sectoral Organisations, Universities, Research centres, companies, Public authorities Trade Unions, Technical institutes…etc.) the EU TCL SKILLS COUNCIL aims at improving the quality of the European labour force of our Industries, and to assist enterprises to be better prepared in meeting changing competitive demand.
Gonzale highlighted that “By bringing together corporate executives, owner-operators of smaller firms, employees, union leaders, educators and interested government representatives, the EU TCL SKILLS COUNCIL aims at addressing a wide range of issues related to technological change, quality standards, planning, and human resource development. Through their participation, the EU social partners pledge to cooperate actively and loyally with the EU TCL SKILLS COUNCIL and to contribute to its success in a spirit of openness and transparency.”
Falling Rupee Sinks to new low; Fails to cheer up Garment Exporters
Amid rising oil import bill and external debt, the rupee-dollar exchange rate could well reach the levels of 53.80 by January next year and 55.10 by March if the global economy continues to be bleak like in recent months is the refrain of those who know and study the movement of currencies.
However, if the Eurozone and the United States start showing signs of recovery and foreign funds start flowing back to India, the exchange rate will settle around the new normal level of 49.50. The rupee started tumbling after the downgrading of US credit ranking and increasing threat perception of Greece defaulting on sovereign debt. It slid against the dollar from 44.40 in July to 45.50 in August, 47.60 in September, 49.30 in October and 52.70 this month.
It could further slip to 53.10 in December, 53.80 in January 2011, 54.50 in February and 55.10 in March, said the Chamber in its latest study titled ‘Exchange Rate Slide – What Impact is it Having?’ “Such wild fluctuations within a short span of time are unsettling and leaving imprint on rest of the economy,” said Secretary General D.S. Rawat. “The depreciating rupee will add further pressure on the overall domestic inflation.”
Since India is structurally an import-intensive country as reflected in high and persistent current account deficits month after month, domestic costs will rise. The rupee depreciation will particularly hit industrial sector and put higher pressure on costs as items like oil, imported coal, metals and minerals, imported intermediate products are getting affected.
A falling rupee has also impacted cost of borrowing for the corporate sector. Indian companies raised 29 billion dollars this calendar year through external commercial borrowings and foreign currency convertible bonds. If current valuations persist, they will end up paying five billion dollars more. India’s external debt is dominated by dollar to the extent of 54.2 per cent. The rupee depreciation by 16.54 per cent between April and November is bound to increase interest payments. Between June and November, the total external debt increased by Rs 21,860 crore. But India is not alone though. The crisis prevailing in the West is hurting all major economies worldwide. Barring China, currencies of Brazil, South Africa, Mexico and Russia have taken a hammering.
The falling Bombay Stock Exchange (BSE) index is partially an indication that foreign institutional investors are selling out, putting pressure on the rupee value, said the study. Instead of intervention by the Reserve Bank of India and burdening foreign exchange reserves, India should stagger oil imports demand and coordinate purchases so that there is no undue bundling of imports at any time.
The Government should take initiatives which encourage flow of foreign investments into the country. Recent steps to consider allowing foreign direct investments in pension fund or increase in investment limit in government securities and corporate bonds are in the right direction.”
India's total exports in the current fiscal may fall below $ 300 billion target set by the Government due to difficult global situation and sluggish demand,. Looking at the problems in the third and fourth quarter, we may not reach the target as we are up against the very difficult situation. And, from that perspective we may fall short of USD 15 to 20 billion. Even the Minister of State for Commerce and Industry, Jyotiraditya Scindia, said that exports will reach USD 280 billion this fiscal registering around 18 percent growth as compared to the last fiscal. It appears that it is the right time for exporters to hedge their risk while negotiating their orders.
Govt Blames Global Economic Turmoil for All-time Low Rupee
Finance Minister Pranab Mukherjee says that the rupee's fall was a reflection of international economic uncertainty and added that an intervention by the Reserve Bank of India (RBI) would not help much at this stage. "We expect there will be a self correction in the market," Mukherjee added. In fact, there is no fundamental reasoning behind the sharp depreciation of the rupee. The single most important factor that is causing this weakening is the global sentiment, the financial turmoil in Europe and the US.The volatility could continue at least till December-end as there was no support for the rupee from the domestic market, which was facing high inflation. The Government thinks that moderation in the global economic turmoil could bring back foreign investors as the growth fundamentals of the Indian economy are sound.
The RBI, which usually steps in to curb volatility in the currency, has not done so yet. Subir Gokarn, Deputy Governor of the RBI, said the central bank was weighing its options. "We don't have a target or a rate in mind, the rupee is moving according to market dynamics," said Gokarn. "There's an impact on companies and it is a problem. But, any action we take now, if any, has to take into account the fact that these actions might have consequences further down the road. So, we've got to balance out actions now with the risks of potential increases in vulnerability later," he added.
While appreciation of Indian rupee should have brought some cheer to exporters who also seem to share the gloom of steep and consistent downward journey of Indian Rupee on account of determined bid on the part of interntgional retailers to slice down the prices, a weak rupee is a cause of worry for many corporates who have raised funds from overseas sources. During 2011 till date, Indian corporates have raised about $30 billion of external commercial borrowing (ECB). That is, about Rs.150,000 crore," said Jagannadham Thunuguntla, head of research, SMC Global Securities. Companies preferred to raise funds through the ECB route as interest rates were much lower at 5-7 percent, compared to the 12-14 percent that Indian lenders were charging. "This naturally translates into an increased burden on the Indian companies in repaying the ECBs. Such additional burden works out to $5.4 billion. That is, an additional burden of about Rs.27,000 crore.
Foreign Retailers Revisiting their Strategies
 The decision of the Government of India to hold back its Cabinet decision to allow 100% FDI in retail has turned many an applecart of the international retailers. The potential of the booming Indian market is captivating to the world's biggest store chains, which long to make it a linchpin of their growth strategies. Now, with the Indian government backtracking from retail liberalization, retailers like Wal-Mart Stores Inc. and Tesco PLC are retooling their plans.
The political backlash against foreign retailers was a major setback for Wal-Mart, which for years lobbied Indian officials to change the rules, arguing that allowing international retailers to run their own stores in the country would not only improve shopping options for the public, but modernize the entire economy. The Indian government backtracked on a plan to open the country to foreign mass merchants amid a public outcry, led by small shopkeepers.
The world's largest retailer also has been vocal about India's potential impact on its bottom line. Executives of U.S.-based Wal-Mart said during a March investors' conference on its international business that the company expected to turn a profit more quickly in India than in China, where the process took a dozen years. The enormity of the Indian retail market has dazzled major corporations: Consulting firm A.T. Kearney, which has been polling companies about global-expansion aspirations for more than a dozen years, said India now ranks only below China on their priority lists, ahead of markets like Brazil and the U.S.
But public opposition to the move in India remains rife. Radha Krishna Store in Bengali Market in central Delhi is typical of the mom-and-pop stores the Government wants to protect from big-box retailers like Wal-Mart. The small store's shelves are stacked with items as diverse as shampoos, cooking oils, diapers and milk. Kamlesh Gupta and her husband have been operating the store for 25 years. If chains like Wal-Mart and Tesco are permitted to operate in India, "everything will be over," Mrs. Gupta said. "If they sell goods cheaper than us, who will come here? Already, we have lost 20% of our business since Big Bazaar and Reliance started operating in the last two years," she said, referring to two Indian retailers.
To protect stores like these, Uma Bharti, a leader of the main opposition party, the right-of-center Bharatiya Janata Party, had threatened that she would personally set fire to any Wal-Mart stores if they were allowed to enter India. She said she was prepared to go to prison for it. This party's voting constituency includes small retailers.
The political opposition to loosening the foreign-investment rules ensures that, for now, Wal-Mart's only way to grab a piece of the lucrative market is through a partnership with Bharti Enterprises Ltd. to operate wholesale-style "cash and carry" shops selling bulk items to small-business owners. The joint venture only had nine stores as of the end of October, a minuscule presence for a retail giant with more than 9,000 shops in 28 countries.
Carrefour SA, the world's second-largest retailer behind Wal-Mart, has long pegged India as a strategic market. For years, the French company has been seeking a local partner with whom to launch a chain of supercenters. A person close to Carrefour said the company is unswayed in its quest, regardless of whether the retail law goes into effect or not, though this person added that having a majority stake would be important "symbolically." Impatient to get its business started in India, Carrefour has opened two wholesale cash-and-carry stores in the meantime. The first opened in Delhi a year ago, and the second opened in Jaipur in November. The opening of the second store coincided with the passing of the retail law, and protesters demonstrated outside the store against the new law. Carrefour intends to open more wholesale stores next year but hasn't detailed its plans.
The Government's decision to put the proposal for multi-brand retailers on ice came also as a blow to Tesco, which along with other British businesses has advocated changing the regulations. Tesco has been unable to open stand-alone retail stores in India and instead operates through a franchise deal with Tata Group unit Trent. "The decision to defer [foreign direct investment] is a missed opportunity for Indian producers, farmers and consumers," Tesco said.
Saloni Nangia, senior vice president and head of retail and consumer goods at Technopak, a consulting firm based in New Delhi, is hopeful that the decision to allow foreign retailers to open supermarkets in India might still happen. "A number of brands were already in the country and will continue to believe and be a part of the India opportunity," Ms. Nangia said. "While the discussion has been put on hold, it will come back in due course of time and the government will come up with a plan."
The door remains open to "single brand" retailers in India, like Ikea Group of Sweden, Nike Inc. of the U.S. and Marks & Spencer PLC of the U.K. Until now, single-brand foreign retailers like Nike could only hold 51% of an Indian joint venture. Now, the Government has been pushing for allowing 100% foreign investment in single-brand retail, which is attractive to companies like Ikea that have publicly said that they weren't interested in partnerships.
Brands like Levi Strauss & Co., Nike and Reebok International Ltd. have been in India for several years. Their products have been popular among a brand-conscious generation and were being sold in India initially through department stores and more recently through their stand-alone stores operated via joint ventures or franchisees. Marks & Spencer entered the market in 2001, initially as a franchise business. In 2008, the company, which has 23 stores in India, signed a joint-venture agreement with the Indian company Reliance Retail Ltd., a unit of Reliance Industries Ltd., which has allowed Marks & Spencer to open larger stores and tap into local sourcing.
More recently, brands like Tommy Hilfiger, Zara, Mango and French Connection have set up stores in the bigger cities, offering more choice and providing more competition to increasingly discerning consumers. These brands, under the new policy, will now have the opportunity to buy out their partners or franchisees with the condition that they source at least 30% of their future products from Indian small and midsize enterprises.
But this requirement poses a problem for companies in the luxury-goods sector, many of which make their products in Europe and export them to markets like India.
An example is Burberry Group PLC, the British trench-coat maker. The company has seven stores in India, all of which are operated as a joint venture with the Indian company Genesis Colors Pvt. Ltd. Burberry, which opened its first store in India in 2008, owns 51% of the venture. Burberry faces high import duties in India because many of its products fall under a so-called luxury tax on high-end goods. The company would face difficulty satisfying the sourcing requirements if it decided to take full ownership of its Indian operation. Burberry's traditional raincoats are made in England, and most of its leather products come from Italy.
Govt Admits Putting Out Wrong Export Figures; Promises New Methodology
Readers of The Stitch Times will recall that we had pointed out the apparent mistake in the export figures being put out by Government. Our fears about exports being shown on the higher side have come true with the Government conceding that it made a mistake as the numbers got inflated by US $9 billion in the April-November period of the current fiscal. "Every damn number for the last eight months has been revised..." Commerce Secretary Rahul Khullar said, conceding the crucial balance of trade deficit was also kept under-valued at US $107 billion instead of US $117 billion.
"There were not only mis-classifications but also error in double counting and all sorts of things due to problems in the computer software which was recently upgraded," he said. Having admitted mistakes, Khullar said that at least now "the notion that the Government is deliberately cooking up and telling lies... has got to stop. How many people will come and tell you that we have goofed up; there was a mistake. I have said it openly there is nothing to hide; there is no shame in admitting that there is something wrong".
However, he said that even after factoring in mistakes, the exports grew by 33.2 per cent between April-November. The data goof-up was 4-5 per cent of the export billing and on an average it was inflated by US $1 billion a month, Khullar said. There were doubts on huge growth in exports which was even shown at 82 per cent in July at a time when the manufacturing was going down.
"Exports are still doing pretty damn well. (Earlier) you thought it (growth) would be 40-45 per cent, now it is down to 33 per cent (during April-November this fiscal)," he said. For the eight month period, total exports have been calculated at US $192.7 billion, while imports at US $309.5 billion (growth of 30.2 per cent). The fiscal-end trade gap may be US $150-160 billion, he said.
The Government is now planning a work out and put in place a new methodology to track industrial production and export growth every month after a recent set of data pointed towards inconsistency between the two readings. The index of industrial production, which measures factory output growth and the export growth numbers over the past few months have shown a huge divergence. Growth in exports has remained robust despite a slowdown in industrial activity, prompting economists and policymakers to speculate that exporters may be mispricing their transactions to bring back black money stashed in tax heavens abroad.
While IIP for July fell to a 21-month low of 3.84%, exports during that month grew 72% in rupee terms. The following month, industrial output rose 4.04%, but exports registered a growth of 40%. Mispricing refers to under- or over-invoicing of transactions.
The Commerce and Industry Ministry has carried out a study that compares factory output growth of specific items to their exports from 2004-05 to 2010-11. The ministry proposes to use this data to devise the index. "We have conducted a comprehensive study matching export growth in manufacturing to the disaggregated export data," a senior official at the ministry told.
The Department of Industrial Policy and Promotion in the Ministry is responsible for collecting over 70% of the data on manufacturing in the IIP. Economists say there has always been an element of mispricing in trade data. Discrepancies also arise as the IIP is a volume index while exports are captured in value terms. But, they say keeping in mind all the caveats, there is still some mismatch. "There is something partially wrong," said Abheek Barua, chief economist at HDFC Bank. "With 30% plus export growth, we should be getting a higher level of industrial growth." The Ministry has also sent its study to economists in the Reserve Bank of India for their comments and suggestions. "We plan to put out these numbers and also come up with a monthly report matching export growth and industrial production. Exports are finally goods produced domestically," said the official.
Matching production growth and trade data is not an easy exercise as the grouping of items is very different. Exports are classified according to the Indian Trade Classification Harmonized System (ITC HS) code, while industrial production is recorded under the National Industrial Classification. Economists in the Ministry have created tables that will match 268 items under 22 categories of the manufacturing sector with their export growth. "This is a good move from a policy perspective, it will help solve a lot of puzzles," said Sunil Sinha, senior economist at ratings agency Crisil. Sajjid Chinoy, India economist at JP Morgan, said India's export performance was in line with data from ports. He said exports were also higher as more goods were being sent to developing nations where economic activity remained buoyant. JP Morgan had said in a recent report that Brazil's trade discrepancy was higher than that of India.
Study warns of risks posed by Chemicals in Textile Products
A comprehensive study from the Finnish Environment Institute has been published in October 2011 concerning risk management and governance of chemicals in textiles, including clothing and bedclothes.
The study finds that existing national and EU level rules and initiatives are insufficient to mitigate the risks posed, particularly by chemicals in imported textiles, such as those originating in mainland China. The study advocates innovative action at higher levels of governance. The tools foreseen include in particular banning imports of textile articles containing chemicals that are already prohibited for use within the EU, international inter-agency collaboration; increased public information, especially to consumers; an extension of eco-labelling to chemicals and new areas or product quality control, including information on physical safety, care, durability and recyclability; and economic steering, through the development of incentives for environmentally friendly textiles and related products.
The study is part of a broader project on the management of chemicals in consumer products and articles, commissioned and financed by the Finnish Ministry of the Environment, which launched the National Programme on Dangerous Chemicals in 2006.
Textiles have been chosen as the focal point of the study, primarily due to the numerous chemicals involved throughout their life-cycle, from production to use and finally disposal. Textile products are also heavily present in consumers’ every-day lives.
While the study focuses to a great extent on Finland, domestic measures are necessarily considered with a view to seeing them applied also at the EU level (i.e., all over the EU). This is inevitable since the manufacturing of textiles in Finland, as well as most other EU Member States, has decreased over the years largely as a result of cheaper manufacturing costs in other countries. In particular, it is widely recognised that many textiles are imported to Finland from non-European countries such as China, India and Bangladesh.
The study reviews the chemicals most broadly used in textiles, including pesticides, heavy metals and mineral oils, and assesses their environmental risks. It finds that chemicals in textiles pose multi-dimensional risks, including environmental, safety and health risks notably to consumers, but risks exist also to ecosystems in regions of production, use and disposal of textiles. Risks vary according to the characteristics of textiles, for instance the fibres used and the treatment processes employed, but also according to the characteristics of the chemicals themselves, such as persistency, accumulation and toxicity.
In contrast to the above findings, the study highlights the fact that the chemical content of consumer articles in general is a problematic area which is still largely unknown, and in which solutions are only beginning to take shape. Indeed, consumer perception of risks related to chemicals in textiles is only starting to emerge.
The study acknowledges that chemicals are very useful in textiles when they are employed to improve safety (e.g., flame retardants), preservation (anti-microbial properties) and technical properties (e.g., water repellence). As such, the authors of the study stress that risks and advantages must be carefully balanced, and interests of various stakeholders must be considered.
The report assesses existing legislative and voluntary measures, but also explores other possible approaches to risk-governance. Measures in place concern, among others, chemicals, production processes, importation, waste and product safety. These measures often involve the monitoring and supervision of chemicals in textiles and their emission. The study finds, however, that the effectiveness of such measures remains somewhat unclear and subject to shortcomings. The study advocates better risk governance through a more comprehensive assessment of risks and a more efficient use of existing measures. For example, coordination with eco-design rules and consumer awareness must be enhanced. While only time will tell what the impact of this study will be.
Trade Opening Should Continue Even as global economic outlook worsens: LAMY
 Director-General Pascal Lamy, in his annual report to WTO members on developments in the international trading environment told members that “in a context of greater economic uncertainty and rising global risks, it is all the more important that the process of global trade opening continues”. In the light of a worsening of the global economy in recent months, with the forecast for world export growth revised downwards to 5.8% in 2011, he warned that unilateral action to shield domestic industries will not solve global problems but might make things worse by triggering a spiral of tit-for-tat reactions in which every country will lose.
The outlook for the global economy has worsened considerably in recent months. Risks and uncertainties are increasing, after the encouraging signals of recovery seen at the end of 2010. Global activity is slowing down, economic performance continues to be uneven across countries, debt levels and financial volatility are rising, high unemployment levels persist in many countries, and confidence has recently fallen sharply. These risks are aggravated by perceptions in markets that governments' responses to these challenges have so far been inadequate.
World trade has grown more slowly than expected in recent months. Developed economies have been hit by a number of problems ranging from shrinking global demand, to the impact of natural disasters, to issues related to national budgets, credit conditions, and the sovereign debt crisis. Trade growth in developing countries has also been adversely affected by global developments, including signs of overheating in some major emerging markets. In light of the deteriorating economic situation, the forecast for world export growth in 2011 was revised to 5.8%, down from the earlier estimate of 6.5%. Developed economies' exports are expected to rise by 3.7% and those from developing countries by 8.5%.
The economic recovery has so far not been strong enough to reduce significantly high levels of unemployment in many countries. According to the ILO, based on current trends, employment is not projected to return to its 2008 level before 2015 in high-income economies. The number of unemployed stood at 205 million in 2010, essentially unchanged from the year earlier, with little hope of this figure reverting to pre-crisis levels in the near term.1 The ILO warned recently of a "dramatic downturn" in employment over the coming months unless governments act to soften the effect of the economic slowdown on labour markets.2
The TPRB monitoring exercise and individual Trade Policy Reviews undertaken in 2011 show that on the whole governments have largely continued to resist protectionist pressures, although an upward trend was observed this year in the imposition of new trade restrictions. During the period under review, 339 new trade restrictive measures (and those that have the potential to restrict or distort trade) were recorded, which is 53% more than in the previous period. In particular, the number of new export restrictions has increased sharply; although accounting for only 19% of total restrictions during the monitoring period, export measures were the fastest-growing component.
Moreover, there is a growing perception that trade protectionism is gaining ground in some parts of the world as a political reaction to current local economic difficulties – difficulties that trade restrictions are very poorly equipped to resolve. There are various signs of a revival in the use of industrial policy to promote national champions and of import substitution measures to back up that policy. Unilateral actions to shield domestic industries, although appealing from a narrow short-term perspective, will not solve global problems; on the contrary, they may make things worse by triggering a spiral of tit-for-tat reactions in which every country will lose. These developments are adding to the downside risks to the global economy.
Nonetheless, new restrictive measures introduced in the period between mid-October 2010 and mid-October 2011 cover around 0.9% of world imports, down from 1.2% recorded in the previous twelve-month period.3
Some countries have also adopted measures to facilitate trade, especially by reducing or temporarily exempting import tariffs, terminating trade remedies actions, and streamlining customs procedures. Trade facilitating measures implemented during this period account for 48% of the total number of measures.
Regional Trade Agreements (RTA) activity continues to be strong. As of end-October 2011, 390 RTAs had been notified to the WTO, of which 211 are in force. The Secretariat estimates that there are around other 100 agreements in force which have not yet been notified to the WTO. The majority of RTA notifications during this period involved one or more partners in the Asian region. Asia, Europe and Latin America appear to be relatively more active than other regions in respect of agreements that have recently entered into force.
The multilateral trading system has been instrumental in maintaining trade openness during the global financial and economic crisis. WTO Members need to preserve and strengthen this system so that it keeps performing this vital function in the future. The best way to further open trade in a global, predictable and transparent manner remains the multilateral route. The multilateral trading system has helped countries navigate the crisis so far and resist protectionism. In a context of greater economic uncertainty and rising global risks, it is all the more important that the process of global trade opening continues; not only by WTO Members showing pragmatism and determination to find a way out of the current impasse in the Doha Round, but also through accession to the WTO of the Russian Federation, Samoa, Vanuatu, and other acceding countries, as well as through the prompt conclusion of the Government Procurement Agreement negotiations. The forthcoming 8th Ministerial Conference provides a possibility to find a way forward.
US Unveils Initiatives to Help C for LDCs
As the eighth ministerial conference of the World Trade Organization (WTO) gets underway in Geneva, the US has unveiled a number of new initiatives to help the textile and apparel industries in least-developed countries (LDCs) benefit more fully from global trade.
Among measures unveiled to coincide with the three-day event in Switzerland are plans to enact legislation to extend the African Growth and Opportunity Act's (AGOA) "third country fabric" provision to 2015, and offer duty-free-quota-free treatment for imports of upland cotton fibre from LDCs. The US is also seeking to provide extra help for countries who want to make maximum use of its existing trade preference programmes. However, Trade Representative Ron Kirk admits the moves will still need Congressional support before they can be put into action.
"For decades, the United States has been a strong partner to least-developed countries," Ambassador Kirk said. "We want to see these partners have a greater stake in global trade and overcome constraints inhibiting faster progress." On improving market access for upland cotton, the US says it plans to launch a review process to consider adding upland cotton fibre to the list of products eligible for duty-free treatment for LDCs through GSP. It also intends to seek Congressional action to provide quota-free access for LDCs on all upland cotton fibre tariff lines.
"These steps, combined with current historically low US subsidies for domestic cotton production, will contribute measurably to the viability of export-oriented cotton production in West African countries and other LDCs." There will also be a follow-on to efforts to build the capacity and efficiency of the cotton sectors in the C-4 countries (Benin, Burkina Faso, Chad, Mali) through initiatives like USAID's West African Cotton Improvement Program. This new cotton assistance scheme for these countries would be introduced when the existing programme expires in April 2012 - with the US expecting to provide up to $16m over four years.
And a new USAID programme is being launched to help LDCs make the most of trade preference measures such as the Generalized System of Preferences (GSP). Least-developed countries who are also WTO members include apparel producing nations like Bangladesh, Cambodia, Haiti, Lesotho, Madagascar, as well as cotton producers Benin and Burkina Faso. A WTO note says that issues on the agenda include a stronger framework to facilitate LDC accessions to the WTO, more time for LDCs to protect intellectual property rights, and a waiver to let members grant preferential treatment to services of LDCs. The US announcement may be an effort to counter any attempt to secure other LDC-specific concessions at the WTO meeting in Geneva, says Sandler & Travis Trade Advisory Services Inc, a consultancy firm that specialises in international trade law issues.
"Earlier this year WTO members, having realised that they would not be able to conclude a comprehensive Doha Round agreement by the end of December, proposed instead to work out a narrower deal focusing on issues of importance to LDCs such as duty-free/quota-free treatment, simpler rules of origin, a waiver from implementing a to-be-negotiated agreement on services, and "a step forward" on developed country support for cotton production," it said in a briefing note. "However, due to what Director General Pascal Lamy called "paralysis in the negotiating function of the WTO," it soon became clear that this effort too would not see a successful conclusion. There have been reports that supporters of an LDC-friendly package could try make another effort to push it forward at the upcoming ministerial."
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