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EU Sees Increase In Restrictive Trade Barriers

by Ulrika Lomas, Tax-News.com, Brussels

27 October 2010


A new report published by the European Commission (EC) shows that more than 330 trade restrictive measures have been taken by the major trade partners of the European Union (EU) since the outbreak of the financial and economic crisis in 2008.

At the Washington Summit in November 2008, the G20 committed to a self-imposed standstill in terms of new barriers to investment or to trade in goods and services, new export restrictions or World Trade Organization inconsistent measures to stimulate exports. At the London Summit in April 2009, G20 members committed to rectifying measures that had already been taken. Successive summits, including the latest G20 summit in Toronto in June 2010, extended the commitments until 2013.

The report covers thirty of the EU's trading partners over the two-year period from October 2008 to September 2010. The measures found range from classical trade barriers, such as import bans or tariff increases, to "buy national" and other behind-the-border policies. The report finds that many of the new barriers are rapidly becoming permanent features of the world trading system and risk undermining the economic recovery.

Between May and September this year, 66 new trade restrictive measures have been introduced by the EU's trading partners. This brings the total figure of measures in force to 332 since the beginning of the crisis. The report therefore points out that, while the economic recovery is under way in many countries, this has not yet been translated into a reversal of the tendency towards new trade restrictive measures.

Only 37, or about 10%, of the measures taken in the context of the crisis have been withdrawn or have expired. This figure, the report says, is at odds with the repeated commitment made by G20 leaders and confirmed at the latest G20 Summit in Toronto to "rectify" such measures.

Among the countries investigated, Russia is once again confirmed as the trading partner with the most trade restrictive measures taken since the start of the crisis. The report considers Argentina's import licensing system and import reference values to remain of serious concern, but Indonesia seems to have refrained to some extent from introducing further trade-restrictive measures.

The EC sees the negative trend in government procurement as showing evidence of new worrying developments. The protection of domestic industry and jobs from foreign competition seems to be the underlying motivation in the introduction of new limitations in most cases. Most recently, with its “Buy National” policy, Brazil has joined the countries which apply additional restrictions in this area.

It also discloses a notable trend towards investment-related restrictions. Russia, as well as Algeria and Nigeria, increasingly resort to local content or technology transfer requirements as a precondition for market access. This trend is coherent with the observed proliferation of new stimulus measures or other support schemes, frequently coupled with selected tariff increases.

The report points out that these developments suggest a strongly focused industrial policy in several countries aimed at fostering development of local industries. Such measures stem particularly from Russia, South Africa and South Korea. It shows that the most affected EU sectors are still agro-food, automotive, services and textiles and clothing, although there have been fewer measures applied in the steel and other metals sectors.

EU Trade Commissioner, Karel De Gucht, said: "With the economic recovery still fragile, the world's major economies must remove the trade restrictive measures that put a brake on growth. For the world economy to move forward, we have to roll back these barriers. The G20 summit in Seoul needs to demonstrate leadership in this respect."

TAGS: Russia | South Africa | tax | European Commission | tariffs | Algeria | licensing | Brazil | Indonesia | import duty | G20 | trade | European Union (EU) | Argentina | Europe | Africa

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