Africa has resisted protectionism – why can’t the EU?
Simon Evenett interviewed by Viv Davies, 25 June 2010
Simon Evenett of the University of St Gallen foretells Viv Davies about the fifth Global Trade Alert (GTA) report. They discuss why the EU – as opposed to Africa, which includes resisted protectionist temptations – is currently in the very best five ‘offending nations’ on all the GTA criteria. Evenett also answers recent criticisms that GTA has been ‘over-alarmist’ in its analysis of protectionist measures implemented by governments because the onset of the financial meltdown. The interview was recorded in June 2010.
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Viv Davies interviews Simon Evenett for Vox
Transcription of an VoxEU audio interview [
Viv Davis: Hello and welcome to Vox Talks, a number of audio interviews with leading economists from all over the world. I’m Viv Davis from the guts for Economic Policy Research. I’m talking today to Professor Simon Evenett of St. Gallen University about the most recent report made by Global Trade Alert, an unbiased trade monitoring initiative led by Professor Evenett and coordinated by CEPR. The report is titled "Africa Resists the Protectionist Temptation: The Fifth Global Trade Alert Report". I began by asking Simon to outline the primary findings of the report.
Simon Evenett: The fifth report includes both a worldwide overview as well a particular concentrate on Sub Saharan Africa. The global overview demonstrates that countries are continuing to close borders aswell concerning discriminate against foreign commercial interests through the entire beginning of the year. The so called recovery in the national economies hasn’t really affected that trend quite definitely. We’ve seen hardly any change in behavior from the first part of the year in comparison to what we saw in ’09 2009. With that said, one little bit of silver lining is that the amount of liberalizing measures which governments are investing in place has risen of the share of total measures. But there’s still massively outnumbered by the amount of discriminatory measures.
So those will be the findings at a worldwide level. I’m afraid very little good news there. But nonetheless, it’s part of our monitoring job to recognize what’s actually happening on the floor.
Regarding Africa, we do involve some very good news. We’ve found consistently throughout our monitoring period, that Sub Sahara African governments apart from South Africa and Nigeria have already been undertaking a lot more liberalization than other areas of the world. We see governments liberalizing foreign direct investment regimes, lowering tariffs on parts and components, and generally improving the business enterprise environment in ways which benefits both domestic and foreign firms.
We’ve seen plenty of evidence in the budgets of the countries showing the governments are consistently pursuing the strategy of trying to attract foreign ranks investment and investors. That will not may actually have changed as a result of crisis.
Viv: Just what exactly you’re saying, Simon. And from what I’ve read of the report, it seems, for example, that europe, unlike Africa, which includes resisted the temptations of protectionism, is currently in the most notable five offending nations on each of the global trade alert criteria. Just what exactly does that say about the EU and its own commitment to trade openness?
Simon: Well, you’re right. Inside our global overview, we rank countries in line with the extent to that they have closed their markets or discriminated against foreigners. Our last four rankings, the EU member states taken together will be the worst performers. Now, I will stress here that discriminatory measures could be used EU by the European Commission and by the member states’ governments. What we found is it is the member states’ governments that have undertaken a lot of the discrimination. It isn’t Brussels.
So although it may be the EU’s record isn’t good, it’s rather a member states’ problem. The question then arises, from what extent will there be a mismatch between your European Commission’s stated goals, for keeping European markets available to both European and foreign producers, and the member states who are taking actions, often defensively for a while, to try and take care of certain domestic interests? This mismatch, I believe, is becoming progressively more glaring as time passes. I think it’s something should be resolved within Europe.
Viv: The theory for global trade alert came into being in response to the G 20 leaders’ commitment to resist the temptation of protectionism also to prevent trade barriers from being erected. The initiative’s been gathering data on discriminatory government measures for a year now. What exactly are the entire findings? Are we seeing less protectionism now when compared to a year ago? What would you say will be the most common discriminatory measures which have been recorded?
Simon: We’re not seeing significantly less measures than we were this past year. Among the things that means it is very hard to interpret precisely what’s happening is that we now have substantial reporting lags in measures which have become un transparent. Among the key top features of this crisis has been the resort by governments to murkier types of protectionism . This often is harder for all of us to document. But nonetheless, we continue this. What we’ve found as time passes is that we’ve had to keep systematically revising up, quarter by quarter, what we’ve found for every era.
It appears that in year 2009, approximately 100 to 120 discriminatory measures were set up by governments every quarter. Rapidly, this year 2010, we’re converging to those numbers aswell. THEREFORE I don’t see a lot of a change in pattern at all.
Actually, if anything, our view of 2009 is worse than what it had been last year whenever we initially reported, because we didn’t realize the importance of the reporting lags.
So overall, we’d paint a more sanguine or less optimistic picture about protectionism in this downturn than many others. I think it is important to appreciate the relevance these reporting lags, within an era when governments are tenacious about not using the most transparent types of protectionism.
Viv: What would you say will be the most common discriminatory measures?
Simon: Oh, that is right. You asked me concerning this. The most common types of discrimination we’ve seen area the bailouts and subsidies by governments. Here I will stress that in the GTA’s database, not even half of the bailouts were linked to the financial sector. The governments have used this crisis to substantially subsidize agriculture and services and manufacturing. I will say, services apart from financial services.
Which means this pattern of subsidization is an attribute which is likely to be a significant matter as countries recover. Especially in a period when countries come to mind about spending and budget deficits. You have to hope that that pressure to limit budget deficits will encourage governments to unwind these subsidies and restore the relative amount of competition in the markets which prevailed prior to the crisis.
Viv: What would you say, Simon, for some critics who claim that Global Trade Alert has been unnecessarily alarmist and has overplayed the extent of protectionist measures? And in addition that it is paid no attention whatsoever to a specific measure reported that could possibly have already been WTO consistent?
Simon: Well with respect it the charge of alarmism, it’s hard to learn what that basically means. It isn’t clear when one has been too alarmist or whether one is deliberately underplaying the reality, deliberately underplaying the amount of protectionism for a few apparent commercial or bureaucratic interest. Therefore these metrics to be alarmist or too alarmist, or rather, the metrics connected with being alarmist or too alarmist have become unclear. You can use as a label, very difficult to pin down precisely where in fact the borderline is. With regards to the WTO consistency measures, there’s’ a preexisting practice or process of coping with this matter, which may be the WTO’s Dispute Settlement body. The GTA had not been likely to replicate that body’s work. And even we will go further, we’d say that the GTA by considering matters that are not in WTO agreements will probably consider policies and state initiatives which are broader and more significant and for that reason WTO consistency doesn’t arise in those cases.
So WTO consistency I don’t believe is an especially compelling overall metric for examining the amount of discrimination through the crisis. It really is valuable in assisting ascertain whether countries adhere to WTO agreements through the crisis.
But even then, sticking with the WTO agreements isn’t the only method of looking at how governments should behave in this crisis. Governments focused on openness should avoid all types of discrimination against foreign commercial interests whether they’re included in WTO agreements or not.
Viv: The facts, Simon, about the Global Trade Alert that sets it in addition to the monitoring initiatives that are being undertaken. For instance, by the WTO or the OECD or the joint report that they produced?
Simon: The differences are several. First, ours can be an independent initiative, therefore we aren’t responsible to member governments. And we therefore aren’t under any pressure or obligation to them. Secondly, the scope of our work is a lot broader. We look at all statements which are discriminatory. Including, for instance, migration measures where you won’t find that covered in the WTO’s work for instance.
And thirdly, we’ve kept updated our records, and we update them as time passes, and we accumulate those records as time passes aswell. So users of the GTA database and the Global Trade Alert.org website can in fact track the substantial effect on their sector or country’s commercial interests with techniques far easier than the reports released by other bodies.
In short, we’ve advantages with regards to independence, scope along with utility for users.
Viv: Looking at the kind of protectionism measures which have been, or are along the way of being set up, to what degree do you consider they are temporary? Or are we looking at a potentially long term trend here which has implications that’ll be difficult to reverse?
Simon: The mixture of measures that we’ve observed in this last downturn vary or differ of course according to how easy they’ll be to reverse. Viewers measures like trade defense, anti dumping, countervailing duties and so on have built-in timetables in them at the WTO for reversal So those measures we are able to be sure is going to be reversed over a five years’ time horizon, but not sooner. The other measures are that we’ve seen being set up, just like the bailouts and procurement measures have a tendency to take a lot longer to reverse, a lot longer to reverse. And the knowledge there’s not been positive. Occasionally the discrimination hasn’t been reversed. Regarding the Buy America provisions in america, rarely have we seen these been removed once they are ratcheted up.
And so therefore we must be very available to the possibility that there may be an extended term sustained upsurge in discrimination in various areas of international commerce as we move forward. And of course, that is on the main one hand bad news, but alternatively creates a chance for far sighted trade negotiators and governments to negotiate agreements which can only help reduce and eliminate these types of discrimination too.
So with every little bit of bad news this is a diplomatic opportunity and we should hope hat the diplomats in Geneva will grasp that opportunity.
Viv: And how about the continuing future of GTA, where’s it going next? Have you got any plans beyond continuing to monitor and gather data?
Simon: We do have plans. We will continue steadily to monitor state activities as the crisis isn’t over. There’s still a threat of a double dip recession. And governments could find themselves short of resources as budgets become constrained and protectionism or other styles or measures, other regulatory measures which are one sided. So we’ll stay static in business for all people reasons. But we also want to stress inside our second year more analysis of existing trade policy measures, trying to indicate where there are sensible government measures and less sensible measures, what the expenses of less sensible measures are. Trying to provide governments an improved sense of the ranking of measures, choosing polices which entail minimal possible harm. They are all important policy messages which we need to develop.
Furthermore, ideally you will see much more outreach to policy makers also to other trade policy analysts to go over the implications of Global Trade Alert’s findings also to consider what they mean for WTO accords, regional trading agreements and nation trade and development strategies.
So in a nutshell, I believe an augmentation of our strategies will be ideal for the next year, increasing the monitoring substantial levels of policy relevant analysis and interaction.
Viv: OK. Many thanks very much, Simon, It has been very interesting to speak to you and I wish you all of the best with the continuing future of GTA.
Simon: Thanks, Viv.
Africa resists the protectionist temptation: The fifth Global Trade Alert report – Download the report here