Feb 8, 1986


GENEVA, FEBRUARY (IFDA/CHAKRAVARTHI RAGHAVAN)— Despite the general advocate of the need for an improved, open and expanding trade system and further trade liberalisation efforts, "there has been no overall and generalised move towards liberalisation in trade actions during the past year", says the UN Conference on Trade and Development.

In a report to the Trade and Development Board on restrictions on trade and structural adjustment (TD/B/1081), the secretariat has said that "a significant part of international trade continues to be administered by a wide range of non-tariff measures, with many of them having an adverse impact on the developing countries".

Persistent trade frictions and disputes among countries, particularly the major OECD countries, have increased uncertainty in the international trading environment.

In turn, UNCTAD says, this has had direct or spill-over effects on the third world countries.

Protectionist actions appear particularly to have affected trade in steel, footwear, textiles and agricultural products -- all of special interest to the third world.

Several industrial and third world countries, UNCTAD notes, have taken unilateral and autonomous trade liberalisation measures during the year.

"Whether these individual and voluntary efforts will trigger a more generalised move in the developed countries towards halting and rolling back protectionism and eliminating trade barriers depends on the ability of member states to devise a coherent framework in which these efforts will act in a mutually reinforcing fashion".

In reviewing developments in the trade area during 1985, the report notes that while some actions contributed to trade liberalisation, "a significant part of international trade continues to be administered by a wide range of Non-Tariff Measures (NTMS), and there is no clear evidence of any significant decrease in their application".

"There are also no signs of relaxation of the restrictive measures which have been applied in a discriminatory way against developing countries".

Most of the trade liberalisation effort in individual countries have been concentrated on tariffs, though there has also been some liberalisation in non-tariff measures.

But the small progress made in trade liberalisation is "largely outweighed" by increased protectionist actions.

In many instances the protectionist measures and retaliatory actions have been taken by industrial countries against each other.

But in the major industrial country markets, third world countries have been facing "increased and discriminatory protectionism".

Several Voluntary Export Restraint (VER) agreements have been concluded or renewed, anti-dumping and countervailing measures have been initiated or taken, and Quantitative Restrictions (QRS) have been imposed on products and sectors where third world countries have demonstrated comparative advantage.

In most cases these have been taken to protect inefficient and costly domestic industries.

"These facts", UNCTAD adds, "show a clear contradiction with the commitments for a ‘standstill’ and ‘rollback’ of protectionism made at the GATT Ministerial meeting of 1982 and reaffirmed at UNCTAD-VI".

Sectors most seriously affected by protective measures are agricultural, steel, textiles, and footwear.

In agriculture new QRS and other import restrictions have been imposed in a number of instances in the industrial countries.

The U.S. and EEC continue to "administer" their imports of important categories of iron and steel products through VERS and control of the price level.

U.S. steel import agreements now extend (besides the EEC) to Australia, Brazil, Japan, Mexico, South Africa, South Korea, Czechoslovakia, the GDR, Hungary, Finland, Romania and Venezuela.

The allocation of market shares to countries on the basis of historical trade flows, UNCTAD notes, affects especially the third world countries, whose exports have grown more rapidly in recent years.

The EEC continues to control both volume and prices of imported steel products through bilateral export restraint agreements with its main suppliers.

During 1985, the EEC has worked out agreements with 15 countries, including two from the third world.

In the textiles and clothing sector, a number of bilateral accords have been extended or concluded for restraining trade, and affecting essentially exports from the third world.

UNCTAD also notes an increase in the number of anti-dumping and countervailing duty investigations, with an increase observed also in respect of products imported from the third world.

Between July 84 and June 85, third world countries were involved in 70 anti-dumping investigations out of total of 193 (or more than one-third), as against 44 out of 176 (or about one-fourth) in the previous twelve months.

The increase was mostly due to investigations initiated in the U.S.A. and Canada.

The number of countervailing duty investigations also increased by 57 percent from 1983/84 to 1984/95, mainly due to increases initiated by the U.S.

The cases against third world countries quadrupled, accounting for almost 80 percent of all investigations initiated by U.S.

UNCTAD notes that in 1985, most countries taking "safeguard" actions did not formally invoke GATT provisions, but frequently resorted to "grey area" measures.

A large number of VERS, orderly marketing arrangements, export forecasts or basic price systems, either remained in force, have been renewed or newly entered into, affecting principally trade in steel, textiles, and automobiles.

Several third world countries have also taken restrictive actions and cut imports, but due to balance-of-payments problems, exacerbated by continuation reduction of export earnings and limited access to external finance.

The unfavourable trading environment, UNCTAD says, also forced many third world countries to resort to counter trade arrangements in order to maintain a certain level of imports.

Shortfalls in export earnings and debt servicing difficulties, UNCTAD points out, have substantially reduced import capacity of many third world countries.

Counter trade is being used as a means of securing access to foreign markets and maintaining a minimum level of imports to keep economic activity going.

Reported counter-trade arrangements in 1985 amounted to 9.549 million dollars, according to UNCTAD.

This figure, it adds, excludes unspecified amounts involved in arrangements between Saudi Arabia and U.K. for aircraft, several arrangements between Iraq and Brazil, and between India and Yugoslavia.

The reported incidence, UNCTAD suggests, "may represent only a proportion of the actual trade involved, as many counter trade arrangements are not made public".

The rapid increase in counter-trade, UNCTAD suggest, shows that effective demand in the world market is far from being fully utilized.

"But while it may constitute a temporary remedy to the liquidity problem created by the failure of monetary and trading systems, it could also distort international competition and encourage bilateralism, in contradiction with the principles of multilateral trading system", UNCTAD says.

UNCTAD notes that apart from serving as a response to shortage of foreign exchange, counter-trade is also being used in combination with transfer of technology or as a means to strengthen competitive positions.

Between 1980 and 1984, U.S. companies signed contracts worth 28.8 billion dollars, with European countries, having counter-trade elements.

Several third world countries have either introduced or are in the process of promulgating regulations on counter-trade.

These countries include Brazil, Colombia, Jordan, Mexico, Peru, South Korea, Thailand and Tunisia.

Several European countries are providing government backing to counter-trade by providing information services and setting up clearance systems for counter-trade.