Global News Journal

Can export bans be challenged at the WTO?

Russia’s ban on grain exports as a heat wave parches crops in the world’s third biggest wheat exporter has raised questions whether such export curbs break World Trade Organization rules. Russia is not a member of the WTO, and it remains to be seen how its new grain policy will affect its 17-year-old bid to join. But other grain exporters, such as Ukraine, which is also considering export curbs, are part of the global trade referee.

WTO rules are quite clear that members cannot interfere with imports and exports in a way that disrupts trade or discriminates against other members. But in practice most WTO rules aim to stop countries blocking imports – shutting out competitor’s goods to give their own domestic producers an unfair advantage.

Searching for silver in Greece’s storm clouds

Greece and the euro zone are still very much in the midst of a debt and deficit storm, with not just Athens but possibly Portugal and Spain at risk of being swept up in the maelstrom.

But that hasn’t stopped economists and political analysts looking for a silver lining in this unprecedented meltdown.

One positive is the impact the uncertainty is having on the euro, which has weakened sharply against the dollar and the British pound this year. That may not be very good for those in the United States or Britain holding euro-denominated assets, but it’s good for European exporters, whose goods become relatively less expensive for importers.

As Jennifer McKeown, a senior economist with Capital Economics, pointed out in a research note on Thursday, euro zone export orders are sharply up (by some counts they are now the highest in 10 years), while in April, euro zone manufacturing expanded at its fastest rate since November 2006, according to Markit.

That’s clearly a positive for the euro zone. The EU is the world’s largest trading bloc by value and exports are a key component of growth, particularly for the major economies such as Germany, France and Italy. Accountancy firm Ernst & Young said in a recent report that it expected net trade to contribute 0.7 percentage points to euro zone growth in 2010 — thereby accounting for three-quarters of the rise in overall GDP.

It is therefore perhaps not so surprising that economic and business sentiment in the euro zone rose strongly in April, despite the chaos in Greece and the volatility in financial markets across the region. 

But there is also a broader positive shakeout that could ensue from this crisis. It may take several years — at best — but economists and political analysts think it will force profound structural adjustments in several EU economies, including Greece, Portugal, Spain and possibly Italy.

China, and the slowdown showdown

America caught a cold and now China has one too. 

IMF chief Dominique Strauss-Kahn said on Monday that the Fund could cut its forecast for China’s economic growth in 2009 to around  5 percent. To think that only last year China was galloping at a double-digit clip. It’s staggering, and it’s worrying.

Worrying, for one thing, because  - as the Heritage Foundation’s Derek Scissors puts it - ”the American economic slump is running into the Chinese economic slump, creating the conditions for a face-off between Beijing and the U.S. Congress, possibly leading to destabilization of the world’s most important bilateral economic relationship”. 

He argues that the new U.S. administration, confronted with a record-breaking bilateral deficit and soaring unemployment, could impose prohibitive tariffs or erect other barriers to Chinese goods. The EU, Japan and others would then be permitted by WTO rules to raise barriers against a diversion of Chinese goods to protect their markets, and “some form of Chinese retaliation is certain”.

“If intemperate, such retaliation will prompt further action by the U.S. and perhaps other countries, threatening the global nature of the trading system,” Scissors concludes.

Michael Pettis, a professor of finance at Peking University, blogged on the same theme last month, warning that Smoot Hawley, the notorious U.S. tariff act that contributed to the Great Depression of the 1930s, could return in a different guise.