EC fears "uncontrolled protectionism

Europe fears 'uncontrolled protectionism' as emerging markets turn against free trade
The European Commission has warned of a slide towards “blatant and uncontrolled protectionism” across the world as emerging markets defend themselves, warning that abuses by Russia, Brazil, Indonesia, China and other key states pose a growing threat to global recovery.


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Red hot steel is rolled into coils in Vitoria, Brazil. The country put fees of up to 25pc on machinery, iron and steel, plastics, chemicals, paper and wood products Photo: Bloomberg News
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By Ambrose Evans-Pritchard
7:02PM BST 02 Sep 2013
128 Comments
The EU trade’s body said 154 new tariffs and restrictive measures have been pushed through over the past year while “virtually none” has been abolished. This violates a promise by the G20 bloc of leading powers to dismantle barriers before they become embedded in the global system.

“It is a striking phenomenon. Looming protectionism is now more than ever a significant threat to global growth,” said trade EU commissioner Karel de Gucht.

“It is high time for the G20 pledge be adhered to in full,” he added, exhorting the G20 to act at the St Petersburg summit this week, an event certain to be dominated by Syria.

Protectionism is the dog that did not bark during the global crisis of 2008-2009, but trade abuses have been building up ever since. They have spread rapidly over the past year as the credit cycle turns in Asia and Latin America, and once-booming economies exhaust the low-hanging fruit of catch-up growth. The worry is that emerging markets - now half global output - are turning their backs on free trade as political pressure mounts.

The Commission’s 190-page report listed a catalogued of abuses, pointing the finger at Argentina, Brazil, India, Indonesia, Russia and South Africa as top offenders over the past year. China is no longer viewed as an arch-villain.

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Brazil raised tariffs on 100 sectors last October to defend is declining industrial base, with fees of up to 25pc on machinery, iron and steel, plastics, chemicals, paper and wood products. It is now pursuing a full-blown “industrial policy” under its Plano Brasil Maior, with tax concessions for those who build plant locally. It has targeted the car industry with its Inovar-Auto programme, and this will soon be broadened to 19 strategic sectors.

Argentina imposed tariffs of up to 35pc in January to stem a balance of payments crisis, while Ukraine imposed duties on 131 tariff lines and vowed to renegotiate its agreed terms with the World Trade Organisation (WTO).

The Commission said the move by several states to unravel the WTO structure is alarming. “Such practices should be strongly condemned, as their potential proliferation can put at risk and even nullify the whole global set-up of rules governing trade, opening the way to blatant and uncontrolled protectionism.”

Indonesia’s food law prohibits food imports unless deemed necessary, and it too has a draft industry law for wholesale takeover of strategic sectors.

Countries are using every trick to keep goods and services out, going far beyond from tariffs and fees. These include licensing barriers, technical regulations, procurement rules and internal stimulus measures that distort competition. Russia keeps out imported cars through the use of a recycling fee that shields local producers.

Many forms of “behind-the-border” protectionism are hard to police. “These measures are often applied without pre-warning for businesses. Whole consignments of goods end up blocked in customs entry points and warehouses. Perishable products can often totally lose their market value in the process,” said the report.


The Commission said the vices are spreading to the OECD bloc of rich states, with a “Plan for Australian Jobs” that supports local bidders for tenders.

“We think it is too crude to say emerging markets are going protectionist,” said Neil Shearing from Capital Economics. “For every case like Brazil, there are those like Columbia, Chile, Peru and Mexico that have just signed a free trade deal.”

Mr Shearing said this year’s currency crash in emerging markets may help restore lost competitiveness for those with big current account deficits, notably Brazil, India, Turkey and South Africa. “A weaker exchange rate is what they need and will be more useful in the end than any industrial policy,” he said.

Capital Economics said the G20 is unlikely to make any breakthrough on trade. The bloc controls 85pc of global GDP but is a “dysfunctional” club, with no permanent staff, and deeply conflicting views.

“The group is too large and disparate to function as an effective decision-making body, and it has no means of enforcing any decisions which it does make,” it said.

Greece: ‘Grim’



3 September 2013

Presseurop
Eleftherotypia
Eleftherotypia, 3 September 2013

According to a study by the General Confederation of Greek Workers (GSEE), which represents private sector employees, the outlook for the Greek economy will remain grim for some time yet.

Eleftherotypia reports that the study, which will be published at the end of this month, predicts that unemployment will reach 33 per cent in December this year, and that pensions and incomes will continue to decline in 2014. Since 2009, it remarks, “workers have lost close a quarter of their purchasing power.”

The study finds that four out of 10 unemployed people are dependent on family support, while only 12 per cent currently receive benefits. Families that have taken charge of 70 per cent of unmarried unemployed people are getting poorer, while 55 per cent of Greeks would be willing to work for any level of pay.

At the same time, the country’s 50 leading publicly quoted companies have reported a 17 per cent decline in their profits. "And worst of all," adds Eletherotypia


… it would take 20 years at a growth rate of 4 to 5 per cent to restore unemployment to 2009 levels and to recreate the million jobs that have been lost since then