US-China trade war caused ‘dramatic spike’ in trade barriers, WTO warns ahead of G20 summit

Finbarr Bermingham

Global trade tensions, largely stemming from the ongoing US-China trade war, have led to a “dramatic spike” in barriers to doing business between the G20 nations, according to a new report by the World Trade Organisation.

The World Trade Organisation (WTO) calculated that between October 16, 2018 and May 15, 2019, there were 20 new restrictions introduced between the world’s most powerful economies, covering trade worth US$335.9 billion.

This was the second largest spike on record, behind only the preceding period when US$480 billion worth of trade was affected by new protectionist measures. This means that since the trade war first started in earnest in July 2018, US$815.9 billion worth of trade has been affected by such measures.

The WTO has been tracking and quantifying “import restrictive measures” since May 2012, and the latest figure is 3.5 times higher than the initial average.

We urgently need to see leadership from the G20 to ease trade tensions and follow through on their commitment to trade and to the rules-based international trading system

Roberto Azevêdo

As the G20 leaders prepare to convene in Osaka, Japan for their annual summit this weekend, the WTO’s director general Roberto Azevêdo said the findings “should be of serious concern for the whole international community”, adding that “we urgently need to see leadership from the G20 to ease trade tensions and follow through on their commitment to trade and to the rules-based international trading system”.

The restrictive measures the WTO found included tariff increases, import bans and new customs procedures for exports. Over the same period, the G20 nations introduced 29 trade easing measures, such as reducing or eliminating tariffs or export duties, or simplifying customs procedures.

However, the WTO said that, on average, the four new trade-facilitation measures per month was the lowest number on record. Furthermore, for the first time since the report was launched seven years ago, G20 nations launched as many trade remedy investigations at the WTO than were terminated after being filed without need for action.

Trade remedy investigations are trade policy tools that allow governments to take action against imports which are perceived to be causing material injury to a domestic industry, with a higher proportion of terminations welcomed by the WTO as it suggests respective parties have been able to resolve the issue themselves, therefore boosting trade.

Trade barriers in the context of the US-China trade war

“This report provides further evidence that the turbulence generated by current trade tensions is continuing, with trade flows being hit by new trade restrictions on a historically high level,” Azevêdo added. “The stable trend that we saw for almost a decade since the financial crisis has been replaced with a steep increase in the size and scale of trade-restrictive measures over the last year. This will have consequences in increased uncertainty, lower investment and weaker trade growth.”

The WTO report concluded its findings in mid-May, meaning that it did not include the increase in import tariffs from the United States on US$200 billion of Chinese goods from 10 per cent to 25 per cent, or China’s retaliatory tariffs levied on US$60 billion of US goods. It also does not factor in the potential imposition of tariffs of up to 25 per cent on a further US$300 billion of Chinese goods threatened by the Trump administration.

Along with the US-China trade dispute, countries such as Brazil, Canada, Mexico, South Korea as well as European Union member nations have been affected to varying degrees by US tariffs on metals, while Canada has been hit with a number of import bans by China, including a series of canola and pork embargoes.

In addition, in May the US terminated Turkey’s preferential trade treatment which had enabled tariff-free access for goods such as car parts and jewellery.

Within the report, the WTO singled out “the series of trade actions triggered by US tariffs on steel and aluminium products and on China’s exports to the United States, and the responses by US trade partners to those actions”, which “contributed to a significant increase in the value of trade affected by trade-restrictive measures”.

While these measures have yet to make significant dents in global trade and economic growth, the WTO warned that a further escalation could draw in more G20 economies and lead to a more broad-based global trade conflict, which would make a greater impact.

It has been confirmed that Chinese President Xi Jinping and his US counterpart Donald Trump will meet in Osaka on the sidelines of the G20 summit, although the nature of the meeting has not been confirmed.

Negotiating teams from both sides are back in contact to lay the groundwork for the leaders’ meeting, following a dramatic collapse in negotiations in May. Chinese Vice-Premier Liu He, Beijing’s lead negotiator, spoke with US trade representative Robert Lighthizer and US Treasury Secretary Steven Mnuchin by phone on Monday, according to a statement published by Chinese state news agency Xinhua on Tuesday morning.

According to the instructions from the phone conversation of leaders of both countries, both sides exchanged views on economic and trade issues. Both sides agreed to continue communication

Xinhua statement

“According to the instructions from the phone conversation of leaders of both countries, both sides exchanged views on economic and trade issues. Both sides agreed to continue communication,” the statement said.

Also high on the agenda in Osaka will be the WTO itself, with China thought to be particularly keen to push for reform of the Geneva-based institution.

In an essay published on Monday, the secretary general of the United Nations Conference on Trade and Development, Mukhisa Kituyi, said that the WTO had “failed to pre-empt the unilateral measures and resulting heightened tensions that have emerged among the world’s major trading partners over the past year”.

Kituyi added that “these trade tensions are a symptom rather than cause of the diminishing relevance and effectiveness of the multilateral trading system” and that “they have brought to the fore the need to revitalise global partnership in trade”.

Sign up to our China at a Glance newsletter and you'll receive an exclusive 3-day G20 news package in collaboration with POLITICO (coverage from 28-30 June)

More from South China Morning Post:

This article US-China trade war caused ‘dramatic spike’ in trade barriers, WTO warns ahead of G20 summit first appeared on South China Morning Post

For the latest news from the South China Morning Post download our mobile app. Copyright 2019.