Wednesday, September 12, 2012

Trade war redefined

Increasingly, signs of "protectionist measures" are seen in trade policy across the world. Experts have attributed this to a rising protectionist wave that could severely challenge the multilateral system. With the Doha round in an impasse, policies that do raise barriers to trade cause tremendous friction between trading partners.

This friction is reflected in two kinds of action - first, a tit for tat protectionist measure which leads to more protectionism in the ecosystem and second, a tit for tat WTO litigation. While the former increases the chances of protectionism, the latter tends to ease the situation with a claim for bringing down the barriers.

Simon Lester has this succinct piece in the Cato blog where he discusses the "new kind of trade war" - litigation at the WTO. We have seen that recently in the context of Argentina.
"Complaints at the WTO do not always lead to a finding of violation of trade rules, of course.  The rules are complex and every case must be evaluated on its own merits.  But nevertheless, the notion that, in the current version of a trade war, challenges to trade restrictions will be met with challenges to other trade restrictions is a vast improvement over the old-style trade war.  With trade negotiations progressing so slowly these days, we should be happy if trade litigation can bring about some degree of liberalization. 
It is worth noting that there are potential pitfalls.  The WTO litigation system could be overwhelmed with cases; and in the search for cases to bring in response, countries might choose to file somewhat frivolous cases that might not otherwise have been brought.  But despite such concerns, a shift away from the old-style trade war is of great benefit to the world trading system and to the cause of free trade."
Whether the WTO can handle a floodgate of such requests is open to debate. It would test the capabilities of the "crown jewel" of the international trading system. However, the more pertinent issue is, how would countries deal with this deluge? It would call for enhancing legal capacity, cross sectoral analysis with multi-stakeholder teams and a national strategy to succeed at the WTO.


choten lama said...

Litigation to stall in the guise of litigation to decide issues/ points of law is often used by parties...the stronger the party, the larger the contingent of lawyers on their pay-roll. So I do not find it too surprising that a strategy that had been seen adopted liberally in traditional scenarios is being adapted and unleashed in this arena as well.

Srikar said...

Yes, time for enhancing national legal capacity to engage in strategic litigation!