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WTO vigilant over growing disputes

(China Daily)

09:23, September 22, 2012

The World Trade Organization is staying very vigilant about the growing number of trade disputes in recent months amid a significant slowdown of global trade growth, the chief of the world trade body said.

Pascal Lamy, director-general of the WTO, told China Daily that the deceleration of trade growth has led to increasing trade conflicts, which is "worrying".

"We have to remain very vigilant," he said.

But while trade frictions affect 3 to 4 percent of world trade, Lamy said there hasn't been a big wave of protectionism.

"We have trade frictions, we have trade disputes, we don't have trade wars. One of the great things of the WTO is that there are no trade wars anymore," Lamy said.

World trade will grow by a mere 2.5 percent this year, dragged down by Europe to less than half of the previous 20-year average, the WTO said on Friday.

"It's significantly slower growth of world trade than we expected," said Lamy.

"This should not be surprising. This is just confirmation that the world economic outlook is slowing down."

The WTO report published in July pointed to the global rise of trade protectionism, stating that "a clear trend has emerged in which non-tariff measures are less about shielding producers from import competition and more about the attainment of a broad range of public policy objectives".

Some global institutions, along with developed nations and regions including the EU, also warned about rising trade protectionism.

This is also true with China, which has been victim of trade protectionism for more than a decade. Chinese figures show the first half of this year saw the start of 40 trade remedy investigations into Chinese exports, up 38 percent year-on-year.

"We've clearly witnessed in recent months a rise in the number of disputes we have to adjudicate," Lamy said.

Although the number is lower than in 2000 when it reached a record high, "it is clearly growing and we will have to cope with that and administer the disputes, create the necessary panels, do the necessary work on the procedures."

"We promote keeping opening trade."

Besides traditional industries in China, some high-tech industries are becoming targets of trade investigations, including solar panels and wind towers. As the US enters a crucial period in its presidential election campaign, the US is expected to be tougher on China's trade policies.

Yu Benlin, deputy director-general of the Bureau of Fair Trade for Imports and Exports with the Ministry of Commerce, said the "situation of trade frictions against China is very severe, and there has been an upward trend."

Weak global economic growth "has an impact, notably on big, rich, deep exporting markets like Europe, US and Japan and has a consequence on trade in a number of emerging markets including China," Lamy said.

Growth of Chinese shipments has been on the decline during the past several months, decelerating to 1 percent in July, which casts a shadow over Chinese economic growth, which has been largely reliant on high-speed exports.

Early this year, the Chinese government set a target of 10 percent for this year's foreign trade growth and 7.5 percent for the nation's economic growth in 2012. But experts said the 10 percent target is not achievable.

China recently launched a series of measures to stabilize exports and stimulate the economy, including tax rebates and credit insurance, but many doubt whether the efforts will take off.

According to Lamy, investment and consumption are important amid slackened global trade.

"If China wants to maintain its growth rate, China will have to accelerate its economy more on the domestic side. There are two engines — investment and consumption — and China will have to play with both," Lamy said.

After the financial crisis landed in 2008, China launched a big stimulus package worth 4 trillion yuan ($630 billion), approving a large volume of big infrastructure projects.

"There's a big lever on infrastructure and we know this is the classic China way of stimulating the Chinese economy, but we also know this may lead to heavy debt, notably in the local authorities or over-capacity," Lamy said.

"Then of course the next question is how you can stimulate domestic consumption."

As part of its aim to transform its economic growth model, China pledges to boost consumption.

From 2011 to 2015, China's social retail consumption is expected to grow annually by 15 percent, reaching 32 trillion yuan in 2015. China's imports would surpass $8 trillion in the five-year period.

But for Lamy, "stimulating Chinese domestic consumption is not that easy."

Hurt by eurozone debt woes and tightening property policies, China's economic growth has been decelerating this year, with expansion slowing to 7.6 percent in the second quarter, the slowest pace in more than three years.

But, "what will remain true is that for the rest of the world and notably for growing countries, China will remain an important indispensable source of growth worldwide," said Lamy.

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