Unequal Compliance: The 6th GTA report

Transcription

1 Unequal Compliance: The 6th GTA report

2 Centre for Economic Policy Research (CEPR) Centre for Economic Policy Research Great Sutton Street London EC1V 0DG UK Tel: +44 (0) Fax: +44 (0) Web: Centre for Economic Policy Research 2010

3 Unequal Compliance: The 6th GTA report Edited by Simon J. Evenett

4 About Global Trade Alert (GTA) Global Trade Alert provides information in real time on state measures taken during the current global economic downturn that are likely to discriminate against foreign commerce. Global Trade Alert is: Independent: GTA is co-ordinated by the Centre for Economic Policy Research, an independent academic and policy research think-tank based in London, UK. GTA draws upon expertise and analysis from 7 independent research institutions around the world. Comprehensive: GTA complements and goes beyond the WTO and World Bank s monitoring initiatives by identifying those trading partners likely to be harmed by state measures. Accessible: The GTA website allows policy-makers, exporters, the media, and analysts to search the posted government measures by implementing country, by trading partners harmed, and by sector. Third parties will be able to report suspicious state measures and governments will be given the right to reply to any of their measures listed on the website. Transparent: The GTA website allows policymakers, government officials, exporters, the media, and analysts to report discriminatory measures, but also will provide data for all stakeholders on the posted government measures by implementing country, by trading partners harmed, and by sector. Timely: The up-to-date information and informed commentary provided by Global Trade Alert will help ensure that the G20 pledge not to repeat the historic mistakes of protectionism of previous eras is met, by maintaining confidence in the world trading system, deterring beggar-thyneighbour acts, and preserving the contribution that exports could play in the future recovery of the world economy. For further information, visit About the Centre for Economic Policy Research (CEPR) The Centre for Economic Policy Research is a network of over 700 Research Fellows and Affiliates, based primarily in European universities. The Centre coordinates the research activities of its Fellows and Affiliates and communicates the results to the public and private sectors. CEPR is an entrepreneur, developing research initiatives with the producers, consumers and sponsors of research. Established in 1983, CEPR is a European economics research organization with uniquely wide-ranging scope and activities. The Centre is pluralist and non-partisan, bringing economic research to bear on the analysis of medium- and long-run policy questions. CEPR research may include views on policy, but the Executive Committee of the Centre does not give prior review to its publications, and the Centre takes no institutional policy positions. The opinions expressed in this report are those of the authors and not those of the Centre for Economic Policy Research. CEPR is a registered charity (No ) and a company limited by guarantee and registered in England (No ). Chair of the Board Guillermo de la Dehesa President Richard Portes Chief Executive Officer Stephen Yeo Research Director Mathias Dewatripont Policy Director Richard Baldwin

5 Contents Foreword 1. Executive Summary 1 Section 1: Global Overview 2. Did G20 Members Hold the Line Against Beggar-thy-Neighbour Policies after the Pittsburgh Summit? The Record Since September Simon J. Evenett Section 2: Specific Analyses of G20 Commercial Policy Measures 3. Assessing the G20 Use of Antidumping, Safeguards and Countervailing Duties During the Crisis 39 Chad P. Bown 4. Jumbo Discriminatory Measures and the Trade Coverage of Crisis-Era Protectionism 49 Simon J Evenett and Johannes Fritz 5. Crisis and Modernisation : An Analysis of Russian Commercial Policy and its Application to the Automobile Industry 59 Darya Gerasimenko Section 3: Jumbo Measures: Potentially Far-Reaching Discriminatory State Measures Jumbo Measure No. 1: China: Export tax rebates 107 Jumbo Measure No. 2: USA: Buy Amercian provisions in stimulus package 108 Jumbo Measure No. 3: China: Implementation of State Council Opinions on imported goods 111 Jumbo Measure No. 4: Belarus and Russia: Increase in export tariffs on crude oil and oil products 113 Jumbo Measure No. 5: UK: Temporary aid for the production of green products 114 Jumbo Measure No. 6: China: Adjustment of tariff policy on key technical equipment 116 Jumbo Measure No. 7: Venezuela: Devaluation of the Bolivar 118 Jumbo Measure No. 8: Kazakhstan: Announced 25% devaluation of the national currency 119 Jumbo Measure No. 9: Nigeria: Deliberate devaluation of the Naira 120 Jumbo Measure No. 10: Russia: The programme of the anti-crisis measures of the Russian Government Jumbo Measure No. 11: Japan: State endorsement of private initiative to raise food self-sufficiency 123 Jumbo Measure No. 12: Brazil: New credit line for exports of consumer goods 125 Jumbo Measure No. 13: Russia: Subsidized loans to producers of certain type of machinery 126 Jumbo Measure No. 14: India: Extension of service tax refund for exporters 127

6 Jumbo Measure No. 15: India: Pre- and post-shipment export credit 128 Jumbo Measure No. 16: Indonesia: Import tariff increases on certain products that compete with locally manufactured products 130 Jumbo Measure No. 17: Indonesia, Malaysia, and Thailand: Limiting rubber exports to 915,000 tons during Jumbo Measure No. 18: Argentina: Extension of tax exemptions for locally produced capital goods 133 Jumbo Measure No. 19: Russia: Public procurement price advantage to domestic producers 134 Jumbo Measure No. 20: Russia: Preferences to domestic producers in amendments to Government Procurement Law 135 Jumbo Measure No. 21: Russia: Temporary import tariff introduction on certain type of machineries 136 Jumbo Measure No. 22: France: More restrictive public procurement rules for construction work tenders 137 Section 4: G20 Compliance and Commercial Interests: Country-by-Country Reports Argentina 141 Australia 152 Brazil 160 Canada 170 China 177 France 188 Germany 197 India 206 Indonesia 216 Italy 226 Japan 235 Mexico 244 Republic of Korea 251 Russian Federation 260 Saudi Arabia 270 South Africa 277 Turkey 286 United Kingdom 293 United States 302

7 Foreword Global Trade Alert is now a year old. Over the past year it has investigated over 1050 state measures taken during the global downturn that are likely to affect foreign commerce, and has assembled what we believe is the most comprehensive database of such measures available online. The database, which is freely available at the GTA website has provided the evidence base for the six GTA Reports issued over the past year. This, the sixth Report, focuses on the commercial policy of the G20 nations since the last Leader s Summit in September When the fifth Report was published, earlier this year, there were signs of recovery in the world economy. Events since then, in particular the crisis in the Eurozone, have cast some doubt on the strength of the recovery, and more important, has sharply increased the pressure on Eurozone (and other) countries to eliminate their fiscal deficits. Governments contribution to aggregate demand is thus set to fall. That leaves net exports as one of the few sources of aggregate demand expansion. If exports fail to grow then governments may be tempted to throttle imports in order to boost aggregate demand. Therein lies the danger for the global trading system. Overall, the evidence presented in this Report makes for sobering reading. Since the September 2009 Summit governments have almost trebled the amount of discrimination in place by imposing 357 discriminatory measures, with harmful measures outnumbering beneficial measures by a ratio of 4:1. In addition, with additional information now available, it seems clear that protectionism was even more prevalent during 2009 than anyone realized. The Report also examines the use of trade defence instruments, and the impact of what it calls jumbo protectionist measures. It also examines in detail the policies adopted by Russia a large and important country whose trade and development policies have shifted very sharply during the crisis. We are grateful to Simon Evenett for the unbounded energy and enthusiasm he has shown in leading GTA initiative. Thanks are also due to his hard-working team at the Swiss Institute for International Economics and Applied Economic Research in St. Gallen, who prepared the summary tables and maps and provided general research support namely, Johannes Fritz, Darya Gerasimenko, Malwina Nowakowska, and Martin Wermelinger. CEPR s Publications Team Anil Shamdasani and Samantha Reid, provided invaluable support, as always. The task of collecting and analysing the data has been conducted very efficiently and professionally by GTA s regional network partners, notably, the African Centre vii

8 viii Unequal Compliance: The 6th GTA report for Economic Transformation (ACET), the Centre for International Governance Innovation (CIGI), the Gulf Research Center (GRC), the Latin American Trade Network (LATN), and the Research and Information System for Developing Countries (RIS). We also owe thanks to GTA s supporters: the Centre for International Governance Innovation; the German Marshall Fund of the United States, the International Development Research Center; the Trade Policy Unit of the UK Department for Business, Innovation and Skills and the Department for International Development. In particular we would like to acknowledge financial support from the Global Trade and Financial Architecture project (an initiative of the UK Department for International Development and the World Bank). Indeed, the support from all our partners has been generous and most welcome, but they of course play no role in the operation of GTA, nor do they necessarily endorse the opinions expressed in this Report. The overwhelmingly positive reaction to Global Trade Alert from the world s media, policymakers and the international trade community has convinced us that an independent initiative such as GTA is valuable and can coexist alongside other monitoring initiatives. In this spirit, we trust that the contents of this report, and the ongoing work of GTA, will continue to be of interest to trade policymakers, commercial organisations, NGOs and analysts following developments in the world trading system. Stephen Yeo Chief Executive Officer, CEPR 23 June 2010

9 1. Executive Summary Simon J. Evenett University of St. Gallen and CEPR Introduction The purpose of this sixth report of the Global Trade Alert is to analyse leading commercial policy developments since the last G20 Leaders summit in September Interest is not just confined to whether the G20 Leaders have kept their word and eschewed protectionism. The nine-month time horizon (from the Pittsburgh to Toronto summits) allows for an examination of possible changes in discrimination by governments against foreign commercial interests, in particular as the world economy began its recovery in the last quarter of 2009 and the first quarter of That recovery, however, has in turn been called into question by a sovereign debt and liquidity crisis that arose in the Eurozone countries in the second quarter of The new macroeconomic context--with its growing emphasis on fiscal restraint--may influence government behaviour towards open borders as well. This latest twist in the financial crisis has certainly affected the value of the euro, with the unanticipated knock-on effect of making the Chinese government less willing to revalue the renminbi than before--much to the consternation of certain members of the U.S. Congress, who have threatened to impose extra tariffs on Chinese goods. The latter example highlights the different ways crises can test policymakers resolve to keep open borders to international commerce. Indeed, one conclusion that recurs throughout this report is that the commercial policy challenges in 2010 and 2011 may be significantly different from those in the first half of Policymakers and trade diplomats need to align the expectations with these new circumstances and should not assume that formulas used to keep borders open in the past must be successful in the future. The principal findings of the report are summarised in the sections that follow, after a discussion of the possible implications of fiscal restraint for protectionist dynamics. The case for open borders is even stronger in an era of fiscal retrenchment In the second quarter of 2010 such was the pressure from financial markets that many European governments announced measures to reduce their budget 1

10 2 Unequal Compliance: The 6th GTA report GTA: Contributing to policy dialogue through independent monitoring of state measures Global Trade Alert (GTA) has always operated on the assumption that in current circumstances the most practical approach to resisting protectionism is to combine peer pressure with high-quality, current information about state measures and their actual or potential effects on foreign commercial interests. Governments, the media, and civil society are the key sources of the former; the job of Global Trade Alert and other monitoring exercises is to provide the latter. An assessment as to the extent and changes over time in protectionist dynamics is also provided for in this Report, by considering not just the quarter-by-quarter changes in the numbers of protectionist measures implemented but also the number of pending measures that have been announced and are expected to implemented in the future. Information on the pending measures provides policymakers with an early warning of what is to come, a feature unique to the GTA s monitoring initiative. The Global Trade Alert was formally launched on 8 June 2009 in London, UK. The GTA s database contains reports on state measures whose implementation might affect the treatment of foreign commercial interests. State measures announced on or after 1 November 2008 are eligible for inclusion in the GTA database. GTA is implemented by a team of part-time trade policy experts from all over the world. These experts investigate state measures, seeking to document them with official sources, and identify affected products, sectors, and trading partners. Reports on state measures are submitted to the GTA s Evaluation Group and, if approved, a measure is published on the GTA s website. GTA has a group of eminent persons as advisors. They not only provide valuable advice but also stand as guardians of the independence of this initiative from any external influence. In its one year of existence over 7,500 users have returned to the website 15 times or more. The reports of GTA have been mentioned in over 200 newspapers and media outlets. Leading business persons, political leaders, and analysts have referred to GTA in their speeches. This is the sixth GTA report. Other reports are available at: deficits and borrowing needs. These measures involved both a combination of tax increases and expenditure reductions, both of which are likely to reduce the contribution of the state to total aggregate demand in national economies. What challenges or imperatives for commercial policymaking arise because of fiscal retrenchment? Coming at a time when most European economies had barely turned the corner (from contraction to expansion), and with investment outlays constrained by frozen corporate debt markets, net exports are seen as one of the few sources of demand stimuli. 1 This should strengthen the interest that every European government has in its major trading partners keeping their markets open. 2 1 No position is taken here as to whether fiscal retrenchment is desirable. What matters for the argument that follows is that net exports will be one of the few remaining sources of aggregate demand expansion, which in turn could tempt governments to bolster exports and limit imports in ways that trigger retaliation from abroad. 2 Although this crisis began in the Eurozone experience teaches us that it could spread to other regions of the world economy.

11 Executive Summary 3 This argument has another side, of course, for it is net exports that contribute to aggregate demand, not gross total exports. Even with the euro depreciation, European governments should not seek to further squeeze import market shares with discriminatory policies. Doing so may well trigger retaliation limiting access to foreign markets, detracting considerably from the attractiveness of discriminating against own imports in the first place. Overall, so as to maximise the opportunities for export growth, governments engaging in fiscal retrenchment ought to strongly support open borders and ultimately this will require leading by example. Another consequence of financial markets applying pressure for fiscal retrenchment is that some floating currencies may depreciate substantially, with implications for trade frictions. Reference has already been made to the impact of the euro s devaluation on the US-Sino currency dispute. But the matter does not stop here. If trading partners are given grounds to suspect that a depreciation was deliberately induced or reinforced by a government, then this may trigger retaliation in different forms. Depreciations had better appear to be marketdriven or the potential for difficult commercial policy disputes will increase. Public adherence to open (that is, non-interference in) markets--including currency markets--will be important here. The third potential relationship between fiscal retrenchment and commercial policy discrimination relates to the widespread use of subsidies and bailouts in the early phase of the crisis (that is, from November 2008 until second quarter 2010). One of the reasons governments have run up such large budget deficits is precisely because they chose to intervene during the crisis with subventions rather than price-based instruments, such as tariffs. Pressure from the financial markets to reduce budget deficits may cause governments to scrap crisis-era subsidies, which on the face of it is desirable as many such subsidies distort market forces. However, if subsidy removal is replaced by other forms of government intervention, then the principal effect of fiscal retrenchment on commercial policy discrimination may be to alter its composition, rather than to reduce its level. Much will depend on the viability of subsidy recipients and the extent to which the macroeconomic impact of fiscal retrenchment, including potential exchange rate depreciation, worsens or improves their financial health. A worst case scenario arises when retrenchment causes aggregate demand to fall considerably, subsidy withdrawal leads to fear of corporate viability and further job losses, and the state intervenes replacing a prior subsidy with a competitionrestricting or profit-shifting measure. To summarise, while there are good arguments why governments implementing fiscal retrenchment should argue for open borders at home and abroad, pressures from firms and unions may be at their greatest if that retrenchment involves unwinding the very subsidies that added to the budget deficit in the first place. Since rule-based solutions are off the table for G20 members and evidently are evaded frequently enough in the European Union, the only tool at hand to strengthen government resolve during this next commercial policy challenge is mutual support through enhanced monitoring and peer pressure. This begs the

12 4 Unequal Compliance: The 6th GTA report question what existing mechanisms have accomplished, the report s findings for which are summarised in the next section. What has the G20 accomplished since the Pittsburgh Summit? Given the upcoming G20 summit meeting in Toronto, Canada, the opportunity was taken here to assess what has happened since the last G20 Leader s summit in September Worldwide, governments have imposed 357 state measures that discriminate against foreign commercial interests, almost trebling the amount of observed discrimination (to 554 measures). Government measures that harm foreign commercial interests outnumber beneficial measures four to one, although it should be borne in mind that each measure may differ in impact. Like the period before the Pittsburgh summit (November 2008-September 2009), afterwards G20 governments were responsible for just over 60 percent of all the discriminatory measures implemented worldwide. It should also be noted that in the latter period, 80 percent of the benign or beneficial measures implemented worldwide were put in place by G20 governments. What can one make of the G20 s record on protectionism? Some have argued that it was naïve to expect G20 members to refrain from any form of protectionism during the crisis, yet those critics don t go on to propose a metric for evaluation (giving the impression that there argument is an excuse for the protectionism imposed.) Others argue that every G20 member has broken their pledge and every G20 member knows this, that each G20 member values the flexibility to do so, and therefore one should expect little from peer pressure initiatives and the like. On this view, the pledge on protectionism amounts to window dressing ; cheating is acceptable to all precisely because fear of the unknown (which is heightened in a crisis) calls for preservation of options. If realpolitik or options preservation were the factors underlying the calculations of policymakers, then the facts uncovered since the Pittsburgh summit highlight the growing costs of either logic. Such has been the resort to discrimination by governments, in contravention of the G20 and other such pledges, that there is a growing price paid by each country s commercial interests. Perhaps, before the Pittsburgh summit, China was prepared to pay a price of 99 hits to its commercial interests abroad in exchange for preserving its option to discriminate at home. Now that the price paid by China has risen nearly 200 percent to 282 hits to its commercial interests, is a weak monitoring and peer pressure exercise still in China s economic interests? As Table 1.1 makes clear, many large trading nations have paid a substantial price for going along with the current G20 trade initiatives. Moreover, many of the hits taken to national commercial interests have been discovered since the Pittsburgh summit. Will each government continue to accept this damage to their commercial interests, especially when there is a lot of variation across countries in harm inflicted? If not, some could argue for more vocal monitoring and peer pressure to discourage new discrimination and an unwinding or exit initiative to terminate measures taken since the G20 pledges were first made.

13 Executive Summary 5 Table 1.1 Since Pittsburgh many G20 countries have seen their commercial interests hit very often; worse, there are still plenty of pending measures in the pipeline Top 10 Targets Number of discriminatory measures imposed on target This report (June 2010) Increase from previous G20 meeting (2nd GTA report) Number of pending measures, which if implemented, would harm target too This report (June 2010) Increase from previous G20 meeting (2nd GTA report) China EU na 80 na USA Germany France UK Italy Belgium Japan Netherlands Note: Unfortunately when our second report was prepared data on the total number of times the EU 27 nations were harmed was not collected, hence frustrating direct comparisons between early June 2010 and early September Data on EU27 was reported from the third report on due to requests from users. Moreover, individual member state information in this table may indicate the extent how often some European trading nations have been harmed since the Pittsburgh summit. Another factor that might create dissension among the G20 is the recognition that some countries inflict a lot more harm than others (see Table 1.2). Any notion that the current G20 process generates a parity of pain and opportunity ought to be dismissed. The GTA reports four indicators of harm done by a nation s policies and the top 10 worst offenders on each metric are listed in Table 1.2. Some countries (Argentina, China, Ethiopia, India, Indonesia, Germany, Nigeria, Russia, and Venezuela) recur on the list. The EU27 refers to the combined impact of all the actions taken by the European Commission and the 27 Member States. Together, the EU27 appear in the top 5 worst offenders on all four metrics, a dubious honour shared with no other trading entity or nation. It should be noted, however, that most of the harm done by the EU27 grouping result from measures taken by the EU member states and not by the European Commission. Like the rest of the world, within the EU there is considerable variation in the resort to state measures that harm foreign commercial interests. Whether inside the EU or out, not every government, then, seems under the same pressure to

14 6 Unequal Compliance: The 6th GTA report hold the line against protectionism; greater attention should be given to holding to account those governments that violate the G20 pledges. Protectionism in 2009 was far more prevalent than many thought at the time The other advantage of periodically looking back over the crisis-era is to reevaluate just how bad matters were in prior years. Readers may recall that 2009 began with strong fears that a relapse into 1930s-style protectionism might occur. Table 1.2 Some countries inflict more harm than others Metric, Country in specified rank, Number Rank Ranked by number of (almost certainly) discriminatory measures imposed Ranked by the number of tariff lines (product categories) affected by (almost certainly) discriminatory measures Ranked by the number of sectors affected by (almost certainly) discriminatory measures Ranked by the number of trading partners affected by (almost certainly) discriminatory measures 1. EU27 (146) Venezuela (784) EU27 (55) EU27 (168) 2. Russian Federation (73) Kazakhstan (719) Algeria (54) Argentina (161) 3. Argentina (41) Nigeria (599) Nigeria (45) China (161) 4. India (31) EU27 (437) Venezuela (38) Indonesia (152) 5. Germany (29) Russian Russian Kazakhstan (36) Federation (421) Federation (142) Russian 6. UK (24) India (347) Finland (132) Federation (34) Indonesia (347) Germany (132) 7. Indonesia (22) Ethiopia (32) South Africa 8. Ethiopia (345) Indonesia (32) (132) China (19) 9. Italy (19) Argentina (336) India (31) Belgium (131) 10. Austria (17) China (335) Germany (27) Brazil (131) Note: There is no single metric to evaluate harm. Different policy measures affect different numbers of products, economic sectors, and trading partners. GTA reports four measures of harm. The EU27 refers to the sum of all of the measures taken by the 27 national governments of the European Union and the measures taken by the European Commission. To be included in this total a state measure must have involved discrimination against the commercial interests of another state, including potentially another member of the European Union.

15 Executive Summary 7 Figure 1.1 Far more protectionism occurred before the Pittsburgh summit than policymakers knew at the time Number of discriminatory measures Nov/Dec 2008 Q Q Q Latest report Last G20 summit (Sept 2009) Figure 1.2 Nearly 650 harmful measures have been taken since the G20 Leaders summits began in November 2008; there is much crisis-era protectionism to unwind Number of harmful measures (red, amber) implemented since first G-20 summit Nov/Dec Q Q Q Q Q1 2010Q (to ) Cumulative total up to the quarter in question 645

16 8 Unequal Compliance: The 6th GTA report The evidence provided by the GTA before the Pittsburgh Summit, reproduced in part in Figure 1.1., pointed to between harmful measures a quarter in the first half of 2009, was seen as bearing out those fears and the need for restraint. Now we know that matters in the first half of 2009 were much worse: in fact, between harmful measures were implemented in each quarter. Worse, the third and fourth quarters of 2009 saw approximately 100 more such measures implemented per quarter, suggesting that protectionist momentum has barely subsided. Some critics called the GTA alarmist for arguing on the basis of then available data that there was a protectionist juggernaut underway; in reality, subsequent data revisions bear out our initial concerns. As far as open markets were concerned, 2009 was a terrible year. Much of the discrimination put in place then has yet to be removed--as the cumulative total of outstanding harmful state measures in Figure 1.2 make clear. Counts of state measures reveal the frequency of beggar-thy-neighbour interventions by governments, but not necessarily the amount of trade potentially covered by such discrimination. In 2010 a number of reports by international organisations have sought to estimate the trade coverage of certain measures taken by governments. The latest report of the WTO secretariat (issued on 14 June 2010) computes the trade coverage of import restricting measures implemented since 1 November The WTO secretariat estimates that trade amounting to approximately 0.4 percent of total world imports are affected by these measures. Sadly--or perhaps wisely--the WTO secretariat did not comment on the policy implications of the magnitude of this figure. For the first time the GTA decided to check whether the approximate level of trade coverage could, in fact, be so small. Rather than restrict our analysis to import restricting measures, instead objective criteria were used to identify socalled jumbo discriminatory measures, that is, those measures likely to affect a large number of trading partners or trade. If the so-called jumbo measures in fact covered relatively little trade, then this would be surprising; certainly more surprising than confirming that targeted trade defence actions and tariff increases--the apparent basis of the WTO s calculation--affect small amounts of trade. 3 Surely, the sensible place to start when calculating the minimum amount of trade covered by crisis-era protectionism is to sum up the trade covered by those wide-ranging discriminatory measures for which confidence in the underlying calculations is high? Despite adopting a remarkably conservative methodology, 22 such measures were found to each cover more than US$10 billion of trade. 4 (Each jumbo measure is described in section 3 of this report.) Our most conservative estimate of the total trade covered by these measures is US$1.618 trillion, equivalent to approximately percent of world imports in No doubt a less conservative method--that added in the trade coverage of the other 1000 or more state measures included in the GTA database--would have obtained a far higher percentage of world imports covered. But that was not our 3 A finding that is already well established in the literature on anti-dumping, for example. 4 Incidentally, almost all of these 23 measures were implemented by governments that are members of the G20.

17 Executive Summary 9 purpose. Our goal here was modest: to demonstrate that enough wide-ranging discriminatory measures have been implemented since November 2008 that the total amount of trade affected is far from de minimus. In sum, the sheer volume of information that has become available about the frequency and potential trade coverage of protectionism in 2009 and subsequently reinforces the case for vigilance, effective monitoring, peer pressure, and public warnings about the threat to open borders. Going forward, however, even more vigilance is needed as governments enter an era of fiscal retrenchment and potential deflation. Unwinding crisis-era discrimination should be added to the trade policy agenda The task before policymakers in the year ahead is not just to resist the temptations of future protectionism but also to find the means to unwind the substantial amount of discrimination introduced into the world economy during the crisis (recall Figure 1.2). That task is likely made harder by the fact that fears of another Great Depression no longer keep decision-makers awake at night. Still, G20 Leaders could easily instruct their trade ministers and the WTO to draw up a list of systemic (that is, far-reaching) measures whose removal would greatly reduce the trade coverage of crisis-era discriminatory measures. In short, this could amount to taking GTA s list of jumbo measures or using different objective criteria to identify another set of far-reaching state measures. Governments could them simulataneously phase out these discriminatory measures over a given timeframe. Mapping Crisis-Era Protectionism Sometimes averages and totals obscure interesting variation across countries. To counter this, and to facilitate comparisons across jurisdictions, in each report of the Global Trade Alert several world maps will be included. These maps are reproduced at the end of this Executive Summary. Map 1.1 shows how many almost certainly discriminatory measures have been implemented by each jurisdiction since November There is considerable variation across countries. Almost every major trading nation has implemented 10 or more such measures since the first G20 crisis meeting. In contrast, with the exception of Nigeria, every African nation has implemented less than 10 discriminatory measures. Some government initiatives affect very few trading partners, others many. Map 1.2. reports the total number of trading partners that - on the basis of existing flows of goods, investments, and people across borders - are likely to have been harmed by the implementation of a government s discriminatory measures. More than a dozen national governments have already taken measures

18 10 Unequal Compliance: The 6th GTA report How GTA built its extensive database on contemporary protectionism Since GTA was launched on 8 June 2009 over 1050 state initiatives have been investigated by our independent team of trade policy analysts located around the globe. These initiatives vary from packages of wide-ranging public measures, with many implications for trade and investment policy instruments, to temporary tariff increases on single product lines. GTA s goal is to provide the most comprehensive online database of state measures taken since the first crisis-related G20 summit in November 2008 that might affect foreign commercial interests. The latter are broadly conceived by the GTA team to include not just trade flows and foreign investments but also intellectual property rights and migrant workers deployed abroad. It is through careful, multi-faceted investigations of these initiatives that a rich evidential base was built, from which the contours of contemporary protectionism can be discerned. Users can access this evidence at the website: One of the most important steps in a GTA investigation is to establish whether the implementation of a state initiative has, or is likely, to alter the relative treatment of domestic and foreign commercial interests in the markets where the initiative s effects will be felt. In common parlance, GTA checks whether a state initiative tilts the playing field against foreign firms. GTA, therefore, does not opine on the WTO legality of a measure or whether a measure is appropriate, fair, reasonable or crisis-related (there being no agreed definitions of these terms.) State initiatives that almost certainly (or certainly) introduce or change asymmetries of treatment to the detriment of some foreign commercial interests are deemed by the Global Trade Alert to be contrary to the no-protectionism pledges made at the November 2008 G20 summit in Washington, DC, and reaffirmed at subsequent London and Pittsburgh Summits. In this Executive Summary, the phrases discriminatory and protectionist are used synonymously. Without attempts to carefully enumerate the different types of state measures used and their various effects, any assessment of contemporary protectionism is likely to overlook key trends and is of diminished value to policymakers. That is why GTA goes beyond providing an assessment of the discriminatory impact of state initiatives. Examination of the tariff lines, sectors, and trading partners that are likely to be affected by each state initiative are carefully conducted so as to provide some indication of a public initiative s impact in what is still a relatively interdependent global economy even though, strictly speaking, there may be some circumstances where some form of discrimination is needed to attain a non-protectionist government objective. No doubt purists will argue that a complete understanding of the consequences of crisis-era protectionism requires a detailed economic analysis of each state initiative. Such analyses could indeed be very useful, indeed the GTA team is and would gladly cooperate with experts interested in conducting such studies. But, leaving aside the question of resources and the availability of all the necessary data, quite frankly it is utopian to believe that over 1000 such analyses could be conducted in the timeframe necessary to influence policymaking. In short, we should not make the perfect the enemy of the very good. GTA s investigations go a long way towards indicating the scale of an initiative s effects by making extensive use of publicly available trade, investment, migration, and other data. Still, the GTA team welcomes suggestions that will result in further improvements in the coverage and assessment of state initiatives. Note: See Evenett (2009a) for an overview of the GTA s methodology and Evenett (2009b) for a discussion of the concerns some have raised about the GTA s approach.

19 Executive Summary 11 that harm 100 or more of their trading partners. Maps 1.3. and 1.4. report the number of product categories (4 digit tariff lines) and economic sectors affected by the discriminatory measures that have been put in place since the first crisisrelated G20 summit in November Maps were also generated for the number of times that each jurisdiction s commercial interests have been harmed by other countries discriminatory measures. The number of countries whose state measures have adversely affected a given jurisdiction s commercial interests is reported in Map 1.5. Map 1.6 shows how many times a jurisdiction s commercial interests have been harmed by the discriminatory state measures taken by other governments. This Map indicates that approximately a dozen countries have seen their commercial interests harmed 120 times or more by government measures taken since November Given the enduring interest in whether the G20 member states have lived up to their no-protectionism pledge, Map 1.7. may be of particular interest. This map demonstrates the almost global reach of the harm done when G20 governments violated their own no-protectionism pledges. Map 1.8. shows that the overwhelming majority of nations will find their countries commercial interests harmed if the discriminatory measures in the pipeline are actually implemented. Forward-looking trade policymakers may find this map and the related information in the Global Trade Alert database helpful in identifying those pending foreign measures whose implementation could be usefully influenced. The largest trading nations, according to this map, could be harmed by 40 or more measures in the pipeline. The organisation and contents of the remainder of this Report The rest of this Report is organised as follows. The next chapter of this report provides an account of how frequently governments have resorted to discriminatory state measures since the Pittsburgh G20 Leaders summit in September This evidence is used to assess what the G20 countries have or have not achieved and helps identify the policy challenges going forward. Section two of the report provides three analysis of specific crisis-era episodes of protectionism and associated state policymaking. First is an account of the resort to so-called trade defence instruments by the G20 countries. Second is an analysis of the trade coverage of the jumbo protectionist measures, these being the measures that meet certain criteria associated with likely sizeable regional or global impact. By identifying these measures and the potential trade affected by them, so doubt is cast on recent calculations showing that contemporary protectionism is limited in scope. Policymakers and trade diplomats may find the focus on jumbo measures useful in thinking through exit strategies for commercial policy. Reversing these measures is surely a priority. Third, and finally, a lengthy description and analysis of Russian trade and development policy is provided in section two. Of the world s large economies no country stands out more than Russia in terms of the changes to its economic policies during and after the global economic crisis. For better or for worse,

20 12 Unequal Compliance: The 6th GTA report many lessons will be drawn from this Russian strategy, not least because it draws on ideas that many have previously rejected (such as import-substituting industrialisation.) It is hoped that this chapter substantially contributes to the evidential base and allows for more informed discussions. The chapter also includes a case study of intervention in the automobile sector. Section three of the report presents a short summary of each of the entries in the GTA database that has been classified a jumbo (discriminatory) measure. As will be explained in the relevant paper in section two, each of these measures have reached certain thresholds that imply both substantial trading partner and country coverage. Section four of the report presents for each G20 countries summary information on the extent to which their commercial interests have been affected by other country s measures since November The information presented here is symmetric, therefore foreign measures that benefit a country s commercial interests are recorded, as are harmful foreign measures. Moreover, the discriminatory content of the measures taken by a G20 country are also reported here, again revealing the degree to which a G20 country s actions have beggared its neighbours or helped them, as the case may be. The variation across G20 members, referred to earlier, will become evident should readers examine this section of the report. References Evenett (2009a). Simon J. Evenett. What can be learned from crisis-era protectionism? An Initial Assessment. Business & Politics. October. Evenett (2009b). Simon J. Evenett. Crisis-era protectionism one year after the Washington G20 meeting: A GTA update, some new analysis, and a few words of caution. In Richard E. Baldwin (ed.). The Great Trade Collapse: Causes, Consequences and Prospects. VoxEU.org publication. December Simon J. Evenett is Professor of International Trade and Economic Development, University of St. Gallen, Switzerland; Co-Director of the International Trade and Regional Economics Programme, CEPR; and Coordinator of Global Trade Alert. 18 June 2010

21 Map 1.1 Number of discriminatory measures implemented since the first G20 crisis related summit, ignoring measures in the pipeline Executive Summary 13

22 14 Unequal Compliance: The 6th GTA report Map 1.2 Number of trading partners harmed by each jurisdiction s discriminatory measures

23 Map 1.3 Number of (4 digit) tariff lines harmed by each jurisdiction s discriminatory measures Executive Summary 15

24 16 Unequal Compliance: The 6th GTA report Map 1.4 Number of sectors harmed by each jurisdiction s discriminatory measures

25 Map 1.5 Number of trading partners affecting a jurisdiction s commercial interests Executive Summary 17

26 18 Unequal Compliance: The 6th GTA report Map 1.6 Number of times a jurisdiction s commercial interests are harmed by trading partners

27 Map 1.7 Number of harmful measures implemented by G20 countries affecting each jurisdiction Executive Summary 19

28 20 Unequal Compliance: The 6th GTA report Map 1.8 Number of pending discriminatory measures likely to harm a jurisdiction

29 SECTION 1 Global Overview

30

31 2 Did G20 Members Hold the Line Against Beggar-thy-Neighbour Policies after the Pittsburgh Summit? The Record Since September 2009 Simon J. Evenett University of St Gallen and CEPR We will fight protectionism, pledged G20 Leaders in their Statement released at the end of the Pittsburgh Summit on September The leaders provided more details in a section titled An Open Economy, amongst others, reaffirming their commitments made in previous summits not to raise trade and investment barriers. 1 The questions naturally arise: What have the G20 Leaders delivered? and So What? The latter question is surprisingly important given the heavy emphasis in G20 deliberations on non-binding accords and inter-governmentalism. If this approach to global economic governance delivers it stands in contrast to the many deficiencies associated with negotiating binding accords and relying on supranational institutions. The willingness of governments, then, to take on domestic commercial interests when implementing the no-protectionism pledge may reveal much about the credibility of the G20 as a place to do business on other commercially-sensitive matters. Assessing what the G20 Leaders have delivered is somewhat different from assessing whether the G20 Leaders have delivered, the latter requiring a benchmark of normal or pre-crisis behaviour. As we have discussed performance compared one such benchmark in other writings and previous GTA reports 2, the focus here is on what the G20 Leaders may have delivered. Those Leaders claimed at the London Summit, for example, to have learned the lessons of history, specifically the 1930s. If the lesson they learned was each not to take enough beggar-thy-neighbour measures so that it triggered escalating retaliation between trading partners that would eventually shut down much international Readers may recall that one leading trade expert asserted that in a normal year four per cent of tariff lines were affected by protectionism or discrimination. The GTA database readily reveals which nations have implemented policy changes that in total cover more than four percent of their tariff lines. Every major trading nation, except Canada, breached this threshold, suggesting that the crisis-era discrimination against foreign commercial interests was hardly normal. 23

32 24 Unequal Compliance: The 6th GTA report trade, then arguably their behaviour this time around is consistent with that lesson. However, there are other alternatives: perhaps the lesson they learned from history was to eschew the more transparent forms of trade protectionism, namely, tariffs and quotas and resort to more murkier forms of protectionism? Information from the GTA database can reveal what G20 governments and others have been up to since the Pittsburgh summit. Between the Pittsburgh and Toronto summits, the amount of information collected by the GTA team more than doubled. Now the GTA database contains over 1000 records of state measures that, upon announcement, might have had implications for foreign commercial interests. Of the 775 measures that have been implemented, 554 almost certainly discriminated against foreign commercial interests (see Table 2.1). The G20 governments were responsible for 337 of those discriminatory measures, over 60 percent of the world total (see Tables 2.2. and 2.3.) Interestingly, this percentage has remained unchanged since the Pittsburgh summit, and is one of several indicators that the G20 s behaviour does not appear to have changed much through 2009 and into There is some good news, however. Since the Pittsburgh summit the G20 have been responsible for over 80 percent of the state measures that either liberalise markets, make trade policy more transparent, or that ultimately decide against imposing discriminatory measures (all of which are coded green in the GTA database). It would be wrong, therefore, to paint the G20 s contribution as entirely negative. Closer inspection, however, reveals that certain countries have probably contributed more than others in this respect. Canada recently, and earlier in the crisis Mexico, announced plans to reduce large numbers of tariffs on imported goods. Outside of the G20, our previous (fifth) report highlighted the trade and investment policy liberalisation of the Sub-Saharan African countries during the crisis. Table 2.4 highlights what is at stake for many G20 members by reporting the number of times their commercial interests have been harmed by other trading partners. At the time of our pre-pittsburgh report China s commercial interests had been harmed by other governments 99 times; in the run up to Toronto that number has nearly trebled to 283. The USA, Germany, France, the UK, and Italy have all seen their commercial interests harmed over 100 times more since the Pittsburgh summit. These hits represent lost orders, less job security, fewer jobs, and forgone investment. These losses have occurred despite the G20 pledges; in countries undergoing fiscal retrenchment, where exports are now the most promising means of escape from economic downturns, governments may not longer be able to tolerate the rate of harm to their commercial interests experienced under the current G20 s trade regime. Circumstances for many countries have changed, so may expectations of G20 pledges. Resort to discrimination against foreign commercial interests varies a lot across nations, including across the G20. The GTA reports four indicators of harm done by a nation s policies and the top 10 worst offenders on each metric are listed in Table 2.5. Some countries (Argentina, China, Ethiopia, India, Indonesia, Germany, Nigeria, Russia, and Venezuela) recur on the list. The EU27 refers to the combined impact of all the actions taken by the European Commission and

33 Did G20 Members Hold the Line Against Beggar-thy-Neighbour 25 Policies after the Pittsburgh Summit? The Record Since September 2009 the 27 Member States. Together, the EU27 appear in the top 5 worst offenders on all four metrics, a dubious privilege shared by no other trading entity or nation. It should be noted, however, that most of the harm done by the EU27 grouping result from measures taken by the EU member states and not by the European Commission. Like the rest of the world, within the EU there is considerable variation in the resort to state measures that harm foreign commercial interests. Not every government, then, seems under the same pressure to hold the line against protectionism; greater attention should be given to holding to account those governments that violate the G20 pledges. The types of discrimination that governments resort to has been markedly different from that in the 1930s, as Table 2.6 makes clear. Since the Pittsburgh summit all governments (not just the G20) have imposed three times as many discriminatory state aid (subsidy) packages than tariff increases. (Likewise, the ratio of so-called trade defense measures to tariff increases is two-to-one.) Add in resort to export taxes and restrictions and public procurement measures, and the mix of measures taken varies considerably from that in the 1930s. Many of these measures are complex in organisation, whose details are not immediately revealed by governments, and may not necessarily be trade-reducing, even though they are trade-distorting. Arguably, these features have made it harder to intelligently compare and count state measures (although the GTA team contends that some forms of counting can be legitimately undertaken). Worse, since so many of our analytical tools for estimating trade policy are based on tariffs, the heavy recent use of non-tariff measures (in particular subsidies, which have a completely different economic logic) has made it even harder for commentators to estimate and discuss the impact of measures during the current crisis. The ensuing silence inevitably favours those who resort to such murky protectionism in the first place. For this reason, the GTA has preferred to layout whatever assumptions are necessary to analyse or count measures and be criticised for our approach, rather than let fear of criticism--or inherent conservatism--allow governments to get away with violating pledges to keep borders open. The murkiness of much contemporary protectionism has another very important implication for judging the G20 s and other governments commitments to eschew protectionism, namely, reporting lags are inevitable and that monitoring exercises should not confine themselves to narrow time windows. Updates on prior results should be demanded often by users. Figures 2.1 and 2.2 bear out these points. As Figure 2.1 shows, in preparing each report the GTA team tends to find additional information about harmful measures undertaken in earlier quarters. Sometimes this leads to a substantial upward revision in the amount of discrimination felt by the world s exporters, investors, migrants, and the like. In updating our database since mid-may 2010, just a month ago, a substantial number of harmful measures were found in the last quarter of 2009 and first quarter of The policy significance of this finding is that there is precious little evidence of a fall of in protectionism as the then global economic recovery began. Here we join others in noting that governments are playing with

34 26 Unequal Compliance: The 6th GTA report fire as their resort to discrimination may well dampen the prospects for exportled growth. The other advantage of periodically looking back is to reevaluate just how bad matters were in prior years. Readers may recall that 2009 began with strong fears that a relapse into 1930s-style protectionism might happen again. The evidence provided by the GTA before the Pittsburgh Summit, reproduced in part in Figure 2.2., pointing to between harmful measures a quarter in the first half of 2009 was seen as bearing out those fears and the need for restraint. Now we know that matters in the first half of 2009 were much worse: in fact, between harmful measures were implemented in each quarter. Worse, the third and fourth quarters of 2009 saw such measures implemented per quarter, suggesting that protectionism momentum has barely subsided. Some critics called the GTA alarmist for arguing on the basis of available 2009 data that there was a protectionist juggernaut underway; subsequent data revisions bear out our initial concerns. As far as open markets were concerned, 2009 was a terrible year. Much of the discrimination put in place then has yet to be removed and is, as noted above, less conventional in nature. In sum, the case for vigilance and for sharp warnings on protectionist dynamics in 2009 were in retrospect warranted. The case for continuing vigilance especially if many nations are entering an era of fiscal restraints is now even stronger. The task before policymakers is not just to resist the temptations of future protectionism but also to find the means to unwind the substantial amount of discrimination introduced into the world economy in The task before policymakers in the run up to, at, and after the Toronto G20 meeting is therefore harder than before, not least because the fear of another depression no longer keeps decisionmakers awake at night.

35 Did G20 Members Hold the Line Against Beggar-thy-Neighbour 27 Policies after the Pittsburgh Summit? The Record Since September 2009 Table 2.1 Total number of state measures reported in the GTA database Statistic Total number of measures in GTA database Total number of measures coded green Total number of measures coded amber Total number of measures coded red Total This report (June 2010) Total except unfair trade and safeguards investigations Increase from previous G20 meeting (2nd GTA report) Total Total except unfair trade and safeguards investigations How does the GTA colour code measures? Color code Red Criteria (i) The measure has been implemented and almost certainly discriminates against foreign commercial interests. Amber (i) The measure has been implemented and may involve discrimination against foreign commercial interests; OR (ii) The measure has been announced or is under consideration and would (if implemented) almost certainly involve discrimination against foreign commercial interests Green (i) The measure has been announced and involves liberalization on a non-discriminatory (i.e., most favored nation) basis; OR (ii) The measure has been implemented and is found (upon investigation) not to be discriminatory: OR (iii) The measure has been implemented, involves no further discrimination, and improves the transparency of a jurisdiction s traderelated policies.

36 28 Unequal Compliance: The 6th GTA report Table 2.2 Measures implemented since first crisis-related G20 summit in November 2008, totals for all jurisdictions and change since last report Statistic Total number of measures in GTA database Total number of measures coded green Total number of measures coded amber Total number of measures coded red Total number of 4-digit tariff lines affected by almost certainly discriminatory measures Total number of 2-digit sectors affected by almost certainly discriminatory measures Total number of trading partners affected by almost certainly discriminatory measures Total This report (June 2010) Total except unfair trade and safeguards investigations Increase from previous G20 meeting (2nd GTA report) Total Total except unfair trade and safeguards investigations

37 Did G20 Members Hold the Line Against Beggar-thy-Neighbour 29 Policies after the Pittsburgh Summit? The Record Since September 2009 Table 2.3 Measures implemented by G20 countries in the year since the first crisisrelated G20 summit in November 2008, totals for all G20 jurisdictions and change since last report Statistic Total number of measures in GTA database Total number of measures coded green Total number of measures coded amber Total number of measures coded red Total number of 4-digit tariff lines affected by almost certainly discriminatory measures Total number of 2-digit sectors affected by almost certainly discriminatory measures Total number of trading partners affected by almost certainly discriminatory measures Total This report (June 2010) Total except unfair trade and safeguards investigations Increase from previous G20 meeting (2nd GTA report) Total except unfair trade Total and safeguards investigations

38 30 Unequal Compliance: The 6th GTA report Figure 2.1 Q and Q are on track to match the same protectionist pace as the first half of 2009, when concerns about protectionism were at their highest. Number of discriminatorymeasures imposed Nov/Dec Q Q Q Q Q Q (to ) Latest report 5th report (May 2010) Figure 2.2 The record for 2009 now looks much worse than it did at the last G20 meeting; documenting murky protectionism takes time. Number of discriminatory measures Nov/Dec 2008 Q Q Q Latest report Last G20 summit (Sept 2009) Note: In Figures 2.1 and 2.2. a harmful measure is taken to be one which has been implemented since November 2008 and is almost certainly discriminatory (coded red) or likely to be discriminatory (coded amber).

39 Did G20 Members Hold the Line Against Beggar-thy-Neighbour 31 Policies after the Pittsburgh Summit? The Record Since September 2009 Table 2.4 Top 10 biggest targets of discriminatory measures Number of discriminatory measures imposed on target Number of trading partners imposing discriminatory measures Number of pending measures, which if implemented, would harm target too Target This report (June 2010) Increase from previous G20 meeting (2nd GTA report) This report (June 2010) Increase from previous G20 meeting (2nd GTA report) This report (June 2010) Increase from previous G20 meeting (2nd GTA report) China EU na 77 na 80 na USA Germany France UK Italy Belgium Japan Netherlands Note: Unfortunately when our second report was prepared data on the total number of times the EU 27 nations were harmed was not collected, hence frustrating direct comparisons between early June 2010 and early September Data on EU 27 was reported from the third report on due to requests from users. Moreover, individual member state information in this table may indicate the extent how often some European trading na-tions have been harmed since the Pittsburgh summit.

40 32 Unequal Compliance: The 6th GTA report Table 2.5 Which countries have inflicted the most harm? Metric, Country in specified rank, Number Rank Ranked by number of (almost certainly) discriminatory measures imposed Ranked by the number of tariff lines (product categories) affected by (almost certainly) discriminatory measures Ranked by the number of sectors affected by (almost certainly) discriminatory measures Ranked by the number of trading partners affected by (almost certainly) discriminatory measures 1. EU27 (146) Venezuela (784) EU27 (55) EU27 (168) 2. Russian Federation (73) Kazakhstan (719) Algeria (54) Argentina (161) 3. Argentina (41) Nigeria (599) Nigeria (45) China (161) 4. India (31) EU27 (437) Venezuela (38) Indonesia (152) 5. Germany (29) Russian Russian Kazakhstan (36) Federation (421) Federation (142) Russian 6. UK (24) India (347) Finland (132) Federation (34) Indonesia (347) Germany (132) 7. Indonesia (22) Ethiopia (32) South Africa 8. Ethiopia (345) Indonesia (32) (132) China (19) 9. Italy (19) Argentina (336) India (31) Belgium (131) 10. Austria (17) China (335) Germany (27) Brazil (131) Note: There is no single metric to evaluate harm. Different policy measures affect different numbers of products, economic sectors, and trading partners. GTA reports four measures of harm.

41 Did G20 Members Hold the Line Against Beggar-thy-Neighbour 33 Policies after the Pittsburgh Summit? The Record Since September 2009 Figure 2.3 Top 10 implemented measures used to discriminate against foreign commercial interests since the first G20 crisis meeting. 10. Local content requirement; 15; 3% Other; 63; 11% 1. Bail out / state aid measure; 183; 30% 9. Import ban ; 16; 3% 8. Export Subsidy; 19; 3% 7. Migration measure; 24; 4% 6. Non tariff barrier (not otherwise specified); 26; 4% 5. Export taxes or restriction; 28; 5% 2. Trade defence measure (AD, CVD, safeguard); 112; 19% 4. Public procurement; 31; 5% 3. Tariff measure; 75; 13% Figure 2.4 Top 10 pending measures that target foreign commercial interests. Non tariff barrier (not otherwise specified); 9; 3% Other; 31; 10% Import ban; 9; 3% Export taxes or restriction; 10; 3% Trade defence measure (AD, CVD, safeguard); 153; 49% Other service sector measure; 11; 3% Bail out / state aid measure; 11; 3% Local content requirement; 13; 4% Public procurement; 15; 5% Investment measure; 22; 7% Tariff measure; 31; 10%

42 34 Unequal Compliance: The 6th GTA report Table 2.6 Ten most used state measures to discriminate against foreign commercial interests since the first G20 crisis meeting (Ranked by number of discriminatory measures imposed) State measure Bail out / state aid measure Trade defence measure (AD, CVD, safeguard) Number of discriminatory (red) measures imposed. This report (June 2010) Increase from previous G20 meeting (2nd GTA report) Number of measures implemented (red, amber, or green). This report (June 2010) Increase from previous G20 meeting (2nd GTA report) Number of jurisdictions that imposed these discriminatory measures. This report (June 2010) Increase from previous G20 meeting (2nd GTA report) Number of jurisdictions harmed by these discriminatory measures. This report (June 2010) Increase from previous G20 meeting (2nd GTA report) Tariff measure Export taxes or restriction Public procurement Non tariff barrier (not otherwise specified) Migration measure Export subsidy Import ban Local content requirement 15 na 18 na 11 na 124 na Note: The fall in the number of jurisdictions harmed by trade defense measures reflects a more conversative assessment of the impact of certain safeguard actions.

43 Did G20 Members Hold the Line Against Beggar-thy-Neighbour 35 Policies after the Pittsburgh Summit? The Record Since September 2009 Table 2.7 Top 20 sectors most affected by discriminatory measures. CPC code, Affected Sector Number of discriminatory (red) measures affecting commercial interests in this sector Number of implemented measures affecting specified sector Number of jurisdictions implementing measures affecting specified sector and classified as red Number of pending measures affecting specified sector 81 (Financial intermediation services and auxiliary services therefor) (Basic metals) (Transport equipment) (Special purpose machinery) (Products of agriculture, horticulture and market gardening) (Basic chemicals) (Fabricated metal products, except machinery and equipment) (Meat, fish, fruit, vegetables, oils and fats) (Grain mill products, starches and starch products; other food products) (Live animals and animal products) (Dairy products) (Textile articles other than apparel) (Furniture; other transportable goods n.e.c.) (General purpose machinery) (Other chemical products; man-made fibres) (Rubber and plastics products) (Electrical machinery and apparatus) (Yarn and thread; woven and tufted textile fabrics) (Knitted or crocheted fabrics; wearing apparel) ( Radio, television and communication equipment and apparatus)

44

45 SECTION 2 Specific Analyses of G20 Commercial Policy Measures

46

47 3 Assessing the G20 Use of Antidumping, Safeguards and Countervailing Duties During the Crisis 1 Chad P. Bown The World Bank Introduction Since the onset of the global financial crisis in 2008 and 2009, the G20 summits resulted in public commitments not to increase trade barriers and resort to protectionism. To date, the incidence of these economies implementing new import protection by simply raising applied tariff rates has been fairly limited. 2 Nevertheless, a number of these economies have changed their levels and distribution of import protection during the crisis through their use of antidumping, countervailing duty (anti-subsidy), global safeguard, and Chinaspecific safeguard policies, the four policies that we refer to jointly as temporary trade barriers (TTBs). Each of these policies can be used in potentially WTOconsistent ways, and most members of the G20 had a significant history of using at least one of these four TTB policies long before the recent crisis. The current analysis refers to results of new research that provides a more detailed and precise assessment of G20 use and potential trade impact of such TTB policies during the period of the global economic crisis in recent historical perspective. 3 First, new estimates indicate that the major G20 users of these policies combined to cover approximately 25% more imported product lines with TTBs by the end of 2009 compared to the pre-crisis levels of The new crisis-era TTBs that these economies have imposed are estimated to impact only 0.3% of these economies total imports. While small on average, the trade impact is nevertheless not uniform across either TTB-using economies or adversely affected exporters. For example, on the user side, India s and Turkey s newly- 1 This analysis draws heavily from Bown (2010a) and Bown and Kee (2010), to which the reader should refer for more details on methodology as well as additional results. Any opinions expressed in this paper are the author s and should not be attributed to the World Bank. All remaining errors are my own. 2 Kee, Neagu and Nicita (2010) analyze the countries that raised applied tariffs during the crisis and estimate the limited trade impact of such tariff increases. 3 Earlier updates include Bown (2009a, 2009b). For earlier assessments of protectionism during the crisis through other (non-ttb) policies, see Baldwin and Evenett (2009) and Evenett, Hoekman and Cattaneo (2009). 39

48 40 Unequal Compliance: The 6th GTA report imposed crisis-era TTBs are estimated to affect more than 1% of each economy s imports. Finally, while confronting such TTBs is not new for China s exporters, they face a 40% increase in the stock of products subject to G20 TTBs in 2009 relative to pre-crisis level of In value terms, nearly 80% of the G20 imports being subject to new TTBs imposed during the crisis are sourced from China. The crisis-era implementation of new G20 TTBs may affect more than $20 billion worth of China s exports, or almost 2% of its (pre-crisis) 2007 level of exports to these economies. Increased stock of imposed temporary trade barriers resulting from the crisis In theory, the level and distribution of national import protection due to temporary trade barrier policies such as antidumping, safeguards, and countervailing duties can change over time as the flow of new TTBs evolves. First, domestic industries file petitions with their governments, governments initiate investigations of cases, and then they make preliminary and final rulings on whether there was sufficient evidence to merit imposition of a new trade barrier. Thus the level of TTB protection can be affected by changes to the flow of new barriers that industries demand and/or that government policymakers grant. Second, previously imposed TTBs can also be removed at different rates over time. For example, removal of a preliminary measure (after a preliminary affirmative decision in an investigation) can take place after only a few months, such as after a negative final determination. TTBs can also be removed after a number of years because of an administrative review, a WTO-mandated sunset review, or the explicitly scheduled expiration of the barrier. Sometimes TTBs are even removed earlier than their scheduled expiration, for example, if the policy is successfully contested through formal WTO dispute settlement. Thus to better address the question of whether there is a higher level of TTB import protection resulting from the crisis relative to earlier eras, we follow Bown (2010a) and examine the stock of such measures in place over time, and not simply the flow of products subject to newly imposed measures. The dark black line of Figure 3.1 is taken from Bown (2010a) and provides a summary of the combined stock of products that twelve of the major G20 economies have covered by imposed TTBs during The figure relies on product-level data from the World Bank s Temporary Trade Barriers Database (Bown, 2010b) and 4 The twelve G20 members included in figures 1 and 2 are Argentina, Australia, Brazil, Canada, China, European Union, India, Indonesia, South Africa, South Korea, Turkey, and the United States. While G20 economy and TTB user Mexico is included in table 1, it is not included in the aggregated figures 1 and 2. Unrelated to the crisis in October 2008, Mexico suddenly removed antidumping duties on Chinese imports of roughly digit HS product lines that had been imposed since 1993 (Bown, 2010a). Japan, Russia, and Saudi Arabia are the only G20 economies not represented in the analysis of the use of these temporary trade barriers since they did not actively use such policies during this time period. G20 member countries France, Germany, Italy, and UK are not included separately because their trade policy is determined by the European Union, the twentieth member of the G20. Even though many of these economies use of TTBs started much earlier, we begin in 1997 since that is the time period in which each of the twelve G20 economies in the sample were using at least one of their TTB policies, China being the last of the twelve as it adopted its use of antidumping in 1997.

49 Assessing the G20 Use of Antidumping, Safeguards and 41 Countervailing Duties During the Crisis Figure 3.1 Combined G20* Use of Temporary Trade Barriers, Number of unique HS-06 products Stock: products under trade barrier (AD, CVD, SG, CSG) Stock: products under trade barrier (AD only) Flow: products subject to newly initiated trade barrier investigation (AD, CVD, SG, CSG) Flow: products subject to newly initiated trade barrier investigation (AD only) Notes: A product is defined at the 6-digit Harmonised System (HS) level. The figure illustrates the number of importing country-product combinations affected due to the use of policies such as antidumping (AD), countervailing duties (CVD), global safeguards (SG), and China-specific transitional safeguards (CSG). *The data is aggregated over the following twelve G20 economies: Argentina, Australia, Brazil, Canada, China, the European Union, India, Indonesia, South Africa, South Korea, Turkey, and the United States. The only major G20 user of such policies not included in the figure is Mexico, for reasons described in the text. The stock includes both imposition and removal of import restrictions. With roughly digit HS product categories per importing economy and 12 policy-imposing countries, the maximum value that the vertical axis could possibly take is 60,000. Source: Bown (2010a). Data on the stock of policies imposed and removed over compiled from the Temporary Trade Barriers Database. is constructed from the annual number of 6-digit HS products covered by at least one of these four TTBs. The first result from the figure is that 25% more import product lines were subject to these trade barriers in 2009 compared to the precrisis stock level of The dotted black line in Figure 3.1 indicates that most of the products subject to a TTB during the crisis are covered by the imposition of an economy s antidumping policy. 5 Antidumping is predominant even though each of the other three policies has also been used; including the high-profile China-specific safeguard policy that the U.S. used to restrict imports of Chinese tires beginning in September The small differential between total product coverage due to all TTBs and that due to antidumping alone makes the recession different from at least some earlier recessions. For example, Figure 3.1 also illustrates the major increase in the stock of products covered by TTBs other than antidumping in (in this case, through use of the global 5 It is increasingly the case that some of these economies impose simultaneous antidumping and countervailing duties over the same underlying product. In the analysis, we do not double count the same 6-digit HS product that one policy-imposing economy may have subject to multiple (e.g., antidumping and countervailing duty) TTBs simultaneously.

50 42 Unequal Compliance: The 6th GTA report Table 3.1 G20 Imports Subject to Newly Imposed Temporary Trade Barriers G20 Economy Imposer Percent change in stock of products subject to such barriers in 2009 relative to pre-crisis 2007 level (1) Value of 2007 imports for products subject to new TTBs in (2) Share of economy s total 2007 imports (3) Value of 2007 imports from China subject to new TTBs in (4) (4) as a share of (2) (5) (4) as a share of all 2007 imports from China (6) Developing economies 0.41* India 0.61 $3,140,000, $2,332,000, China $2,447,700, Na Na Na Turkey 0.46 $1,940,000, $640,000, Brazil 0.22 $1,218,000, $653,000, Argentina 0.48 $303,800, $167,400, Indonesia 0.69 $289,026, $123,533, Mexico $76,400, $39,600, South Africa $ 7,803, $5,631, High income economies 0.03 United States 0.10 $9,990,000, $9,080,000, European Union $7,750,000, $6,540,000, Canada 0.16 $673,000, $622,000, Australia 0.39 $281,600, $272,200, South Korea Total 0.25 $28,117,329, $20,475,364, * Source: Bown and Kee (2010). Temporary trade barriers imposed during 2008 or 2009, 2007 import data at the economy s national tariff line level from Comtrade matched to tariff line policy data from the Temporary Trade Barriers Database (Bown, 2010b). *The aggregated total subtracts out from the denominator the value of China s imports subject to its own new TTBs, since China does not impose TTBs on its own exports. Tariff line import data for South Korea not available at the time of the analysis.

51 Assessing the G20 Use of Antidumping, Safeguards and 43 Countervailing Duties During the Crisis safeguard policy). In that instance, following the U.S. recession of 2001, the U.S., EU and China simultaneously used their global safeguard policies to implement new import restrictions over hundreds of varieties of steel products. 6 Table 3.1 disaggregates the Figure 3.1 data by TTB policy-imposing country, quickly illustrating how the combined 25% increase in products covered was not the result of each economy increasing its level uniformly. Eight of the thirteen G20 economies in the sample increased the number of products subject to such import restrictions between 2007 and 2009, though at different rates, including Argentina (48% more products covered), Australia (39%), Brazil (22%), Canada (16%), Indonesia (69%), India (61%), Turkey (46%) and the United States (10%). Only China, European Union, Mexico, South Africa and South Korea reduced the number of products subject to such import barriers between 2007 and The estimated impact on G20 imports of such temporary trade policy changes While one way to examine the impact of imposed TTBs is to count changes to number of products that they affect, the next approach we adopt is to assign dollar values to the amount of trade potentially affected by the barriers. Here we match the tariff-line policy information on products subject to new TTBs imposed during with tariff-line level import data for these economies from 2007, i.e., before the crisis-era trade collapse. 7 The purpose of this exercise is to provide another estimate on the scope of trade potentially affected by use of TTBs. To clarify, we do not propose that protectionism during the crisis was a major cause of the trade collapse of the fourth quarter of 2008 and the first quarter of Analysis of higher frequency (quarterly) data available to date suggest that even the TTBs that have been imposed during the crisis have been imposed with a lag. 8 By examining trade values (and the share of trade potentially affected by new TTBs), the purpose of the exercise is to better assess whether the post-crisis stock of TTBs in place is likely to impede a V-shaped trade recovery from its early 2009 nadir. 6 The grey lines in Figure 3.1 illustrate the flow data on the count of products subject to potentially new TTBs over time due to new investigations. 7 To be clear, in this section we no longer rely on the 6-digit HS product level (the unit of measurement common across countries in figures 1 and 2) but instead use each economy s tariff line level import data available from Comtrade, which we match up to the tariff-line level trade barrier information in Bown (2010b). 8 See Bown (2010c) for presentation of the quarterly figures on newly imposed measures during the crisis. Baldwin (2009) presents a set of early research examining likely culprits behind the trade collapse of , most of the evidence pointing toward an adverse demand shock.

52 44 Unequal Compliance: The 6th GTA report Consider again Table 3.1, and to interpret the additional information provided, begin with a G20 TTB policy-imposing country like Turkey. 9 The value of 2007 Turkish imports of products on which Turkey would subsequently impose new TTBs during was $1.94 billion. 10 This was 1.1% of Turkey s total imports in Of the $1.94 billion of Turkey s imports that would be subject to new trade barriers in , roughly 32% ($640 million) were imports deriving from China alone. Finally, the $640 million in imports from China subject to new Turkish import restrictions covered products that made up 4.8% of all Turkish imports from China in As Table 3.1 also indicates, the magnitude of trade affected by Turkey s new TTBs imposed during was not typical of each of the major G20 economies. Only India ($3.14 billion, or 1.4% of 2007 total imports) imposed new TTBs in over a larger share of its total imports. While the U.S. ($10 billion), European Union ($7.8 billion), and China ($2.4 billion), also imposed new TTBs covering a greater value of their economy s imports, their new TTBs covered a much smaller fraction of each economy s total imports (0.5%, 0.2%, and 0.3% respectively). In the aggregate, Table 3.1 indicates that over $28 billion in G20 member economy imports was subsequently subjected to new TTBs imposed in However, this was only 0.3% of these G20 member economies total 2007 imports. Exporters affected by G20 changes in TTBs While there has been a combined 25% increase in the number of products subject to new temporary trade barriers in 2009 compared to the pre-crisis levels of 2007, Figure 3.2 from Bown and Kee (2010) also shows that there was not a uniform incidence of such barriers across exporters. Most striking is how the 2009 stock of China s (6-digit HS) export products subject to these TTBs imposed by these eleven other G20 economy trading partners is 40% higher than the 9 While comparable to the first estimates of this issue contained in Table 7.4 of Bown (2009b), these figures are improved estimates of potential impacts for the following reasons. First, whereas the results in Bown (2009b) covered all newly initiated investigations between 1Q 2008 through 1Q 2009, Table 3.1 reports all temporary (preliminary and final) trade barriers imposed between 1Q 2008 and 4Q 2009 and thus does not include products that were investigated but that which did not result in at least preliminary measures. Second, the results in Bown (2009b) were estimated from 6-digit Harmonised System (HS) level data, whereas the results above are computed from actual tariff line import data (at the 8, 9, 10 or 12 digit level, depending on the tariff line classification system of the importing economy). 10 The analysis in this section admittedly focuses on assessing the value of trade impacted due to the flow of new barriers imposed. We do not examine the value of trade subject to the pre-existing underlying stock of (pre-crisis) imposed TTBs. Due to lack of data, we also do not estimate the potentially offsetting value of trade growth that may be created in due to the removal of TTBs that had been imposed in earlier years. 11 Because many antidumping measures are imposed with triple digit tariffs that are prohibitive, these figures are useful in that they provide an upper bound to the amount of trade estimated to be lost. Nevertheless, for policies that are imposed on a non-mfn basis that target only a subset of exporting countries, one result of the policy may be trade diversion, or an increase in imports from non-targeted sources. This may potentially offset some of the overall negative trade impact facing the targeted country. Second, the targeted exporters may also be able to deflect some of their exports to third markets, so that the total value of their trade subject to the new TTB is not eliminated from global (or even total G20) trade flows.

53 Assessing the G20 Use of Antidumping, Safeguards and 45 Countervailing Duties During the Crisis Figure 3.2 Combined G20* Use of Selected Temporary Trade Barriers by Import Source, Unique HS06 product-exporter combinations China as exporter Developing economy as exporter Developed economy as exporter Notes: The figure illustrates the number of importing country-product-exporting country target combinations affected due to the use of policies such as antidumping (AD), countervailing duties (CVD), and China-specific transitional safeguards (CSG). Unlike figure 1, this figure does not reflect each economy s potential use of the global safeguards (SG) policy which is not exporting-country specific. *The policies are aggregated over the following twelve G20 economies: Argentina, Australia, Brazil, Canada, China, the European Union, India, Indonesia, South Africa, South Korea, Turkey, and the United States. Mexico is the only major G20 user of such policies not included, for reasons described in the text. The stock includes both imposition and removal of import restrictions. Source: Bown and Kee (2010). pre-crisis level of The number of such barriers facing all other (non-china) developing countries increased by only 4% during this period, though this too was not uniformly distributed. For example, the increase in product coverage between 2007 and 2009 was particularly pronounced for developing economy exporters such as India (17%), Indonesia (25%), Thailand (23%) and Vietnam (74%). On the other hand, exporters in developed economies face roughly the same number of such barriers in 2009 as they did in These figures are consistent with pre-crisis trends in the use of these policies that suggest that new TTBs are increasingly South-South in nature. Bown and Kee (2010) also estimate that other developing economies are responsible for more than half the 2009 cumulative stock of TTBs imposed against exports from developing economies such as China (58% of all products affected by TTBs), Indonesia (53%), Malaysia (85%), South Africa (57%), and Thailand (60%). Among the major emerging market exporters, only India (37%), Brazil (38%), Russia (40%) and Ukraine (25%) continue to have a minority of the countryspecific barriers they face result from policies imposed by other developing economies. Finally, the last two columns of Table 3.1 provide a more detailed assessment of the extent to which China s exports have been affected by the new TTBs imposed during the crisis. As described in the context of figure 2, the stock of Chinese

54 46 Unequal Compliance: The 6th GTA report exported product lines facing TTBs in 2009 was 40% higher than the measured stock before the crisis in Table 3.1 indicates that these new TTBs imposed in are estimated to impact $20.5 billion in imports, or roughly 80% of the entire amount of imports that these particular G20 economies subjected to new TTBs during The estimated $20.5 billion was also 1.8% of the value of total Chinese exports to these markets in Two questions for the future: How will ongoing investigations conclude and how temporary are these barriers? The final legacy of temporary trade barriers imposed as a result of the economic crisis is not yet completely known. Notwithstanding the possibility of a further deepening of the global economic recession begun in 2008 that may lead to a substantial increase in the flow of new investigations, the level and distribution of G20 import protection after the crisis will be the result of two yetto-be resolved issues. First, there are many TTB investigations initiated during the crisis that have yet to be concluded. The full post-crisis stock of TTBs will thus partly reflect dozens of forthcoming government policymaking decisions over whether to impose new TTBs. Second, the higher stock of TTBs that we have described throughout are only temporary if they are someday removed. While TTBs imposed as safeguards have typically been removed as scheduled, the evidence on timely removals is much less convincing for policies like antidumping that are used more pervasively (Moore 2006; Cadot, de Melo and Tumurchudur, 2007). References Baldwin, Richard, ed. (2009) The Great Trade Collapse: Causes, Consequences and Prospects. VoxEU.org E-book, November. Baldwin, Richard and Simon J. Evenett, eds. (2009) The Collapse of Global Trade, Murky Protectionism, and the Crisis: Recommendations for the G20. VoxEU.org E-book, March. Bown, Chad P. (2010a) Taking Stock of Antidumping, Safeguards, and Temporary Trade Barriers, , World Bank working paper, June. Bown, Chad P. (2010b) Temporary Trade Barriers Database, The World Bank, available at Bown, Chad P. (2010c) Antidumping, Safeguards, and Protectionism during the Crisis: Two New Insights from 4th Quarter 2009, VoxEU.org, 18 February. Bown, Chad P. (2010d) First Quarter 2010 Protectionism Data: Requests for New Trade Barriers Fall for Second Consecutive Quarter; Newly Imposed Barriers Also Fall, A Monitoring Report to the Temporary Trade Barriers Database, The World Bank, available at 25 May. Bown, Chad P. (2009a) Protectionism Is on the Rise: Antidumping Investigations, in Richard Baldwin and Simon J. Evenett (eds.), The Collapse of Global Trade,

55 Assessing the G20 Use of Antidumping, Safeguards and 47 Countervailing Duties During the Crisis Murky Protectionism, and the Crisis: Recommendations for the G20. London, UK: CEPR and VoxEU.org, (chapter 11). Bown, Chad P. (2009b) The Global Resort to Antidumping, Safeguards, and other Trade Remedies Amidst the Economic Crisis, in Simon J. Evenett, Bernard M. Hoekman and Olivier Cattaneo (eds.), Effective Crisis Response and Openness: Implications for the Trading System. London, UK: CEPR and World Bank. Bown, Chad P. and Hiau Looi Kee (2010) Trade Barriers, Developing Economies, and the Global Economic Crisis, World Bank working paper, May. Cadot, Olivier, Jaime de Melo and Bolormaa Tumurchudur (2007) Anti- Dumping Sunset Reviews: The Uneven Reach of WTO Disciplines, CEPR Working Paper No. 6502, September. Evenett, Simon J., Bernard M. Hoekman and Olivier Cattaneo, eds. (2009) Effective Crisis Response and Openness: Implications for the Trading System. London, UK: World Bank and CEPR, December. Kee, Hiau Looi, Ileana Cristina Neagu, and Alessandro Nicita (2010) Is Protectionism on the Rise? Assessing National Trade Policies During the Crisis of 2008, World Bank Working Paper No. 5274, April. Moore, Michael O. (2006) An Econometric Analysis of US Antidumping Sunset Review Decisions, Weltwirtschaftliches Archiv 142(1): Chad P. Bown is a Senior Economist in the World Bank s Development Research Group, Trade and International Integration (DECTI), in Washington, DC. Prior to joining the World Bank, he was a tenured professor in the Department of Economics and International Business School at Brandeis University. Bown is currently the Book Review Editor for the World Trade Review, a non-resident Fellow in the Global Economy and Development Program at the Brookings Institution, a term member of the Council on Foreign Relations, and an Adviser to the American Law Institute project on the Principles of the Law of World Trade. Since 2004, he has managed a World Bank trade policy transparency initiative that has resulted in the freely available, Internet-based Global Antidumping Database. His recent books include Self-Enforcing Trade: Developing Countries and WTO Dispute Settlement (Brookings Institution Press, November 2009) and The Law, Economics and Politics of Trade Retaliation in WTO Dispute Settlement (edited with Joost Pauwelyn, Cambridge University Press, January 2010).

56

57 4 Jumbo Discriminatory Measures and the Trade Coverage of Crisis- Era Protectionism Simon J. Evenett and Johannes Fritz University of St. Gallen In this chapter a conservative methodology is used to identify those crisis-era state measures that are likely to adversely affect both a large number of trading partners and a sizeable amount of international trade. Identifying such jumbo measures serves two policy-relevant purposes. First, it helps trade officials sort through the many crisis-era measures, finding those measures that are possibly the most trade-distorting, which in turn could become the focus of an international, potentially G20 led, unwinding process. Secondly, where confidence in the underlying calculations permits, the total trade covered by these jumbo measures provides an alternative, minimum benchmark for the potential impact of crisis-era protectionism. 1. Introduction If the evidence collected in the Global Trade Alert s database demonstrates anything, surely it is that governments have sought to discriminate against foreign commercial interests during the current global economic downturn in a wide variety of ways. Sorting out which of those state measures is most harmful- -and therefore, the highest priority for potential reversal--is not an easy task. Moreover, there is only so far that the intelligent counting of measures can go. In a perfect world, economic estimates of the welfare effects of each and every measure would be conducted, enabling measures to be ranked and revealing the full scale of harm done by contemporary protectionism. Between intelligent counting and systematic estimation, however, are intermediate indicators that may (or may not) be correlated with the harm done to foreign commercial interests by governments. In this chapter some intermediate indicators are proposed with the purpose of identifying those state measures that are more likely to have imposed substantial harm to the world trading system. These indicators are based on objective criteria, allowing the procedure here to be replicated by others using publicly-available information. The outcome--the identification of 22 of the GTA measures 49

58 50 Unequal Compliance: The 6th GTA report as jumbo discriminatory measures --may also provide a useful place to start in discussions on the unwinding of crisis-era measures or, as they are sometimes referred to, trade-related exit strategies. Furthermore, the total amount of international commerce associated with the jumbo measures will provide a useful minimum benchmark for estimates of the total trade affected by crisis-era protectionism. 1 The use of indicators, such as the trade potentially covered by a state measure, is necessarily qualified by the fact that such indicators magnitude may not be correlated with the ultimate amount of welfare loss. Still, many seem to prefer trade coverage numbers to counts of measures, or at least to complement the latter with the former. Even so, care is needed in computing trade coverage in a manner that best meets the informational needs of policymakers and other decision-makers. For example, if the purpose of computing trade coverage numbers is to reveal something about the overall reach or scope of crisis-era beggar-thy-neighbour policies, then a focus on a certain class of state measures may be misleading. In the current crisis, as the GTA database has repeatedly shown, as far as counts are concerned the most prevalent form of discrimination involves bailouts and subsidies. These measures might actually stabilise or increase trade, and not reduce trade as is the case with standard trade policy instruments, such as tariffs and quotas. In which case, how useful is a calculation of the total trade coverage of import-restricting measures as an indicator of the total trade coverage of all crisis-era protectionism? Finding that the former is very small may reveal little about the latter. 2 An alternative approach, based on the identified jumbo measures, is taken here. The trade covered by each jumbo measure is calculated, and where confidence in such estimates is high, added up to reveal an estimate of the total trade covered. As will become clear, the methodology adopted here is so conservative that the resulting estimate will almost uncertainly underestimate the total amount of trade affected by crisis-era protectionism. Yet, our estimate is much larger than those reported by certain international organisations. Ultimately, our results lead us to question whether the trade affected by discrimination during the crisis 1 In principle one might learn something from the state measures that are designated jumbo. The GTA database does not contain only those measures that are trade-reducing; nor is the GTA confined to state measures covered by the body of WTO accords, both multilateral and plurilateral. Moreover, one might learn something about the extent to which WTO rules have altered protectionist dynamics through the crisis. For example, it would be difficult to argue that WTO rules have held protectionism in check if there are many jumbo measures with substantial trade coverage that involve policy instruments subject to strict WTO rules. Alternatively, if there are many jumbo measures with substantial trade coverage that involve policy instruments not covered, weakly covered, or barely covered by WTO accords, then an interim conclusion could be that protectionist pressure has been channelled towards less regulated policies within the world economy. The latter finding does not imply that international trade rules are always weak, rather that an incomplete set of rules will leave open the possibility of protectionist pressure being displaced from one set of government policies to another, much like squeezing a balloon may redistribute air rather than bursting it. 2 The most recent report of the WTO secretariat, published on 14 June 2010, follows exactly this approach. They estimate that the total trade covered by the trade-restricting measures implemented between 1 November 2009 and May 2010 is equal to approximately 0.44 percent of total world imports. Paragraph 47 of that report specifically refers to new import restricting measures.

59 Jumbo Discriminatory Measures 51 was really as small as some have implied and, therefore, whether higher priority needs to be given to discouraging protectionism in the months and years ahead. 3 The rest of this chapter is organised as follows. Next a replicable method is proposed to identify jumbo discriminatory measures. Commentary then follows on the results generated. Section three argues that our procedure is conservative in many respects and that far more eye-catching results would have been possible under alternative procedures. The policy implications of our findings are discussed in section four. 2. Identifying jumbo measures The purpose of this section is to describe and comment upon a method used to identify those state measures taken during the global economic downturn that are likely to have harmed a large number of trade partners and affected a significant amount of international trade. If thresholds for large and significant were universally agreed, this would of course be a less contentious exercise. Alas this is not the case and a certain degree of arbitrariness is inevitable in the construction of any approach taken. A jumbo measure is defined as one that meets the following criteria: a) The measure is classified red in the Global Trade Alert database 4 ; that is, the measure almost certainly discriminates against foreign commercial interests and has been implemented. b) In 2008 the measure would have covered more than a de minimus 5 amount of goods trade with at least 15 G20 members. c) The measure is not a subsidy or bailout to the financial sector. d) If the measure is a subsidy or bailout to a non-financial sector, then the total value of the outlay by the implementing government was at least US$1 billion. e) In 2008 the measure would have covered more than US$10 billion in international trade. The above criteria ensure that a state measure cannot be considered a jumbo measure if there was much doubt about the discriminatory impact of the measure in question (then the GTA team would have classified the measure as amber.) Moreover, financial bailouts were set aside, not least because their impact on international trade is not easy to discern. Three de minimus requirements (contained in conditions b), d), and e)) will remove the smaller measures; this is not an exercise is trawling for minnows. Detailed trade data for the largest possible number of countries is available for 2008 and the UN COMTRADE database is used. As the 2008 data preceded the trade collapse in the 2009, this data probably provides a more accurate account 3 Acute readers will, of course, have spotted that even if the trade-related impact of discrimination is not high, it does not follow that the harm done by other forms of cross-border discrimination is tiny as well. A comprehensive view would require estimates (or indicators) of the total harm done by cross-border discrimination to foreign investors, owners of intellectual property, and migrant workers as well. 4 Therefore, measures implemented before 1 November 2008 are excluded. 5 Taken to be US$1 million.

60 52 Unequal Compliance: The 6th GTA report of the ordinary level of trade that would have been affected by the imposition of the state measure in question. The description of many of the state measures considered did not provide for detailed disaggregated product codes, so the 4-digit classification were used to identify both affected trade partners, the trade covered, and whether de minimus thresholds have been met. This procedure identifies 22 state measures, which are listed in Table 1. Various indicators of the scale of each measure are presented in addition to the number of G20 members affected and total trade covered and include the overall number of trading partners affected, the percentage of the implementing country s tariff lines (at the 4-digit level) affected by the measure in question, taking account of the fact that each country need not import or export every product; the percentage of total national imports or exports potentially covered by a measure. It is noteworthy that all but three of these jumbo measures have been implemented by G20 countries, which might make any coordinated initiative to remove or reduce these measures easier to organise. As much by accident than anything else, the G20 has almost all of those responsible for jumbo discriminatory measures sitting around the summit table. Inspecting the types of measures in Table 4.1 it becomes clear that few jumbo measures are traditional tariff measures. 6 However, just because there are no contemporary counterparts to the Smoot-Hawley tariff does not mean that acrossthe-board discriminatory measures are confined to the history books. In fact, most of the jumbo state measures are discriminatory policies for which existing multilateral rules are weak (for example, public procurement, export restraints) or non-existent (competitive devaluations 7 ). One implication of this finding is that across-the-board corporate pressure for relief from imports and associated competitive pressures are being channelled into policies that are not subject to binding international trade rules. In which case, it might be better to think of existing WTO rules not in terms of reducing discrimination but as influencing ultimately the form of the discrimination. This outcome is a consequence of the WTO rules being incomplete, rather than anything else. Where we have particular doubts is in our calculations of the trade covered by the five state measures that involve some form of discriminatory public procurement. Unfortunately the UN COMTRADE dataset does not differentiate between purchases by the state and by individuals. As a result the total value of imports of a particular good may well overstate the change in the amount of foreign goods purchased by the government once discrimination is imposed. For this reason, we excluded the five jumbo measures with public procurement elements from our calculations of the total trade covered by jumbo measures. This is too restrictive as surely some state purchasers will swift from foreign firms to domestic rivals. 6 Nonetheless, many of the measures in Table 1 have been reported in WTO surveillance reports as well. 7 The GTA database only includes those competitive devaluations where a senior public official has argued that one purpose of the devaluation was to shift the conditions of competition in favour of domestic firms. This avoids the GTA team having to make potentially arbitrary judgements about what devaluations were not market-led. Of course, the GTA s approach here is a conservative one in the sense that some competitive devaluations that are not described in beggar-thy-neighbour terms by state officials are omitted from the GTA database. A less conservative approach might well result in more crisis-era devaluations being listed as jumbo discriminatory measures.

61 Jumbo Discriminatory Measures 53 Moreover, we noted that two of the Indian pro-export measures (jumbo measures 14, 15) have the same product coverage and so only counted one of them towards the total trade covered by jumbo measures. Therefore, only data on 16 out of the 22 jumbo measures were used to compute the total trade coverage. 8 For reasons given above and below, the total estimate of US$1.6 trillion is an underestimate of the actual trade covered by crisis-era protectionism. Still, US$1.6 trillion represents more than 10 percent of the total value of world imports in Why our procedure and associated estimates are conservative There are several reasons why the procedure followed here may be regarded as conservative or cautious. First, a measure cannot become a jumbo measure unless it is first in the Global Trade Alert s database. While at present the latter does contain over 1050 measures, the GTA had to choose a starting date for its investigations and measures announced before that starting date are excluded by definition. The GTA evaluates measures announced on or after 1 November 2008, coinciding with the month of the first crisis-related G20 meeting. This cut-off point is significant for before November 2008 there were more Chinese tax-related incentives to promote exports that cut across many sectors. Had the trade associated with those earlier tax measures been included, it would not be surprising if much of the then-second largest trading nation s exports would be included in the total trade covered by discriminatory measures. 9 Some may object to the exclusion of financial bailouts from our approach. (There was, after all, a lot of concern expressed about the effect of so-called financial protectionism expressed before the London Summit in April 2009.) Even so this objection would, if anything, potentially expand the set of jumbo measures. As would a more liberal definition for including competitive devaluations. It turns out that our requirement that a jumbo measure affect 15 or more G20 measures is particularly restrictive. Some might object that, while large, the G20 account for only ten percent of the number of trading nations. What about defining jumbo measures with other permutations of trading partner and tariff line coverage? Table 4.2 reports the number of jumbo measures that would result from using other cut-offs for trading partner and tariff line coverage. Only if one could justify thresholds affecting more than 100 trading partners or a joint 8 Had all data on all 22 measures been used to compute the total value of trade covered, the sum would have been over US$2.3 trillion, approximately 50 percent more than our reported estimate. 9 There is a more fundamental objection when computing the trade coverage associated with exportpromoting measures. If country Y subsidised the exports of apples by 10 percent then the method used here would involve calculating the trade covered as the total value of country Y s exports of apples to destinations (where trade exceeded the de minimus threshold of US$1 million.) In reality, foreign exporters of apples that directly compete with country Y s apples are affected too. Consistent with our conservative approach, we do not include this knock-on effect even though that is precisely what other country s policymakers would be concerned about. Given the number of export incentives and subsidy measures in Table 1, this consideration alone is likely to have lead us to grossly underestimate the amount of trade covered by our jumbo measures.

62 54 Unequal Compliance: The 6th GTA report threshold of affecting more than 75 trading partners and 75 tariff lines would a more restrictive set of jumbo measures be generated than that used here. Others might object that requiring US$10 billion of trade is too restrictive. Relaxing that requirement to US$1 billion, holding everything else fixed, only increases the number of jumbo measures by eight. (Details of those eight measures are available upon request.) The foregoing remarks demonstrate that many of the design choices made in this study have probably constrained the set of jumbo measures identified and, therefore, resulted in an underestimate of the trade covered by wideranging crisis-era discriminatory measures. Even with the set of jumbo measures identified, we have probably gone too far by excluding entirely some measures from the calculation of trade covered. 10 Taken together, these design choices almost certainly bias downwards the calculation of the total amount of trade covered by the jumbo measures identified here. 4 Implications for policymaking Of the beggar-thy-neighbour state measures taken since the first crisis-related G-20 summit in November 2008, nearly 650 have yet to be reversed. Which ones really matter? The purpose of this paper has been to propose a replicable, databased method for identifying those beggar-thy-neighbour measures likely to have wide-ranging and possibly systemic effects on international trade. We have been explicit about the choices made here in large part to stimulate discussion about alternatives. Indeed, we will gladly share the GTA database to facilitate the development and comparison of alternative strategies to sort through the growing number of discriminatory state measures. A total of 22 so-called jumbo measures were identified here and then analysed. A number of implications for policy have been alluded to, not least the finding that existing WTO accords may have done much to channel cross-sectoral protectionist pressures into policy instruments less well covered by multilateral trade accords. This is not the same as contending that the WTO rules have held the line on protectionism.. Our identification of 22 jumbo measures also allows for an alternative means for shedding light on the total amount of trade affected by crisis-era beggarthy-neighbour policies. Rather than focus on a specific class (or classes) of trade policy instrument, which may or may not be representative of the overall set of crisis-era discriminatory measures, we computed a conservative estimate of the trade coverage of the jumbo measures. This estimate, equivalent to ten percent of world imports, will almost certainly be less than the true trade coverage of crisis-era protectionism. Rather than speculate on how large this estimate would be with more liberal assumptions, perhaps it better to conclude by remarking that this level of trade coverage makes crisis-era protectionism a trillion dollar phenomenon worthy of greater attention from policymakers. 10 Recall, the five public procurement measures identified as jumbo measures are likely to have some effect on international trade flows, even though we omitted them from our most conservative estimate.

63 Jumbo Discriminatory Measures 55 Table 4.1 The list of jumbo discriminatory measures, presented in descending order of trade covered No. Implementing jurisdiction: Title of measure Tariff lines affected Percentage of total tariff lines Trading partners affected G20 members affected Implementer is G20 member? Total trade value (2008, US$ bn) potentially affected Share of relevant national trade flow Trade flow used to compute last column Included in conservative estimate of trade coverage? 1. China: Export tax rebates % % Total exports 2. United States of America: Buy American provisions in stimulus package % % Total imports No 3. China: Implementation of State Council Opinions on imported goods % % Total imports No 4. Russia and Belarus: Increase in export tariffs on crude oil and oil products % % Sum of total exports for Russia and Belarus 5. UK: Temporary aid for the production of green products % % Total imports 6. China: Adjustment of import tariffs policy on key technical equipment % % Total imports 7. Venezuela: Devaluation of the Bolivar % No % Total imports plus total exports 8. Kazakhstan: Announced 25% devaluation of the national currency % No % Total imports plus total exports 9. Nigeria: Deliberate devaluation of the Naira % No % Total imports plus total exports

64 56 Unequal Compliance: The 6th GTA report No. Implementing jurisdiction: Title of measure 10. Russia: The programme of the anti-crisis measures of the Russian Government Japan: State endorsement of private initiative to raise food selfsufficiency 12. Brazil: New credit line for exports of consumer goods 13. Russia: Subsidized loans to producers of certain type of machineries 14. India: Extension of service tax refund for exporters 15. India: Pre- and post-shipment export credit 16. Indonesia: Import tariff increases on certain products that compete with locally manufactured products 17. Indonesia, Malaysia, and Thailand: Limiting rubber exports to 915,000 tons during Argentina: Extension of tax exemptions for locally produced capital goods Tariff lines affected Percentage of total tariff lines Trading partners affected G20 members affected Implementer is G20 member? Total trade value (2008, US$ bn) potentially affected Share of relevant national trade flow Trade flow used to compute last column Included in conservative estimate of trade coverage? % % Total imports % % Total imports % % Total exports % % Total imports % % Total exports % % Total exports No % % Total imports % % Sum of total exports for all 3 implementers % % Total imports No

65 Jumbo Discriminatory Measures 57 No. Implementing jurisdiction: Title of measure Tariff lines affected Percentage of total tariff lines Trading partners affected G20 members affected Implementer is G20 member? Total trade value (2008, US$ bn) potentially affected Share of relevant national trade flow Trade flow used to compute last column Included in conservative estimate of trade coverage? 19. Russia: Public procurement price advantage to domestic producers % % Total imports No 20. Russia: Preferences to domestic producers in ammendments to Government Procurement Law % % Total imports 21. Russia: Temporary import tariff introduction on certain type of machinery % % Total imports 22. France: More restrictive public procurement rules for construction work tenders % % Total imports No Estimates of total trade covered by jumbo measures. 1) (Most conservative estimate): All five public procurement measures (where the total import numbers include sales to the private sector) and one of the Indian export promotion measures (see measures 14 or 15) are excluded from the calculation. The total trade coverage of the remaining jumbo measures is US$ trillion, or 10.45% of total world imports in ) (Least conservative estimate): The total trade coverage of the all the jumbo measures listed above is US$2.304 trillion, or 14.77% of total world imports in 2008.

66 58 Unequal Compliance: The 6th GTA report Table 4.2 The list of jumbo discriminatory measures, presented in descending order of trade covered Conditions: In the GTA database, classified red, and Total number of jumbo measures. Total number of jumbo measures implemented by G20 members Affects at least 50 trading partners Affects at least 75 trading partners Affects at least 100 trading partners 11 9 Affects at least 50 tariff lines Affects at least 75 tariff lines Affects at least 100 tariff lines Affects at least 50 tariff lines and at least 50 tariff lines Affects at least 75 tariff lines and at least 75 tariff lines Affects at least 100 tariff lines and at least 100 tariff lines 7 6 Simon J. Evenett is Professor of International Trade and Economic Development, University of St. Gallen, Switzerland; Co-Director of the International Trade and Regional Economics Programme, CEPR; and Coordinator of Global Trade Alert. Johannes Fritz is an editor of the Global Trade Alert and works as a research assistant at the Swiss Institute for International Economics, University of St. Gallen.

67 5 Crisis and Modernisation : An Analysis of Russian Commercial Policy and its Application to the Automobile Industry Darya Gerasimenko University of St. Gallen 1. Introduction The world has changed in many ways during the current global recession, and such changes can compel governments to formulate new priorities. When perceived changes in a country s development needs coincide with a world systemic crisis, the compulsion to change becomes even greater. In such cases the need is not only to survive, like others, but to modernise all aspects of life, including the economy. To achieve such a complex transition during a time of global crisis is an extremely challenging task. One country that is currently experiencing this challenge is Russia. The need for modernisation in Russia stems from Russian society s perception that the current state of the country does not necessarily coincide with the goals and objectives of the society itself. The required modernisation is therefore a complex process that will require a change of attitude amongst the population towards how they view themselves and their role in the society and the world. That being so, an economic modernisation programme is only a part of a bigger, more sophisticated picture. Trade (commercial) policy is one of the instruments that is required to achieve the goals of economic modernisation. This paper addresses the key issues of the current Russian modernisation process and Russia s commercial policy during the crisis, with a particular focus on the symbol of the modern Russian crisis the Russian car industry. During the current crisis Russia has demonstrated a most remarkable commercial policy reaction in terms of changing its priorities from a multilateral framework towards regional and industrial development. This reaction is reflected in the Global Trade Alert (GTA) database which, on 9 June 2010, contained 103 measures introduced by Russia since October 2008 (ie, 10 percent of all measures in the GTA database up to that point), 73 of which are considered to be almost certainly discriminatory measures (coloured red ). Russia is ranked first in the GTA database as the country that has introduced the largest amount 59

68 60 Unequal Compliance: The 6th GTA report of discriminatory measures; it is also positioned amongst the top countries according to other rankings contained in the database. 1 The Russian car industry is an excellent example of this commercial policy reaction. Russia was one of the first countries to violate the G20 promise not to increase protectionist measures following the G20 Washington Summit in November This was followed, on 8 December 2008, by the decision to increase import tariffs on new cars and to essentially block imports of used cars. Since then the Government of the Russian Federation has introduced an unprecedented number and range of support mechanism in order to keep the Russian car industry alive. This paper attempts to identify and evaluate the very preliminary cost of the current government s support policy towards the car industry; it also examines what could be the motivation behind this government behavior. The rest of this chapter is structured as follows: section two discusses the Russian modern industrialisation strategy 2020 and current Russian economic performance, as well as provides an overview of Russian trade policy during the current crisis; section three presents a case study on the Russian car industry; and finally, conclusions are presented in section four. 2. Russia s economic performance of announced modernisation and commercial policy during current crisis 2.1. The concept of Russian modernization and Russia s economic performance during the crisis do they fit? Following the rapid collapse of the soviet system, industrial policies, as well as business development, were not the real priority for the Russian Government. It took almost 20 years to arrive at the point where these topics, as well as that of modernisation in general, would become appropriate. 2 In the years the economic parameters were changing: oil price was increasing, GDP was growing as well (principally as a result of the oil price), the Stabilization (Welfare) Fund was accumulating extra oil income, providing for stability in the country; people s incomes became more stable and citizens began to save and plan their spending. (Please see Figure 5.1). The year 2006 has therefore become the focal point for when the need for Russian modernisation became apparent. The Russian National Priority projects as well as the development of the Russian Long Term Socio-Economic Development Strategy 2020 have since followed. However, it should be added that the implementation of the strategy in November 2008 coincided with the onset of the global systemic crisis, which considerably 1 Only EU27 as single entity is in front of Russia with 146 measures 2 Gerasimenko, Darya (2009) Russia: From Collapse to an Economic Modernization Programme (pages 51-78) in The Unrelenting Pressure of Protectionism: The 3rd GTA Report edited by Simon J. Evenett, Centre for Economic Policy Research (CEPR) and Global Trade Alert (GTA), December 2009.

69 Figure 5.1 Russia s GDP per capita growth (annual %) Source: World Development Indicators database (WDI) Crisis and Modernisation Figure 5.2 Exchange rate of the Russian ruble to US dollar in Rubles per 1 US dollar Source: World Development Indicators database (WDI) Rubles per 1 US dollar January 2008 February March April Figure 5.3 Exchange rate of the Russian ruble to the US dollar in (monthly) Source: The Central Bank of the Russian Federation data May June July August September October November December January 2009 February March April May June July August September October November December January 2010 February March April

70 62 Unequal Compliance: The 6th GTA report Figure 5.4 The world price of oil grade Yurals in (monthly) US dollars per barrel in million US dollars January 2008 February March April Source: The Central Bank of the Russian Federation data January 2008 February March January 2008 February March May June July August September October November December January 2009 February March April May June July August September October November December January 2010 February March April Figure 5.5 The Russian trade with the Rest of the World in period January April 2010 in million US dollars in million US dollars April May June July August September October November December January 2009 February March April May June July August September October November December January 2010 February March April Source: Calculated by author on the basis of the data provided by the Russian Federal Customs Figure 5.6 The Russian trade with the CIS countries in period January 2008 April 2010 in million US dollars April May June July August September October November December January 2009 February March April May June July August September October November December January 2010 February March April Source: Calculated by author on the basis of the data provided by the Russian Federal Customs Export Import Export Import

71 Crisis and Modernisation 63 affected expectations. The pace of the global recession and its influence on the Russian market and society were considerably underestimated. The Annual Report of the Central Bank of the Russian Federation for 2009 begins by stating that the Russian economy had passed through the critical phase of the crisis, which had been characterised by the devaluation of the Russian ruble, capital outflow, the deficit of liquidity, reduced loan activity of the banks, high inflation and a deep fall of the GDP growth (from 7 percent GDP growth in 2008 to an 8 percent fall of GDP in 2009).(Please see Figures 5.1, 5.2, 5.3, and 5.4). In the oil price fell from 129 US dollars per barrel to almost 38. This had a significant impact on the country s budget, as government heavily relied on natural resources income for the planned modernisation and development programme. Taking into account the importance of the domestic currency stability for all sectors of the Russian economy, the Central Bank has, since the beginning of the 2009, continued a managed and gradual devaluation of the Russian ruble (Figure 5.3). This allowed companies with external financial commitments to avoid defaults. By March 2009, however, the situation stabilised somewhat, which allowed the government to increase the effectiveness of anticrisis measures. The economic situation has since improved the oil price went up (Figure 5.4), there was an inflow of foreign currency, and production became more rapid. Total exports of the Russian Federation in 2009 fell to the level of 2006, which was connected with the fall in price of the country s main exports (the oil price also fell to the level of 2006). (Figures 5.5 and 5.6). The physical volume of Russian exports was also reduced due to decreased demand from foreign markets, as well as in consequence of protectionist measures implemented against Russian exporters. (Please, see section 2.2 of this paper). The physical volume of natural gas, black metallurgy and metallurgical products and mineral fertilizers also decreased. However, the physical export volume of oil, oil products, aluminum, and copper increased in An interesting observation is that the share of the natural resources in the export structure of 2009 has decreased. The highest fall in exports was in metallurgy and mineral fertilisers (two traditional Russian exports discriminated against abroad). The lowest fall in exports occurred in the engineering industry. The export of food and agricultural products has increased which is in line with the import substitution concept introduced during the crisis with regard to several sectors, including food and agriculture. As for the imports in 2009, the share of cars, equipment and transport vehicles was reduced as a consequence of the Russian policy of support for the car industry through tariff and other measures (which will be discussed further in this paper). The overall situation in 2009 appears to be much worse than expected and planned for in the budget. The GDP shrank for the first time following 10 years of growth. Also for the first time, following a number of years of budget surplus, the Russian Federation went into a budget deficit of 77.5 billion of US dollars (6% of GDP). The growth in budget spending was also influenced by the government policy of supporting domestic demand and the financial system of the Russian Federation. The overall volume of these support expenses amounted to around

72 64 Unequal Compliance: The 6th GTA report 24 billion US dollars in 2009, according to information provided by the Central Bank of Russia. 3 Despite this economic performance in 2009, which was most certainly underestimated when preparing the The Concept of the Long-Term Socio- Economic Development of the Russian Federation up to in , on 12 November 2009 President Medvedev confirmed the need for the modernisation of the Russian society in all areas. He even identified a list of 5 priorities for the economic modernisation of Russia during his speech to the Federal Assembly of the Russian Federation, namely: medical technologies, increased energy efficiency, nuclear technologies, telecommunications and space industries, as well as information technologies and software. 5 He again emphasized the necessity for modernization of the Russian Federation in his speech at the World Economic Forum in St. Petersburg on 18 June In the document titled The Main Directions of Anti-crisis measures of the Government of the Russian Federation for 2010 written in December 2009, it states that the economic crisis has significantly changed the starting position for Russian modernization, as the socio-economic situation has deteriorated in all aspects. 7 The government duly undertook a package of the anti-crisis measures, though the drop in GDP in 2009 reached 8 to 9 percent (the largest among the G20 a nations, and amongst the BRIC countries). At the outset of the global financial crisis in November 2008 the Russian government introduced The Concept of Long-Term Socio-Economic Development of the Russian Federation up to the year 2020, (hereafter referred to as the Concept ). The text is very ambitious. The Concept states that for Russia, the transformation of the world economy creates new opportunities for the development of external economic integration, for strengthening and widening the Russian position in world markets, as well as for the import of technologies and capital. 8 The Concept adds that Russia will strengthen its leadership in integration processes in Eurasia. 9 The Concept consists of 2 main stages: (i) the consolidation of competitive advantage ( ) in traditional sectors ; adaptation to the crisis processes in the world economy; preparation of the ground for further innovative development; investments in people capital and infrastructure; and (ii) innovation breakthrough ( ) - the increase of competitiveness based on the technological base; structural diversification of the economy and the 3 The Central Bank of Russia. The Annual Report of the Central Bank of the Russian Federation Available from < > 4 The Concept of the Long-Term Socio-Economic Development of the Russian Federation up to 2020 ) positioned Russia as being one of the strongest economies in the world by The Speech of the Russian President Dmitry Medvedev to the Federal Parliament. Poslanie prezidenta RF Dmitriya Medvedeva Federal nomu Sobraniyu Rossiiskoi Federacii. Rossiiskaya Gazeta # 5038 (214) from 13 November Available from < > 6 Video of the Russian President Medvedev s speech at the Economic Forum in St. Petersburg. Available from < > 7 The Main Directions of Anti-crisis measures of the Government of the Russian Federation for 2010 from 30 December 2009, p. 4 8 The Concept of Long Term Social-Economic Development of the Russian Federation for period until the year The Decree of the Russian Government from 17 November 2008 # p, p.5 9 Ibid., p.9

73 Crisis and Modernisation 65 conclusion of modernisation of the infrastructure sectors; softening social and regional diversification. The document lists several high-tech industries where Russia has significant competitive advantage or seeks to build such advantage over the medium term specifically, the aircraft industry and propulsion engineering, spacecraft and rocket industry, radio electronics industry, nuclear energyindustrial complex, as well as the information-communication technologies. The Anti-Crisis Programme of the Russian Government (developed in March 2009) and approved on 19 June 2009, introduced systemic measures to support the real sector as well as to support particular sectors during the crisis such as agriculture, the car industry, defense industry, transport sector, forestry, and the metallurgical sector. The agriculture, construction, food and textile (light) industries, the pharmaceutical industry and the car industry are considered by the government as prospective targets in terms of import substitution and domestic demand. Latterly, those sectors have received separate industrial development strategies up to 2020, which are listed in Table 5.3 of this paper. The New Anti-crisis Programme of the Russian Government for 2010 states that the Anti-crisis Programme for 2009 was aimed at smoothening the consequences of the global crisis and its influence on people and the economy. However, the Russian dependence on natural resources exports along with price fluctuations, low domestic demand, a weak financial system and the lack of long money, are key factors that made the global recession so pervasive in Russia. The New Anti-crisis Programme 2010 emphasises that those factors are not necessarily solved in the short run, and that consequently there is a need for a policy correction away from anti-crisis support of industries towards modernisation and innovation. Only this type of change could compensate for the modernisation gap in the plan of The Anti-crisis strategy of 2010 states that the support for economic revival will be accomplished through, among other measures, support for domestic demand in the sectors that have suffered the most in 2009, as well as in sectors that have multiplier effects in terms of demand in related industries and in employment creation. A special emphasis is made in New Anti-crisis Plan for 2010 on the automobile industry and construction services sector. The modernisation measures in 2010 will be based on the following 8 points: diversification of the economy and the creation of new industries; the stimulation of innovative activity in economy; the development of high-tech industries; the formation of long money in the economy; modernisation of the financial system; the development of the human capital, privatisation of the state property as well as the modernisation of the macroeconomic policy. The Concept of modernization goes even beyond the state level. Mr. Igor Shuvalov, the Deputy Prime-Minister, in his speech at the conference Russia and the world: the challenges of new decade emphasised that there were plans to modernise the format of the Commonwealth of the Independent States (CIS format). He recalled that at the beginning of the 90s the CIS format had an objective to prevent an ex-yugoslavian scenario. Nowadays, this project has a real economic potential. It is not USSR nostalgia and not a friendship. This is a new

74 66 Unequal Compliance: The 6th GTA report market of goods and services with increased external and internal competition. The project of new modernised free trade area within CIS is ready. 10 By 2008 the Russian Federation had enough strong and stable ground (so it thought) to undertake structural reforms at all levels in the country and society. What became apparent through 2009 however, was that reliance on natural resources financing was insufficient to progress the programme. It is clear now that at some point the concept of modernisation will stall, even if oil price rises again. Modernisation as a concept is, in reality, a much greater challenge that envisaged and will require additional engines, such as deep social and political changes in order to facilitate an improved economic performance. Whilst it is an admirable idea to bring together a range of concepts and strategies in order to try to facilitate internal and regional (geopolitical) changes, the reality, as history shows, is that achieving them through force is neither efficient nor effective. To be able to demonstrate the level of performance that would encourage other countries to emulate this trajectory will require painful structural changes inside Russia. Without such a commitment the R in BRIC may well find itself dropped An overview of Russian commercial policy during the current global recession ( ) Russia has demonstrated one of the most remarkable trade policy responses of all G20 countries during the current global recession, not only in terms of Russia s preference for regional and industrial development over a multilateral framework, 11 but also in respect of various forms of commercial policy used during current crisis & modernization. These included import tariffs, subsidies to the priority industries as well as government procurement preferences, export taxes and restrictions, trade defense measures, as well as SPS measures and others. (Please, see Table 5.1). As an illustration, the GTA database contained 103 measures introduced by Russia from October 2008 to 9 June 2010 (ie, 10 percent of the total measures contained in the GTA database); 73 of these measures are certainly discriminatory (coloured red ). 12 Russia is also amongst the top offenders according to other rankings included in the GTA database. 13 Seventeen measures introduced by Russia are coded green, which means that they might facilitate trade. (Please refer to Table 5.5 for a description of the colour coding used in the GTA database). This analysis by GTA allows us to consider Russia s trade policy response at three different levels: international, regional and unilateral. At the international level Russia has given priority to industrial development and to the Customs 10 Shuvalov, Igor (2010). The Speech at the Conference (21 January 2010) Russia and the world: the challenges of new decade. Available from < > 11 Gerasimenko, Darya (2009) Russia: From Collapse to an Economic Modernization Programme (pages 51-78) in The Unrelenting Pressure of Protectionism: The 3rd GTA Report edited by Simon J. Evenett, Centre for Economic Policy Research (CEPR) and Global Trade Alert (GTA), December Available from < > 12 The EU27 as single entity implemented 146 discriminatory measures 13 It is important to notice that Russia undertook a lot of decrees with single tariff increases (one measure is one legal document in the GTA database), this partly explains the relatively large amount of Russia s protectionist measures. Therefore in other rankings provided by GTA team such as number of sectors affected or number of tariff lines and number of trade partners affected Russia is at 5th of 6th places.

75 Crisis and Modernisation 67 Union, which was created during the process of Russia s accession to the WTO what have actually significantly complicated already sophisticated Russian WTO accession process. At the regional level, Russia has intensified its relations with its neighbors within the Commonwealth of Independent States (CIS) and the Eurasian Economic Community (EurAsEC). The creation of the Customs Union of Russia, Kazakhstan and Belarus from 1 January 2010 was indeed a very unexpected decision for the world community (Gerasimenko (2009)). Russia s trade policy reaction to the crisis began in December 2008 with two documents introduced by the government ie, the government procurement price preference to domestic producers which was implemented until 31 December 2010, and the now famous tariff increase on new cars and the blocking of import tariffs on used cars for 9 months (which was later extended see section three of this paper, which considers car industry protection during the current crisis). It is important to emphasise, however, that those measures were introduced immediately following the G20 meeting in Washington in November 2008, where the representatives agreed not to raise barriers to trade. Russia was, therefore, one of the first to violate this commitment. It is also important to add that in November December 2008 the price of oil fell to its minimum (38 US dollars per barrel, from 129 US dollars several months before), as did the volume of exports as a result (see Figures 5.4, 5.5, 5.6). These factors most certainly influenced Russian protectionist tendencies from January 2009 onwards (Please, see Figure 5.7). At the beginning of November 2008, in reaction to the onset of the crisis, the Russian government suspended its moratorium on not signing new agreements with foreign firms, taken during Russia s WTO accession process, to localise the production of foreign cars in Russian territory, in return for discounted import tariffs (Decree #166). The decision not to sign those agreements for the creation of new car production facilities was part of Russia s WTO accession commitments. 14 This is an interesting example of how the Russian government has began to recognise that the WTO accession process might limit Russian policy space for industrial development and for anti-crisis measures; and particularly so in such a sensitive area as the Russian car industry (which will be discussed in more detail in section 3 of this paper). In December 2008 a substantial amount of tariff policy decisions were prepared that were introduced in the first quarter of 2009 (Please see Figure 5.7). This was also connected with the trade collapse (Figures 5.5 and 5.6), that was caused to a large extent by the falling price of oil, which was followed by a decrease in volume of Russian exports (Figure 5.4). The first quarter of 2009 could be characterised by an active use of tariff policy. In the second quarter of 2009 subsidies began to be implemented. By the end of quarter two of 2009, the Russian Government were faced with a rapidly worsening macroeconomic situation. The Government also recognised the fact that the WTO accession process limits Russia s range of policy options in response to the deepening crisis. Therefore it introduced a polite way of saying that accession on the agreed terms and conditions no 14 Prasolov, Oleg. Rossiya otmenyaet moratorii na novye soglasheniya po promsborke avtokomponetov. From 30 October Available from < >

76 68 Unequal Compliance: The 6th GTA report longer reflected the interests of the Russian Federation by announcing the joint accession of the Customs Union of Russia, Belarus and Kazakhstan to the WTO. 15 Following that decision on 9 June 2009 the government introduced two key documents the New Trade Policy Strategy for the Russian Federation from 11 June 2009, describing the use of tariff policy during the crisis; and The Programme of the Anti-Crisis measures of the Russian Government for 2009 on 17 June 2009, which described priority industries, where not only tariffs would be applied but also subsidies and other protective measures. Such support was supposed to be implemented in the agricultural sector, construction, food and textile industries, the pharmaceutical industry and the car industry and in others. At the Russian Cabinet meeting on 11 June 2009 (two days after the Customs Union announcement by Putin), the Minister of Economic Development introduced a new trade policy strategy for Russia. 16 Two stages were planned for Russian customs tariff policy. The first stage (lasting until the end of the year 2010) was characterised as softening the crisis phase. In this stage the customs tariff policy is a part of anti-crisis economic policy. Thus, the implementation of the customs tariff measures will be directed towards the balanced protection of the interests of the state budget, domestic producers and consumers. At this stage, the most important objectives were (i) the protection of the internal market and support of the development of import substitution industries, whilst at the same time support for an effective competition environment; (ii) support and stimulation of exports; (iii) strengthening the fiscal effect of customs-tariff regulation. The second stage was characterised by the stabilisation of the Russian economy and the move towards sustainable development. The main objectives for that period are the restoration of the balance between protectionism and the regulatory functions of the customs tariff policy, as well as the formation of the potential for sustainable, post-crisis economic development. Here such goals as the increase of export potential, export diversification, as well as the support of export with instruments of customs-tariff policies are also stated. An attachment #1 to this document described various aspects of customs tariff policy in According to this attachment all domestically produced goods in Russia will be divided into 5 groups according to their level of international competitiveness. The stable competitive products at the internal market are raw materials, preprocessed metallurgic production, chemical production and timber. The tariff treatment of these products was stable and allows a solution for fiscal objectives. Rolled iron and steel pipes, plastic, paper, cardboard, tracks, railway equipment, cement, construction materials, as well as some food items, belong to the group of middle level of competitiveness. For these products temporary quotas and increased tariffs could be implemented. 15 Gerasimenko, Darya (2009) Russia: From Collapse to an Economic Modernization Programme (pages 51-78) in The Unrelenting Pressure of Protectionism: The 3rd GTA Report edited by Simon J. Evenett, Centre for Economic Policy Research (CEPR) and Global Trade Alert (GTA), December Available from < > 16 Global Trade Alert (2009). Available from < >

77 Crisis and Modernisation 69 Further restrictive measures were suggested for the following products: cars, car parts, engines, paints and varnishes, household chemistry, tyres as well as some items of food (including meat). All of these goods could be subject to low import tariffs on associated materials, parts, and components used in production; higher tariffs would prevail on final goods. The attachment, however, also states that the import tariff on new cars could be lowered should there be gradual import substitution and high import tariffs retained on used cars. The new wave of protectionism measures was implemented after those decisions in quarter 3 of 2009 (Figure 5.7). The amount of subsidies provided by the government increased (car industry, aircraft industry, financial services, machineries). More than 8 subsidy programmes were introduced in quarter 4 of 2009, but this time more towards long-term modernisation industries: shipbuilding, nanotechnologies, defense industry, rocket engines and others. From 1 January 2010, the Customs Union Code came into force. Russia has increased import tariffs in the format of the CU on about 14 percent of its import tariff lines: certain meat products, yeast, certain articles of apparel and clothing accessories. Russia has decreased import tariffs on approximately 4 percent of its import tariff lines: exotic fruit concentrates, materials for photography, wool and fabrics, pharmaceutical substances, parts of footwear, electro-mechanical appliances. The majority of its tariff lines (about 82 percent) have not been changed. Russia used the creation of the Customs Union with Belarus and Kazakhstan to consolidate most of the temporary duty increases introduced during the economic crisis. Those unilateral increases are now a part of the Single Customs Tariff of the Customs Union. Moreover, the Customs Union has not only consolidated these tariff rates but has also widened the scope of these trade restrictions to the other two partners (Belarus and Kazakhstan). The EU states that this (the Customs Union) remains by far the most striking example of entrenching the crisis-related measures in the permanent trade environment, with long-term implications for the resumption of trade flows with Russia. 17 By April 2010, the global financial and economic crisis, a significant narrowing of the global and domestic demand, the implementation of anti-crisis measures, as well as the establishment of the Customs Union of Russia, Belarus and Kazakhstan, led to the need to adjust priorities for customs and tariff policy that were announced on 11 June The Modified New Trade Strategy ( ) emphasises that the current problems with the Russian economy dictate the need for a tighter integration of customs and tariff policy in the process of diversification, restructuring and innovation in the domestic industrial complex. During the transition to an innovation-based economy the role of customs-tariff measures should be strengthened in the implementation of industrial policies. There is therefore a need for greater tariff protection of specific markets in the initial production cycle 17 EU calls on trading partners to remove protectionist barriers, Reference: IP/10/632. Date: 28/05/ Ministry of Economic Development. The Main directions of Customs Tariff policy for 2011 and years (7 April 2010). Available from < foreigneconomicactivit... >

78 70 Unequal Compliance: The 6th GTA report of innovative products in order to ensure the gradual opening of those markets to the full extent of their formation and segmentation, as well as to increase the competitiveness of domestic enterprises in order to maintain a competitive environment. At the same time it is necessary to set customs and tariff and nontariff regulation in order to encourage the production and export of innovative, high-tech products, together with the development of institutions promoting exports and improving the regulatory framework in the field of customs policy more generally. 19 The draft states that customs tariff policy in 2011 should become one of the key factors of competitive advantage for Russian innovative businesses in the domestic and world markets through the following directions (selected ones): further improvement of the Common Customs Tariff of the Customs Union and increasing its regulative function, whilst at the same time retaining the fiscal function of the customs tariff regulation; the combination of customs tariff policy with non-tariff policies that will provide a complex protection of national economic interests in external trade; the active use of special instruments in the regulation of imports in the agricultural sector (seasonal tariffs, import rate quotas, etc.). In priority will be given to the import of high-tech equipment that would increase the competitiveness of domestic production and increase exports. The export tariffs will remain in certain areas such as for oil and oil products, forest, and scrap metals. The draft also describes the qualitative changes in the format of trade-political interaction within the Commonwealth of Independent States (CIS). Table 5.3 shows other decisions and documents connected with Russian commercial policies that were taken during Thus, the Food Security Doctrine has an import substitution focus and gives clear priority to domestic production. The document sets a benchmark level for the share of domestic production on the internal Russian market. 20 The Development strategy for the automobile industry up to 2020 will be discussed in the next section. The Government is also in the process of developing the strategy for the aviation industry up to About 11 trade defense measures (anti-dumping duties and safeguards) were introduced since October 2008 (or on the way to be introduced) by Russia. The Russian trade defense mainly focuses on metallurgical and chemical sectors and is introduced against China, Ukraine and other countries. It is important to emphasize that Russia s trade defense in focused on the same industries as Russia s exports which are heavily discriminated abroad (metallurgical and chemical sectors). The total number of trading partners affected by measures implemented by the Russian Federation during the current crisis that harm foreign commercial interests is 142. The top ones are the Russian main import partners: the EU countries such as Germany, France, Italy, Poland, the UK, then China, the United States, Ukraine, Turkey, Japan, Mexico, Brazil and others. 19 Ibid. 20 GTA (2010). Available from < >

79 Crisis and Modernisation 71 Table 5.1 Russian Federation s implemented measures that harm foreign commercial interests, by type. Type of measure Number of measures As percentage of measures Tariff measure 27 28,72% Bail out / state aid measure 26 27,66% Trade defence measure (AD, CVD, safeguard) 11 11,70% Export taxes or restriction 5 5,32% State-controlled company 5 5,32% State trading enterprise 4 4,26% Public procurement 3 3,19% Quota (including tariff rate quotas) 3 3,19% Consumption subsidy 2 2,13% Other service sector measure 2 2,13% Sanitary and Phytosantiary Measure 2 2,13% Export subsidy 1 1,06% Local content requirement 1 1,06% Migration measure 1 1,06% Non tariff barrier (not otherwise specified) 1 1,06% Total ,00% Source: GTA database Figure 5.7 Measures introduced by Russia which influence foreign commercial interests during crisis (quarterly) GREEN YELLOW RED 5 0 4Q Q Q Q Q Q Q 2010 Source: Calculated by author on the basis of the GTA data (the meaning of colors please, find in Table 5.5)

80 72 Unequal Compliance: The 6th GTA report The Report prepared in December 2009 by the Ministry of Economic Development on the influence of custom tariffs and non-tariff measures on the competition environment of certain markets states that as a protectionism function the customs tariff policy is efficient only together with the simultaneous creation of conditions for the industry development and incentives to increase the efficiency of the internal production, as well as the existence of the high level of the competition among domestic producers. This report analyses the effect of tariff policy during the crisis on the car industry, black metallurgy, cement, milk and meat. 21 The report was prepared during the active public discussion on the necessity of high import tariffs in the automobile sector. The issue will be discussed in more detail in the section of this paper concerning the Russian automobile industry. As for the harm done to Russia, the Ministry of Economic Development prepared another Report on the Conditions of the Market Access of Russian Products to Foreign Markets in May This comprehensive 30-page document states that on 1 May 2010 the Ministry had registered 93 protectionist measures against Russian companies: 40 anti-dumping measures, 8 special safeguards and 45 nontariff measures including administrative regulation. Currently there are 2 antidumping, 6 safeguard investigations as well as 7 reviews of earlier implemented antidumping measures. 23 The largest number of protectionist measures against Russian exports has been implemented by Belarus (22) and the EU (17). Among the problematic markets with protectionism the Ministry names both partners of the Russian Custom Union - Belarus and Kazakhstan as well as the US, Ukraine, Uzbekistan, Mexico, India. 24 The protectionism is mainly implemented against mineral fertilisers, metallurgical production as well as chemical production. The Ministry emphasises that Russia especially suffers from antidumping measures. Thus, Russia traditionally is in the ten most targeted by anti-dumping countries. Among the non-wto members Russia ranked first. Thus, since the creation of the WTO in antidumping measures have been implemented against Russian exporters. Some countries even have provisions in their laws allowing discrimination of non-wto members with regard to anti-dumping duties (Egypt, Turkey, Peru). 25 The GTA analysis adds to the government report as it takes into account the tariff policies of the trading partners which might affect Russia s commercial interests as well as migration and some other issues. (See Table 5.2). The trade 21 Ministry of Economic Development (2009). Report on the Influence of Custom Tariffs and Non-Tariff Measures on the Competition Environment of Certain Markets. 30 December Available from < 22 Ministry of Economic Development (2010). Report on the Conditions of the Market Access of Russian Products to Foreign Markets. 24 May Available from < structure/deptorg/doc _05 > 23 Ibid 24 Gerasimenko, Darya (2010). Tamozhennyi soyuz - mezhdu sotrudnichestvom i protekcionizmom / The Customs Union - between cooperation and protectionism, (in Russian), Bridges Russia (Issue 3: April 2010), International Centre for Trade and Sustainable Development (ICTSD), Geneva, Switzerland. Available from < > 25 Ministry of Economic Development (2010). Report on the Conditions of the Market Access of Russian Products to Foreign Markets. 24 May Available from < structure/deptorg/doc _05 >

81 Crisis and Modernisation 73 liberalisation measures affecting Russian commercial interests are also provided by GTA database. The difference between the GTA and the Russian government report, in terms of the number and the content of measures, is also explained by the fact that certain measures (antidumping, for example) were introduced several years earlier, but the GTA database only looks at the measures which were introduced after October According to the GTA analysis 56 countries have introduced 93 discriminatory measures which could harm Russia s commercial interests. About 28 discriminatory measures are in the pipeline to be implemented. The tariff measures of Morocco, South Africa, China, Malaysia, Vietnam, South Korea, and Indonesia might affect Russia s commercial interests. Export restrictions introduced by Argentina, Malaysia, China should be of attention as well. There are about 30 measures in the database implemented by foreign partners which might facilitate Russia s exports. Trade policy (commercial policy) can be helpful in the industrialisation (modernisation) process but it most certainly does not bring industrialisation itself by blocking imports and putting money through subsidies into new or dying industries. There are two main strategies that have been used historically in the process of industrialization: import substitution (which was, for example, used by Latin American countries such as Brazil and Argentina following independence) and export promotion strategy (which was used by Asian economies such as Japan, Korea and others). The idea of infant industry protection in import substitution strategy is certainly not new. There is a large amount of literature on this topic, from the 18th century through to the present, which questions the efficiency of protecting newly established industries (Bhagwati, Robert Baldwin, Stiglitz, Melitz and others). After World War II many developing countries implemented a high level of protection of newly established industries. The basic idea of infant industry protection is that the new industries are infants and that dynamic factors will come to ensure their economic efficiency. The empirical test provided by Krueger and Tuncer on Turkish data tested the following hypothesis: input per unit of output must fall more rapidly in more protected industries if there is any rationale for infant industry protection. The data analysis showed that Turkish industries did not experience rapid increases in output per unit of input which, according to the authors, can be interpreted to suggest that protection did not bring about the results that infant industry proponents use as their basis for protection. 26 Russia came through the process of import substitution industrialisation from the outset of the Soviet Union in the 20th century. The political regime implied the least possible dependence on foreign markets, even if this meant producing not the best quality products (though it was believed to be the best quality for everything). By the collapse of the Soviet Union, the country was producing virtually everything itself, which meant that if the market was to open up then some sectors would not be able to survive. This actually happened and was made worse by the total disorder in all sectors of life during the transitional period. 26 Krueger, Anne, Tuncer, Baran (1982). An Empirical Test of the Infant Industry Argument in American Economic Review, Vol. 72, #5 (December 1982), pp

82 74 Unequal Compliance: The 6th GTA report Table 5.2 Implemented measures that harm Russian Federation s commercial interests, by type. Type of measure. Number of measures. As percentage of measures. Tariff measure 25 20,33% Bail out / state aid measure 21 17,07% Export taxes or restriction 14 11,38% Export subsidy 11 8,94% Trade defence measure (AD, CVD, safeguard) 9 7,32% Non tariff barrier (not otherwise specified) 7 5,69% Local content requirement 6 4,88% Migration measure 6 4,88% Public procurement 6 4,88% Competitive devaluation 4 3,25% Import ban 4 3,25% Quota (including tariff rate quotas) 3 2,44% Trade finance 3 2,44% Consumption subsidy 2 1,63% Investment measure 2 1,63% Total ,00% Source: GTA database Figure 5.8 Measures introduced by Russian partners which influence Russia s commercial interests during crisis (quarterly) GREEN YELLOW RED 5 0 4Q Q Q Q Q Q Q 2010 Source: Calculated by author on the basis of the GTA data (the meaning of colors please, find in Table 5.5)

83 Crisis and Modernisation 75 Table 5.3 The Main Programmes and Decisions of the Russian Federation for Socio - Economic Development during the global systemic crisis (the end of ) # Programme/Decision Date 1 The Strategy of Economic Development of the Commonwealth of Independent States (CIS) until November The Concept of the Long-Term Economic Development of the Russian Federation for period until 2020 (Decree of the Russian Government from 17 November 2008 # 1662-p) The Main Directions of the Activity of the Government of Russia until 2020 (Decree of the Government from 17 November 2008 #1663-p) 17 November November The Main Directions of External Economic Policy of the Russian Federation until 2020 December The Development Strategy for the Metallurgical sector up to March The Programme of the Anti-Crisis measures of the Russian Government for 2009 draft on 20 March The Strategy of the Russian National Security until the year (Decree of the President of the Russian Federation # 537 from 12 May 2009) 12 May St. Petersburg Economic Forum (meetings of Minister of Economic Development with foreign partners on the WTO accession issues) 4-7 June The meeting of the Eurasian Economic Community -- the decision announced by Prime Minister Putin on the Customs Union accession to the WTO The Main Directions of Customs Tariff Policy for the year 2010 and for the period Presented by the Minister of Economic Development, Mrs. Elvira Nabiullina at the Russian Cabinet meeting on 11 June June June The Programme of the Anti-Crisis measures of the Russian Government for June Amendment to the Main Directions of the Activity of the Government of Russia up to 2020 (Decree of the Government from 17 November 2008 #1663-p) 8 August Light Industry Development Strategy up to September Development Strategy for Pharmaceutical Industry up to November The Programme of the Anti-Crisis measures of the Russian Government for December The Customs Code of Customs Union of Russia, Belarus and Kazakhstan 1 January Food Security Doctrine 30 January New Modified Trade Strategy, March The Development Strategy for the Russian Domestic Car Industry up to April The Development Strategy for the Russian Aviation industry up to 2025 (the document is in the process of development) 14 May 2010

84 76 Unequal Compliance: The 6th GTA report It is not clear that the industries named in for the import substitution strategy are infant industries (agriculture, food and textile (light) industries, the pharmaceutical industry and the car industry). It is also not clear that they are industries in which Russia has a competitive advantage, with the exception of agriculture (and some food). The reasoning behind this decision is more economic (national) security and not economic rationale. According to the Concept of Socio-Economic Development up to 2020, there are several high-tech industries in which Russia has significant competitive advantage or seeks to build it over the medium term. These are the aircraft industry and propulsion engineering, the spacecraft and rocket industry, radio electronics, nuclear energy-industrial complex, and the information-communication technologies. One solution for the modernisation process might be drawn from the Japanese experience of industrialization through export performance, where only the firms that perform at certain export levels continued to receive support from the government. The light car industry is a very special case in Russia. By the time of the collapse of the USSR, the Soviet car industry ranked number 6 (out of 24 car producers in the world) in terms of the total amount of vehicles produced in 1990, with a world market share of 4.39 percent, after Japan (28 percent), United States (20.3 percent), Germany (10.7 percent), France (7.81 percent) and Italy (4.39 percent). 27 In 1990, the Soviet car industry produced 2,117,380 automobiles (including passenger cars, trucks, vans, and commercial vehicles) under a closed market. When the market was opened up the preferences of the Russian people became clear. As a result, by the time of the crisis in 2009, the Russian domestic car industry came very close to the point of disappearing if no measures are taken by the government (even with import tariffs that were imposed before). The following section elaborates on this issue. Interim conclusions for section two By 2008, Russian society was ready to undertake a modernisation process. However, the modernisation or re-industrialisation coincided with a global economic recession, the influence of which on the Russian economy was underestimated; the poor macroeconomic performance in 2009 corrected the reality. Relying on income from oil, the modernisation programme has demonstrated its limited capacity. The commercial policy of modern Crisis & Modernization was intended to smooth over the current situation. The start of the crisis was characterised by an intensified use of tariff policies; however, after an official decision of suspending unilateral WTO accession process, a range of subsidies to priority sectors followed. The government, having understood the policy limitations for crisis & modernisation that have been created by Russia s WTO protracted accession process, has made a choice towards industrial policy and regional integration in the form of the Customs Union. 27 Munkirs, John and others (1993). The automobile industry, political economy, and a new world. in Journal of Economic Issues, June 1993; 27, 2, p. 628

85 Crisis and Modernisation 77 Figure 5.9 Russian trade (import vs. export) in light cars (HS 8703) in Trade Quantity Import Export years Source: Calculated by author on the data provided by the UN Comtrade database The Customs Union Code, effective from 1 January 2010, happened to be the most striking example of entrenching the crisis-related measures into a permanent trade environment. According to the Russian experience, the crisis has determined the policy choice in that it has provided a wider policy manoeuvre to choose freedom in industrial development over a multilateral framework. The case study of the Russian car industry below demonstrates the range of measures that can be implemented by the government in a short period of time in order to save an industry (even if it is not a competitive advantage of this country). The preliminary price of this policy choice, as well as the reasoning behind the decision, is also discussed. The Russian Government currently faces an extremely challenging mission: not only must they respond to the socio-economic crisis but also introduce the concept of modernization of all aspects of life in Russia, which may not be possible without substantial socio-political changes.

86 78 Unequal Compliance: The 6th GTA report Figure 5.10 The Dynamics of domestic sales of new light cars in Russia in domestically produced cars imported cars Source: Data provided by the Analytical agency Autostat 3. The Russian car industry: a case study 3.1. The Russian car industry following the collapse of the Soviet Union According to the Global Trade Alert (GTA) database, since the beginning of the global recession 33 measures by 23 countries have been introduced that affect trade in the light car industry (HS 8703), and classified as red. Half of these discriminatory measures were introduced by Russia in order to protect its domestic car industry and include higher import tariffs on new cars and prohibitive import tariffs on used cars, subsidies to producers, to consumers, to leasing companies, to railways to deliver cars to the Russian Far East, government procurement, local content requirement, and even sanitary and phytosanitory measures on used cars at the border of the Russian Federation. Those are the measures that were introduced within one and a half years to support Russian (light) car production. 28 Thus the Russian car industry has received a sophisticated complex of measures during the current global recession from the Russian Government, although the quality of Russian light cars in particular has been the topic of jokes for many years. Indeed, according to a survey of public opinion conducted by the Russian Public Opinion Research Center in August 2009, a quarter of the respondents answered that it is better to walk than to drive a Russian car. 29 However, the Russian car industry still exists and currently accumulates tremendous attention and unprecedented Government resources in the Russian modern history. 28 The measures which target the related sectors such as metallurgy, light industry and others are not discussed in this paper. 29 Lebedeva, Natal ya. Kruti baranku. Pochemu rossiyane otdayut predpochtenie otechestvennym avtomobilyam? Rossiiskaya gazeta - Federal nyi vypusk #4983 (159) from 27 August Available from < >

87 Crisis and Modernisation 79 Figure 5.11 Russian domestic new cars market (in million cars) Imported cars The cars produced by foreign firms based in Russia Russian domestically produced cars Source: The Russian Strategy for the Development of the Auto Industry up to 2020 from 23 April 2010, p.20 The Russian Strategy for the Development of the Auto Industry up to 2020, from 23 April 2010, defines the situation in the Russian car industry market (especially in light cars which make up 87 percent of the production in the car industry) as critical. On one side there was a rapid market growth connected with an increase in the buying power of the population, the development of a loan system and a stabilisation of the domestic currency. On the other side there was a constant decline of the domestic market share of the Russian producers as a result of the increased competition (Figures 5.9 and 5.10). The automobile strategy states that without the government stimulus of investment measures the domestic car industry could totally collapse in 3-5 years. Several factors should be taken into account when considering the Russian domestic car industry: the general preferences of consumers towards foreign cars (as demonstrated in Figures 5.9, 5.10 and 5.11); the industry (according to government estimates) is up to 7 years technologically behind international standards; Russia has significantly lower labour productivity in this sector; the level of investments in the industry, as well as the general quality of the production, is low; the Research and Development activities of Russian domestic producers constitutes no more than 1 percent of annual turnover, whereas foreign competitors spend 5 percent annually and even more. There are several reasons why the Russian government might wish to retain such a strong focus of attention on the car industry, particularly during a period of crisis and re-industrialization. Firstly, the Russian car industry is still considered to be a leading sector in terms of domestic mechanical engineering, which defines the social and economic level of the country s development. Secondly, the Russian car industry is quite diversified and is represented in all segments:

88 80 Unequal Compliance: The 6th GTA report light cars, light commercial cars, trucks and buses, trailers, special and military cars, car parts, as well as by research and development institutions. Thirdly, there are about 400 companies in the industry providing about 400,000 jobs in car and car parts production. The industry also creates about 1 million working places in the retail sector. Another important point is that the car industry works in close association with companies in other industries such as metallurgy, chemical, electrical, and light industry, etc. As a result the car industry provides about 4.5 million jobs in the various related industries. 30 Issues of national security as well as national pride are also involved. Some more reasons are discussed further. In order to gain a better understanding of the current government s position towards the situation in the Russian car industry, it is worth referring to a number of articles, statements and decrees that have appeared during the last 5 years in the official Russian newspaper, Rossiiskaya Gazeta. A special focus on the crisis period of October 2008 June 2010 will be made in the next section of the paper. By the time of the USSR collapse, the Soviet car industry ranked number 6 (out of 24 car producers in the world) in terms of the total amount of vehicles produced in 1990, with a world market share of 4.39 percent after Japan (28 percent), United States (20.3 percent), Germany (10.7 percent), France (7.81 percent) and Italy (4.39 percent). 31 In 1990, the Soviet car industry produced 2,117,380 automobiles (including passenger cars, trucks, vans, and commercial vehicles) under a closed market. The support history of for the modern Russian automobile industry has not been as sophisticated as it is now during the current global recession. What follows are the main points. In January 1993 the Government of the Russian Federation prohibited the import of right-handed light cars. After multiple protests in May 1993 President Jelzin canceled the order. In August 2002 the Government introduced high import tariffs for light cars of 7 years and older depending on the volume of the engine, the tariffs ranged from 1.4 euros to 3.2 Euros per 1 cubic centimeter. On 29 March 2005 the Government introduced an order defining the term industrial assembly. This Decree #166 allowed foreign companies to import car parts to Russia with reduced import tariffs of 3% or 0% (reduced from 15%). For this deal the foreign producers were meant to open production facilities in Russia of not less than 25,000 autos per year. If, after two and a half years, the foreign firm does not localise the production of the car parts, the import tariff for them reverts to the level of 15%. In the same year, May 2005, the government discussions regarding the prohibition of the import of right-handed light cars intensified, which caused a number of demonstrations and protests across the country. The bill did not become law, as the interests of the Russian Far East were very much involved, because the economy of the region depends on the import of used light cars from Japan. 32 By the end of 2005, the Russian domestic market consisted of new cars of three types: Russian cars (about 800,000 cars), imported cars (about 400,000); and foreign cars produced locally in Russia (about 200,000). At this point Russian 30 The Russian Strategy for the Development of the Auto Industry up to 2020 from 23 April Munkirs, John and others (1993). The automobile industry, political economy, and a new world. in Journal of Economic Issues, June 1993; 27, 2, p Rossiiskaya Gazeta # 3792 from 10 June Pravyi bunt. Available from < pravyj-rulj.html >

89 Crisis and Modernisation 81 cars were still dominating the Russian domestic market of new cars (foreign used cars are not taken into account in this Ref Figure 5.11). 33 By September 2005 China planned to become the third auto producing country after Japan and the US. The Chinese Government announced that the auto industry was a strategic priority in 1994 (before accession to the WTO). The government introduced import tariffs up to 250% on imported cars. Those measures forced the foreign companies to open production facilities in China. By September 2005, there were around 200 plants producing cars (including about 30 Chinese brands). By 2025 China is planning to become the biggest auto producer in the world. 34 By November 2006, the Government Decree #166 about localisation of car production brought results. By then 9 projects of foreign car production in Russia were implemented and 6 were on the way. Experts inside Russia considered the Russian car industry as being very dynamic and in view of the many affiliated industries for goods production (metallurgy, chemical, light industry, electronics) and for the delivery of services (repairing, maintenance, financial services). 35 In 2006, a similar privilege of localising production in the car industry was given to the producers of car parts, with the agreement that in three and a half years the share of the imported parts they produce will be reduced by 30 percent. By 6 March 2007, Russian domestically based plants produced 10 brands of foreign cars: Ford, Hummer, Chevrolet, Cadillac, Chery, Hyundai, Kia and others. Toyota and Volkswagen were building factories. Mitsubishi, Nissan and Daimler- Chrysler were considering opening production facilities in Russia. However, the foreign producers in Russia were faced with a shortage of good car parts inside Russia, as the domestic car parts producers could not catch up with the foreign technologies fast enough. The lack of a qualified workforce was another problem for foreign companies in Russia. 36 At the same time, by July 2007, one could observe the following tendencies in the Russian domestic car sales market. Sales of the Russian domestic producers had fallen by 23 percent, while the market for car sales grew by 28% in terms of cars sold and by 51% in money value. Russian domestic car producers lost 7% of the market share within half a year. Commentators connected this with the fact that the foreign brands produced in Russia could offer good cars at the same price segment as the Russian domestic producers. 37 By the end of 2008, Russian domestic producers sold about 700,000 cars, while foreign producers based in Russia sold about 600,000 cars (Figure 5.11). 33 The Russian Strategy for the Development of the Auto Industry up to 2020 from 23 April 2010, p Evplanov, Andrei. Chetyre kolesa iz Podnebesnoi. V 2006 godu v Rossii otkroyutsya srazu tri proizvodstva po sborke kitaiskih avtomobilei. Rossiiskaya Biznes-gazeta # September Available from < > 35 Proskuryakova, Yuliya. Avtoprom s akcentom. Proizvodstvo avtomobilei pod inostrannymi markami k 2010 godu vyrastet do 1 milliona. Rossiiskaya Biznes-gazeta #579 from 7 November Available from < > 36 Fomchenkov, Taras. Konveier bez kadrov i zapchastei. Inostrannye sborochnye proizvodstva stalkivayutsya s nehvatkoi komplektuyushih i kvalificirovannyh rabochih. Rossiiskaya Biznes-gazeta #594 from 6 March Available from < > 37 Gladunov, Oleg. Otvertochnyi avtoprom. Rossiiskie avtomobili proigryvayut inomarkam. Rossiiskaya gazeta - Central nyi vypusk #4408 from 9 July Available from < avtoprom.html >

90 82 Unequal Compliance: The 6th GTA report By mid-january 2008, Russia received approximately 1.8 billion US dollars of investments in the car sector as a consequence of Decree #166 regarding the localisation of production and import tariff discounts. However, due to commitments made during the Russian WTO accession process, those privileges (tariff breaks) had to be eliminated as they were creating unequal conditions for the producers. Therefore, Russia had to fix the deadline for that privilege programme until November By this time, a lot of companies that wanted to use this programme at the privilege rate had done so, except China who did not manage to get this privilege due to some political economy issues such as high competition in the same price segment (the official reason was that the standards of Chinese production are lower than the Russian security standards, which is rather surprising). 38 In March 2008, a very significant event occurred in the Russian automobile industry. The French company Renault bought a large package of shares (25% plus one share) of the main Russian car producer AutoVaz (about 50% of the production of the Russian light cars) for 1 billion US dollars. At that time there were three owners of AutoVaz: Rosoboronexport (a state company), Troika Dialog and Renault. 39 In October 2008, as a consequence of the global crisis, Russian car industry producers began experiencing difficulties (at the same time oil prices and exports were going down, and the ruble depreciated (Figures 5.3, 5.4, 5.5, 5.6)). As a result, the Russian trucks producer, KamAZ, had to reduce their working week to 4 days as well as decrease production of the trucks. The banking crisis created problems of access to finance for the Russian car industry and an overall decline in demand on production, connected with the fact that the majority of these types of car are bought through leasing agreements, also contributed to the need to decrease the production of the autos The Russian trade policy towards the domestic car industry during the current global recession (October 2008 June 2010) The history of the crisis in the Russian car industry is impressive in terms of the volume and diversity of Russian government support which was introduced in this sector (the full list is given in the Table 5.4, sorted by date of implementation with an indication of the amount of money spent by the government in ). On 30 October 2008, the government, in reaction to the oncoming crisis, suspended the moratorium, taken under the Russia s WTO accession process, to not sign new agreements with foreign firms to localise the production of foreign cars in Russia with discounted import tariffs (earlier the Decree #166). 38 Vasil eva, Yuliya. Bol shie den gi na bol shuyu sborku. Ob em investicii v rossiiskii avtoprom v 2008 godu sostavit okolo 2 milliardov dollarov. Rossiiskaya Biznes-gazeta #636 from 15 January Available from < > 39 Zykova, Tat yana. Lada ot Reno. Vchera AvtoVAZ na chetvert stal francuzskim. Rossiiskaya gazeta - Federal nyi vypusk #4602 from 1 March Available from < html > 40 Brailovskaya, Svetlana. Krizis pritormozil avtopromю Rossiiskaya gazeta - Federal nyi vypusk 4770 from 10 October Available from < >

91 Crisis and Modernisation 83 The commitment not to sign new agreements on the creation of new production facilities of foreign car companies was a part of Russia s WTO accession commitments. 41 At the Washington G20 Summit in November 2008, the countries underscored the critical importance of rejecting protectionism and not turning inward in times of financial uncertainty 42. Immediately after the meeting, in December 2008, the Russian Government approved protectionist anti-crisis measures to increase import tariffs on cars. The car industry has thus become a major catalyst for the range of protectionist measures introduced by Russia. It is important to add that in November December 2008 the price of oil reached its minimum (38 US dollars per barrel from 129 US dollars several months before) as well as the volume of exports as a result (see Figures 5.4, 5.5, 5.6). These factors most certainly influenced Russian protectionist tendencies, which appeared in the form of increased protectionist measures from January (Ref Figure 5.7) The Decree #903 from 5 December 2008, effective from 12 January 2009, introduced import tariff increases of 5 percent, from 25 to 30 percent on light cars, trucks and buses. The import tariffs on used cars were increased by almost double, whilst in addition the age of the cars considered for this increase was reduced from 7 years to 5 years and older. The measure was implemented temporarily for 9 months. 43 According to GTA analysis this measure influenced the commercial interests of 30 countries exporting light cars to Russia. The experts thought there would be no price increase in the domestic market and that the increased price of the used cars would help domestically produced foreign cars to obtain an increased share of the domestic market. Thus, according to the report prepared by the Ministry of Economic Development, the share of used cars after the implementation of the tariffs indeed decreased from 12 percent to 5 percent in January-September 2009, in comparison with the same period in The share of the foreign cars produced in Russia, as well as the share of Russian cars, increased from 17 and 22 percent to 25 and 26 percent respectively. However, the effect of the price increase of domestically produced Russian cars, as well as the reduction of production which occurred as well, will be discussed later. 44 On 19 December 2008, the Russian Prime Minister, Vladimir Putin, announced several ideas on how to save the Russian automobile industry. It is very important to emphasise that at the same time the US Government agreed to provide 14.7 billion US dollars of loans to support the US domestic car industry. Putin emphasised that the government procurement policy has an important role to play in saving the Russian automobile industry. He offered to buy cars for the government needs for different ministries, to introduce consumer-subsidised loans for light cars costing 350,000 rubles (11,600 US dollars) and cheaper, and to transfer new domestically-produced cars to the Russian Far East for free by Russian 41 Prasolov, Oleg. Rossiya otmenyaet moratorii na novye soglasheniya po promsborke avtokomponetov. From 30 October Available from < > 42 G20 Declaration, 15 November GTA (2010). Available from < > 44 Ministry of Economic Development (2009). Report on the Influence of Custom Tariffs and Non-Tariff Measures on the Competition Environment of Certain Markets. 30 December 2009, p. 5 Available from <

92 84 Unequal Compliance: The 6th GTA report Table 5.4 Government measures (chronologically) to support domestic light car industry in Russia in in million Russian rubles (and in million US dollars) Measures (chronologically) to support domestic (light) car industry in Russia (in ) Date of implementation 2009* 2010** by Import tariff increase on used and new cars n/a 2 Subsidies to the State company Russian Railways to transfer domestically produced cars to the Russian Far East for free (62.5) 3 Subsidized loans for consumers to purchase domestically produced cars (62.5) 4 Injection of 25 billion rubles into the charter capital of State Corporation Russian Technologies to support car industry (AutoVaz) (781.3) 5 Subsidies to car industry sector to reimburse some expenses for technology re-equipment ? 6 The Russian Government starts negotiations on Opel deal (to be bought by Magna-Sberbank) to support Russian car industry Beginning of June 2009 n/a 7 New Trade strategy (as well as decision on Customs Union creation) n/a 8 The programmme of the Anti-Crisis measures n/a 9 Amendment to Subsidized loans for purchasing domestically produced cars programme (62.5) 10 Used cars are in the extended list of the goods which are mandatory for the quarantine and phytosanitary control (SPS measure) at the Russian border n/a 11 Car scrappage pilot regional project by plant GAZ (4.7) 12 Subsidy to the leasing companies to purchase cars (31.3) 1400 (46.7) 13 Extension of import tariff increase on used and new cars n/a n/a 14 Government procurement subsidy to buy cars by the end of (625) (667) 15 The injection of 28 billion rubles into the charter capital of State Corporation Russian Technologies to support car industry - AutoVaz (plus 12 billion rubles) 16 Stricter conditions for the production of cars by foreign firms in the territory of the Russian Federation (Local content requirement) (1333) n/a 17 Extension of the programme Subsidized loans for consumers to purchase domestically produced cars (100) 18 Car scrappage programme (federal) (367) 19 Car scrappage regional programme by plant UAZ Business plan of AutoVaz development up to Modified Trade Strategy of the Russian Federation ( ) n/a 22 Tolyatti city special development programme (mono-cities) (1450)

93 Crisis and Modernisation Measures (chronologically) to support domestic (light) car industry in Russia (in ) Date of implementation 2009* 2010** by 2020 Development Strategy for the Russian car industry up to The Extension of the Federal car scrappage scheme (additional finance) (333) 25 The injection of 10 billion rubles into the charter capital of State Corporation "Russian Technologies" to support car industry by the end of (333) Total (1629) (3180) (6000) Notes: * The average exchange rate in 2009 of 32 rubles per 1 US dollar is taken. ** The exchange rate of 30 rubles per 1 US dollar is taken for 2010 Source: assembled and calculated by author from various sources identified in the paper

94 86 Unequal Compliance: The 6th GTA report Table 5.5 How does the GTA colour code measures? Color code Red Criteria (i) The measure has been implemented and almost certainly discriminates against foreign commercial interests. Amber (i) The measure has been implemented and may involve discrimination against foreign commercial interests; OR (ii) The measure has been announced or is under consideration and would (if implemented) almost certainly involve discrimination against foreign commercial interests Green (i) The measure has been announced and involves liberalization on a non-discriminatory (i.e., most favored nation) basis; OR (ii) The measure has been implemented and is found (upon investigation) not to be discriminatory: OR (iii) The measure has been implemented, involves no further discrimination, and improves the transparency of a jurisdiction s traderelated policies. Railways (which is a 100 percent state-owned company). 45 All of these proposed measures were subsequently implemented, in addition to some others. This was the first time in Russian history that such a complex and sophisticated package of measures was announced to support any industry. The announcements made by Putin have given stability and security to the Russian domestic car industry. Thus, the foreign firms producing in Russia, after having stopped production process in December 2008 because of reduced demand, restarted producing in January The Russian car giant AutoVaz re-opened production facilities on 16 February The Russian car producers, KamAZ and GAZ, re-opened as well. Some of them reopened with reduced working hours a week. The Russian domestic producers were keen to satisfy the government procurement order announced by Putin. Some of the new production facilities that were supposed to start working at the beginning of 2009 were not opened (second plants of Toyota and Suzuki). 46 Volvo opened a new plant for the production of trucks in January 2009 in the Russian city of Kaluga, despite the temporary crisis of the industry. In January 2009, Russian Railways (a 100% state owned company), AutoVaz and RailTransAuto signed an agreement by which Russian domestic car producers could transfer their light cars to the Russian Far East at reduced rates. AutoVaz agreed to increase its annual transfer from its current 54,000 cars to 350,000 cars. 45 Rossiiskaya Gazeta web site. Prem er Vladimir Putin nashel reshenie voprosa podderzhki otechestvennogo avtoproma. 19 December Available from < > 46 Zykova, Tat yana. Avtoprom tronulsya. Ozhivlenie rynka avtoprodazh v Rossii ozhidaetsya v seredine fevralya. Rossiiskaya gazeta - Federal nyi vypusk #4827 from 15 January Available from < >

95 Crisis and Modernisation 87 This would have saved AutoVaz up to 500 million rubles (16.7 million US dollars) a year. 47 According to the experts, this measure would provide additional demand for Russian cars in the Russian Far East, which was traditionally supplied by used foreign cars from Asia, and particularly from Japan. With the introduction of increased import tariffs on used cars by twice as much, demand for the new Russian domestically-produced cars could increase. Thus the delivery to the Russian Far East of newly produced domestic cars was considered an important policy support measure for the Russian car industry (later it turned out to be not that efficient). 48 By February 2009 the financial liquidity crisis began influencing the domestic production of cars. Thus, AutoVaz having accumulated a debt of more than 20 billion rubles (670 million US dollars), could not pay its suppliers for car components. The suppliers also experienced liquidity problems and were unable to continue the production without payment from AutoVaz. 49 In February 2009 the experts estimated that the Russian domestic market of cars would drop by 40-50% in 2009 (See Figure 5.10). In January 2009, the domestic market in Russia decreased by 33 percent whilst in Germany and France decreased by just by 10 percent in comparison with the same period in The situation in European countries was as a result of programmes introduced by the German and French governments to support demand through car scrappage programmes, which allow for an exchange of the old auto for 2,500 (1,000) euro discount to buy a new one. In the US the car market dropped by 30 percent. In the countries where there was no support of the car industry, ie, Italy and Spain, it dropped by 43 percent. 50 The Government Decree #194 from 4 March 2009 introduced government subsidies of up to 2 billion rubles (67 Million US dollars) to transfer domesticallyproduced cars by Russian Railways to the Russian Far East free of charge to domestic car manufacturers. The list of the autos also included foreign cars produced in the territory of the Russian Federation, such as Ford, Fiat, Kia and others. 51 In March 2009 the Russian Government announced subsidised loans for purchasing domestically-produced cars. Government Decree #244 of 19 March 2009 established conditions for providing subsidies from the federal budget to purchase motor cars, effective from 1 April Consumers are required to purchase a motor car produced in Russia, that costs no more than 350,000 rubles ($11,667); the permitted lenders who are providing the loan must be majority 47 GTA (2010). Avaliable from < > 48 Shadrina, Tat yana.poladili Avtostroiteli i zheleznodorozhniki dogovorilis o skidkah na perevozki otechestvennyh legkovushek na Dal nii Vostok. Rossiiskaya gazeta - Federal nyi vypusk #4835 from 27 January 2009.Available from < > 49 Imukov, Andrei, Chernysheva, Viktoriya. VAZ tronulsya. A na Ul yanovskom avtozavode prodolzhayutsya vynuzhdennye kanikuly. Rossiiskaya gazeta - Federal nyi vypusk #4845 from 10 February Available from < > 50 Zykova, Tat yana. Kreditnyi avtomobil. Letom avtorynok mogut ozhivit prodazhi zalogovyh mashin. Rossiiskaya gazeta - Federal nyi vypusk #4849 from 13 February 2009.Available from < > 51 GTA (2010). Available from < >

96 88 Unequal Compliance: The 6th GTA report owned by the Russian side (50% + 1 share); and the first payment of the loan has to be no less than 30% of the monetary value of the car. The federal government compensates the lender at two thirds of the Central Bank s refinancing rate, which was at 11.5%. 52 By the end of March 2009, the Russian car giant AutoVaz asked the government for a subsidy of 26 billion rubles (870 million US dollars). The company had a debt of 44 billion rubles (1.47 billion US dollars). The government support in the form of a subsidy would allow AutoVaz to pay to its suppliers as well as its debts and to attract about 90 billion ruble of credit (3 billion US dollars). 53 On 30 March 2009, the Russian Prime Minister Vladimir Putin signed a ruling (the Government Decree #262 from 30 March 2009) effective from 2 June 2009, to provide subsidies to the car industry sector in order to reimburse some expenses (two thirds of the interest) in the form of interest rates for the loans received from the banks in for technology re-equipment. 54 By 21 April 2009, GAZ had faired 8 percent of the staff (5,327 jobs). The truck producer KamAZ again stopped production. For two weeks in May 2009, Toyota stopped production in St Petersburg. From the middle of May 2009, production was resumed. On 2 June 2009, Nissan opened its plant in St. Petersburg. On 1 June 2009 Russian Prime Minister Vladimir Putin signed a ruling (the Government Decree #745-p from 1 June 2009) to inject 25 billion rubles (834 million US dollars) into the charter capital of State Corporation Russian Technologies, with the purpose of providing financial support in the form of non-interest and non-return loans to the Russian car industry producer AutoVaz. 55 From the beginning of June 2009, the Russian Government began to discuss the possibility for Magna-Sberbank to buy German Opel, which has one of the biggest engineering centers in Europe, in order to borrow the technologies for the Russian domestic car industry. The Russian Government was positive about this idea but did not provide money to Sberbank from the budget for this deal. The Government Decree from 7 July 2009 #548 amended the previous one (#262 from 30 March 2009) significantly, widening the range of vehicles eligible for the subsidised loans programme. An additional 2 billion rubles (67 million US dollars) was provided by the Russian Government for this programme until the end of Now consumers could buy more expensive vehicles, including foreign cars produced in Russia (Chevrolet, Ford, Fiat, Kia, Renault, Skoda, and Hyundai) because the maximum price of autos applicable for the subsidised loan has almost doubled (to 600,000 rubles or 19,000 US dollars). Another important amendment concerns the type of auto it is not only motor cars, as in the old Decree, but cars that weigh less than 3.5 tons. This amendment extended the number of vehicles eligible for the subsidised loan to include small tracks and cars bigger than motor cars, such as UAZ. Foreign-owned lenders are now 52 GTA (2010). Available from < > 53 Rossiiskaya gazeta website news. Pravitel stvo primet reshenie ob ob eme finansirovaniya AvtoVAZa. 30 March Available from < > 54 GTA (2010). Available from < > 55 GTA (2010). Available from < >

97 Crisis and Modernisation 89 also eligible to participate in the programme, on the condition that they had the charter capital of no less than 70 billion rubles (2 billion US dollars) on 1 April 2009 and that they have representation in all seven federal districts in Russia. The first payment level of the loan has been reduced from a minimum of 30% to a minimum 15% of the price of the vehicle. The new Decree also extends the period of the loan contract from two years to three years. The Minister of Industry and Trade, Mr. Khristenko, said that he expected the loans to help to sell 120,000 vehicles by the end of By July 2009, each 20th car was sold with this subsidy. 56 The programme has been extended up to On 7 July 2009 the Russian Prime Minister Vladimir Putin signed a ruling (Government Decree #546) effective from 1 September 2009, to provide a subsidy of 1 billion rubles (33.3 million US dollars) to the leasing companies in order to reimburse some expenses in the form of interest rates for the loans received in 2009 for no more than 5 years from the banks to buy the Russian domestically produced cars. In 2010 the state budget allocated for this programme 1.4 billion rubles (46.7 million US dollars), and in ,035 billion rubles (34.5 million US dollars). 57 On 15 July 2009, the Russian Government extended the list of the goods that are mandatory for quarantine and phytosanitary control (SPS measures). Thus, used light cars, tractors and busses entered the list. The government based its decision on the fact that during the years the Russian customs identified at the border more than 4,000 vehicles that contained soil, dead and alive insects and other matter that could be potentially dangerous. In 14 cases the customs found insects falling under the quarantine regime in Russia. The experts agreed on the protectionist background of this list extension with regard to used light cars, especially during the increased campaign to support the Russian domestic car industry by all possible means. 58 By the end of July 2009, all these complex support measures brought some results. The share of domestically-produced cars in the Russian market increased, due to a substantial increase in the price of imported cars as a result of tariff policy and other measures. However, due to the overall fall of the car sales, the sales of the Russian domestically produced cars also fell in the first half of 2009 by 55 percent, in comparison with the same period in 2008 (in Germany a growth of light car sales by 26 percent was registered as a result of the car scrappage scheme). 59 In the spring of 2009, Putin considered a Russian car scrappage scheme. By the end of July 2009, after looking at the experience of Germany and the results of their programme, the Russian Government was preparing a similar scheme 56 GTA (2010). Available from < > 57 GTA (2010). Available from < > 58 Arsyuhin,Evgenii. Udarim neparnym shelkopryadom po inomarkam. Veterinary vzyalis pomogat otechestvennomu avtopromu. From 14 July Available from < karantin-site.html >. The new list for quarantine and phytosanitary control is available from < > 59 Vylegzhanina, Ul yana. Avtorynok povernulsya k svoim. Krizis dobavil populyarnosti mashinam rossiiskoi sborki. Rossiiskaya gazeta - Federal nyi vypusk # 4957 (133) from 22 July Available from < >

98 90 Unequal Compliance: The 6th GTA report in Russia that would be complemented by consumption subsidized loans and other measures. 60 In August 2009 almost all the big car producing plants in Russia again stopped production (AutoVaz, GM-AutoVaz, KamAZ, Renault, Toyota, Volkswagen). By mid-august 2009, the first pilot project of car scrappage opened in one of the Russian states (Nizhegorodskaya Oblast) to support the car production of its car plant GAZ. The regional budget allocated 150 million rubles (5 million US dollars) for The cars produced before 1 January 2003 of all car producers around the world were eligible for this programme. The old car could be exchanged at the official dealer centre for a new car produced by GAZ in 2009, with a compensation of 10% of the price of the new car, but not more than 50,000 rubles (1,670 US dollars), which equates to a discount of about 16 percent. 61 By mid-august 2009, the Russian-Canadian company Magna announced that all sides had agreed on all items of the deal and that the agreement of the Opel sale to Magna-Sberbank was ready to be signed. 62 The representatives of Opel arrived at the plant of GAZ to see the potential production facilities for Opel in Russia. As a result of the deal, Russia would obtain a right to put modern transmissions in Russian cars. The Russian government also had plans to intensify and improve the quality of car parts production in Russia as well as to have Opel production at the territory of Russia. The Russian government secured the support of the German government on the deal. The final decision was up to the American side, however. On 26 August 2009, the board of the state company Rostechnologii ( Russian Technologies ) decided to create one large automobile holding, RosAuto, in Russia, which would unite the largest Russian automobile producers AutoVaz and KamAZ. Rostechnologii wanted to bring together its automobile assets under one structure in order to conduct an intelligent policy towards the Russian automobile industry (especially anti-crisis policy in the industry). In comparison with KamAZ, which has been in the process of modernisation and adaptation to the new market conditions for the last years, AutoVaz, during recent years, has been dealing with the redistribution of the property and not with the development of the business. RosAuto would facilitate the modernisation of the entire automobile industry in Russia together with the Opel deal. 63 By the beginning of September 2009, domestically-produced LADA cars became the most sold in the Russian Far East, which is traditionally dominated 60 The German car scrappage scheme covered the purchase of imported cars as well. Thus, in Germany, foreign produces which exported cars to Germany have benefited from this programme a lot. In Russia, the car scrappage scheme will only cover cars produced in the territory of Russia (which might not be visible if the Russia would have been currently in the active phase of the WTO accession process) 61 Volkova, Mariya. Nizhegorodskie vlasti zapustili programmu obmena staryh avto. Rossiiskaya gazeta website news from 13 August Available from < obmen-avto-anons.html > 62 Angela Merkel snova vyskazalas v podderzhku Magna i Sberbanka v bor be za Opel. Rossiiskaya gazeta website news from 14 August Available from < html > 63 Zhebit,Mariya, Zykova, Tat yana. Rosavto uzhe v puti. Novyi avtomobil nyi holding nameren stat liderom rossiiskogo avtoproma. Rossiiskaya gazeta - Central nyi vypusk #4983 (159) from 27 August 2009.

99 Crisis and Modernisation 91 by used Japanese cars, particularly Toyota, because of the distance to Japan in comparison with the distance to the Russian domestic car production facilities. The programme of free transfer by Russian railways for the Russian domestic car industry to the Far East of the country started working in combination with the subsidised consumer loans and banning import tariffs on used cars traditionally sold from Japan. 64 In September 2009 IZH-Auto (a domestic Russian car producer) announced bankruptcy after having fired in May 2009 about 45 percent of its workers. Kia was ready to invest in the plant. The production started in the end of September By the end of September 2009, AutoVaz announced a discharge of a total of 27,600 people out of 105,000 jobs (almost every 4th job) under the anti-crisis programme undertaken by AutoVaz. 65 In September 2009 AutoVaz asked the government to provide another subsidy of 30 billion rubles (1 billion US dollars) in the form of state guaranties and subsidised loans. The expected debt of the company was 35 billion rubles by the end of The 25 billion rubles (834 million US dollars) that was given several months earlier by then had been spent. On 5 October 2009, Putin made a statement where he clearly meant that the state would not let AutoVaz fail and close, and that the state was ready to take some additional financial obligations in order to help AutoVaz to restructure. 66 At this point AutovAZ claimed it already needed 70 billion rubles (2.3 billion US dollars) just to survive (54 billion rubles to pay debts, 9.5 billion for investment programmes, 12 billion to discharge people, and 2.5 billion to compensate for the diseconomies of 2010). 67 Following the saying there is nothing more permanent than temporary, the Russian Government by the Government Decree #807 from 9 October 2009 extended the famous increased import tariffs on cars and used cars, introduced in January 2009, for a further 9 months. 68 By mid October 2009, when the situation worsened (the production at Russian plants fell by 65% in January-August 2009 compared with the same period in 2008), the government created (finally) a special commission out of two ministries (the Ministry of Industry and Trade and the Ministry of Economic Development), representatives of Sberbank and various consultants, to plan modernisation and development of the automobile industry. Despite the situation in the Russian car industry, after almost 6 months of negotiations, by the beginning of November 2009, General Motors refused to sell Opel to the Magna-Sberbank consortium, which people were considering 64 Drobysheva, Irina. Na Dal nem Vostoke Lada obognala po ob emam prodazh Toiotu. Rossiiskaya gazeta website news from 2 September Available from < > 65 Gricyuk, Marina, Dmitrenko, Ol ga, Smolyakova, Tat yana.vaz sokrashayut. Zavod reshilsya na uvol nenie kazhdogo chetvertogo rabotnika. Rossiiskaya gazeta - Central nyi vypusk #5005 (181) from 25 September 2009.Available from < > 66 Vladimir Putin: Gosudarstvo ne dopustit likvidacii AvtoVAZa. Rossiiskaya gazeta website news from 5 October Available from < > 67 Babenkov, Vladimir, Dmitrenko, Ol ga. AvtoVAZu zapretili sokrashat sya. Igor Shuvalov oproverg informaciyu o massovyh uvol neniyah. Rossiiskaya gazeta website news from 8 October Available from < > 68 GTA (2010). Available from < >

100 92 Unequal Compliance: The 6th GTA report as already a done deal, explaining this decision by the fact that the business environment had improved. 69 On 5 November 2009 Putin commented on this decision of GM in the following way: this decision does not infringe upon our interests, but talks, however, about the special relationships of our American partners with their contractors. We have drawn a good lesson and should take into account this style of interaction with our partners in the future. 70 He added that GM did not warn the government about this decision and presented us with a fait accompli despite all the agreements and signed documents, including the legal ones. 71 By December 2009 the decision was taken about the restructuring of the production facilities of AutoVaz. In December, as part of this programme AutoVaz transferred its secondary assets (17 companies) to the city of Tolyatti where the plant is located. In 2009, the city was supposed to get 1.5 billion rubles (50 million US dollars) to maintain those companies. Another innovation would be the split of AutoVaz into 6 branch companies. On 25 December 2009, Russian Prime Minister Vladimir Putin signed a ruling (the Government Decree #2080-p) effective from 8 January 2010, to inject another 28 billion rubles (933 million Euros) into the charter capital of the State Corporation Rostechnologii ( Russian Technologies ), with the purpose of providing financial support in the form of a non-interest loan to the Russian car industry producer AutoVaz. The share of Russian Technologies in the charter capital of AutoVaz will be increased. The subsidy was given to cover the AutoVaz s credit debts. The Government Decree from 31 December 2009 #1184 provided subsidies to the states of the Russian Federation (as a government procurement subsidy) to buy cars from domestic producers in The budget of the programme constituted 10 billion rubles (approximately 333 million US dollars). The Ministry of Industry and Trade Decree #332, from 27 April 2010, created a list of the domestic producers of cars which fall under the government subsidy programme. 72 By February 2010, the import of used cars through the customs in Vladivostok (the Russian Far East) was reduced by 9 times. About 150,000 people lost their jobs in the foreign used car Far East market. At the same time, the new production facilities were built in the Russian Far East to provide that part of Russia with domestically produced cars. From April to December 2009, 2,100 domesticallyproduced cars were transferred to the Russian Far East free of charge as per the special agreement with the Russia Railways Pravlenie GM prinyalo reshenie ne prodavat Opel Sberbanku. Rossiiskaya gazeta website news from 4 November Available from < > 70 Petrov, Vitalii. Vladimir Putin: Otkaz GM ot sdelki po Opel ne nanosit usherba interesam Rossii. Rossiiskaya gazeta website news from 5 November Available from < putin-anons.html > 71 Ibid. 72 GTA (2010). Available from < > 73 Stepura, Irina. UAZy idut na Vostok. Dal nevostochnaya tamozhnya otmetila godovshinu vvedeniya povyshennyh poshlin na inomarki. Rossiiskaya gazeta - Federal nyi vypusk #5103 (24) from 5 February Available from < >

101 Crisis and Modernisation 93 The Government Decree #56 from 4 February 2010, effective from 8 February 2010, extended the programme of subsidised loans for consumption, introduced by the Government Decree #244 of 19 March 2009, for the year The programme was subsidised by 3 billion rubles (100 million US dollars) in From 9 February 2010, according to matters laid out in the Government Decree #533/1018/137н of 18 December 2009, stricter conditions for the production of cars by foreign firms in the territory of the Russian Federation were introduced. From now on, the import tariff discount for car parts will only be given to companies that produce cars in Russia (involving the full cycle of assembling) of all car models (not just some of the models as before). 74 Thus the government has also introduced stricter local content requirements in support of the car industry. By the end of 2009, the sales of new light cars went down from 2.8 million to 1.4 million (ie, by 50%) (Ref. Figure 5.10). Without the use of state support at all levels and for all types, which was used, this fall would have been much deeper. The programmes for the stimulation of private demand for cars, and the government procurement support for the Russian car industry, have prevented a more dramatic fall in sales. It is important to emphasise that car plants have adapted their production according to the demand and modified the existing models, making them either cheaper or more advanced. All these measures have prevented even more massive layoffs. 75 By mid-february 2010 another pilot project of car scrappage was prepared in one of the Russian states (Ul yanovskaya oblast) to support the car production of its car plant UAZ. The old car could be exchanged at the official dealer centre for a new car produced by UAZ with the compensation of 50,000 rubles (1,670 US dollars) from the regional budget. This compensation, together with another 50,000 rubles which would be given through the federal programme, represents a100,000 rubles (3,340 US dollars) discount on the purchase of UAZ cars. 76 By the end of February, the Russian truck producer KamAZ opened a joint production facility in India. KamAZ came through a serious crisis after 1997, which allowed it to now produce the automobiles at a high competitive level. This plant could represent a best-practice case for the whole industry. KamAZ already has production facilities in Iran, Pakistan, Vietnam, Kazakhstan and North Korea. 77 By March 2010, two key documents finally appeared in support of the car industry (the Federal Scrappage scheme and the Development strategy for the car industry up to 2020). Thus, from 8 March 2010, as a part of the Russian car industry support policy, the Russian government announced that owners of light cars older than 10 years (the person has to own a car for more than 1 year) could 74 GTA (2010). Available from < > 75 Chernysheva,Viktoriya,Ponosov, Il ya, Dmitrenko, Ol ga, Brailovskaya,Svetlana. Razgon s mesta. Za schet chego otechestvennyi avtoprom budet vyhodit iz krizisa. Rossiiskaya gazeta - Ekonomika Povolzh ya # 5105 from 9 February Available from < avtoprom.html > 76 Chernysheva, Viktoriya.Ul yanovskie vlasti doplatyat 50 tysyach rublei zhelayushim priobresti avtomobil UAZ. Rossiiskaya gazeta. From 17 February Available from < rg.ru/2010/02/17/reg-svolga/uaz-anons.html > 77 Brailovskaya, Svetlana. Pravo rulya. From 25 February Rossiiskaya gazeta. Available from < >

102 94 Unequal Compliance: The 6th GTA report receive a subsidy of 50,000 rubles if they purchased a new car produced in Russia. There are no special requirements about the old car that can be scrapped under the new scheme. The government assigned 11 billion Russian rubles to this (366 million of US dollars) from the state budget, and expected 200,000 cars produced in Russia to be sold as a result of the Russian scrappage scheme. 78 In March-April 2010, the Russian government approved the car-making industry development strategy until The strategy outlines in detail the grandiose plans for Russia s carmakers and their foreign partners. The Russian government plans to invest 6 billion US dollars in its domestic automotive industry by 2020 as it seeks to modernise and improve the competitiveness of the domestic industry s infrastructure. The Russian government envisages around 60 billion US dollars being invested in total during the period in question, but with the majority of that investment coming from foreign and domestic businesses. The government estimates the capacity of the car market in Russia will increase to 3.6 million units a year, with the share of imported cars at 20 percent, and exports at 8 percent. The strategy introduces stimuli for the demand, tax and insurance measures, tariff and non-tariff stimuli, and measures to support domestic car producers. In addition, it provides for stimuli in high-tech productions, subsidised interests rates on loans, five-year deferment on loans, state guarantees for loans and for setting up a research infrastructure. Russian domestic producers are expected to get up to 80% of the Russian domestic market for light cars by 2020, up to 97% of the domestic market for tracks and up to 99% for buses. The government s decision to provide unprecedented funds into a mostly Soviet-era technological base rather than opening the borders and making foreign cars affordable is determined by social pressures and interest in economic security. The restructuring of the auto industry is part of Russia s long-held goal of diversifying its economy away from its current dependency on natural resources. Prior to its crash in 2009, the auto industry contributed about 1 percent of GDP, and its share should grow to 2.38 percent by 2020, according to the government plan. The Russian government expects the market to return to pre-crisis levels by The programme would create an expected additional 5 million jobs in the car industry and related industries the by By the end of March 2010, the Ministries approved the business plan of the development of the Russian AutoVaz up to The plan costs 186 billion rubles (6.2 billion US dollars). The plan includes the increase of sales by 2020 up to 1.2 million a year and introduces 9 new models of cars. 80 In 2010 the Government plans to spend up to 100 billion (3.3 billion US dollars) on the government procurement of cars. This number was announced by the Russian Prime Minister Putin on 20 April He also added that after 18 months of a fall in the production of Russian domestically produced cars, the car industry in Russia will restore the production levels. Thus, AutoVaz opened 78 GTA (2010). Available from < > 79 The Development strategy of the Russian car industry up to Available from < minprom.gov.ru/activity/auto/news/194 > 80 Pravitel stvo odobrilo 183-milliardnyi biznes-plan AvtoVAZa. rg.ru from 23 March Available from < >

103 Crisis and Modernisation 95 extra facilities to satisfy the demand due to the car scappage scheme. Putin also emphasised that the car scrappage scheme should have been implemented earlier. 81 By the end of April 2010, the government has began the development of projects to reduce the dependencies of mono-cities (ie, the situation in which a whole city depends on one plant production). Thus, Tolyatti (which has AutoVaz) wants to reduce the share of industrial production of AutoVaz in total for Tolyatti from its current 58 percent to 32 percent by 2020 through various investment projects. This programme is very important as it reduces the vulnerability of the region and prevents potential social crises in the event of any problems at AutoVaz. This was an argument to support AutoVaz, because should AutoVaz fail now, it would create dramatic social consequences for Russia. In 2009 the unemployment in Tolyatti has grown by 5.6 times. The population of the city is about 720,000, with more than 100,000 people working for AutoVaz. 82 The dead loss of AutoVaz for 2009 constitutes more than 38 billion rubles. On 5 May 2010, Rostechnologii transferred a government subsidy of 28 billion rubles given earlier to Rosstechnologii from the Russian government. The share of Russian Technologies in the charter capital of AutoVaz will be increased. The subsidy was given to cover AutoVaz s credit debts. 83 In June 2010, the government extended the Federal car scrappage programme for another year and has provided an additional 10 billion rubles (333 billion US dollars) for The programme is planned to end in The government gave the following assessment of customs tariff policy in The Ministry of Economic Development Report on the influence of custom tariffs and non-tariff measures on the competition environment of certain markets, which was prepared in the December 2009 names the automobile industry as one of the most important industries that was targeted by customstariff policies. 84 The government attempts to make an assessment of the effectiveness of the increased import tariffs on automobiles. The report states that the increase of import tariffs has led to a dramatic decrease of imports of used cars by 75.7 percent. The reduction in imports has led to an increase in market power of the domestic firms producing in Russia, even considering that this market is already highly concentrated AutoVaz produces about 48% of light cars in Russia. The share of the domestic market for the domestic producers has increased from 33.9 % (January 2009) to 49% (August 2009). Russian domestic producers using their increased market power decreased the production and increased prices. If the prices on imported cars (without import tariffs) were increased by 5.7%, the 81 Dlya gosnuzhd budet zakupleno otechestvennoi avtomobil noi tehniki na 100 mlrd rublei. Rossiiskaya gazeta. rg.ru from 20 April Available from < > 82 Dmitrenko, Ol ga. Tol yatti menyaet profil. Gorod razbavit AvtoVAZ Zhigulevskoi dolinoi. Rossiiskaya gazeta - Federal nyi vypusk #5166 (87) from 23 April Available from < rg.ru/2010/04/23/vaz.html > 83 GTA (2010). Available from < million-us-dollars-charter-capital-russian-technologi > 84 Ministry of Economic Development (2009). Report on the Influence of Custom Tariffs and Non-Tariff Measures on the Competition Environment of Certain Markets. 30 December Available from < >

104 96 Unequal Compliance: The 6th GTA report average price of the domestic producers has increased by 33.1% during January- September 2009, in comparison with the same period in Another report was conducted by the Ministry of Economic Development in 2010 in order to assess the influence of car import tariffs on the competitive environment inside Russia, and about the possibility of reducing car import tariffs that were introduced in January 2009 and extended in October 2009 until July The Ministry of Industry and Trade states, however, that due to the objectives of the new Russian Strategy for the Development of the Auto Industry up to 2020 it would be reasonable to keep them even up to However, this decision is not final. 86 Interim conclusion for section three The purpose of this section was to identify the support undertaken by the Russian government for the Russian car industry during the current crisis, as well as to look at the motivation behind these decisions. The paper also estimates the preliminary cost of this support. Since the beginning of the crisis the Russian government has introduced as many measures as possible in support of the car industry. The measures began with the import tariff increase on new and used cars. Then various subsidies programmes followed: subsidies to producers, to consumers, to leasing companies, for technological re-equipment. An interesting decision was to address the Russian Far Eastern market following prohibitive subsidies to used cars (coming mainly from Japan). Thus the government subsidised Russian Railways to deliver cars to the Russian Far East whilst building up the production capacities in that part of Russia. Indeed, the size of this country in terms of the space has to be taken into account. Government procurement preserved the domestic industry when demand was very low and plants were about to close. The inventive part of the support of the car industry was putting used cars under the special sanitary and phytosanitary regime at the border of Russia, which might have increased the time of delivery as well as the price of those used cars. The strong government support for the Opel deal was also in line with the general support of the car industry. Thus, despite the fact that the money to buy Opel was not from the state, the government took an active part in negotiations with the German government, as well as with American partners, for about half a year. The Russian side had hoped that this deal would substantially improve the situation in the Russian car industry, but it did not work out. The extension of the temporary import tariffs were the logical conclusion of this support. The stricter local content requirement for the foreign firms to produce in Russia was supposed to help domestic industry as well. The car scrappage scheme brought substantial results in terms of the production increase through increased demand. 85 Ibid 86 Kukol, Elena. Pri svoei cene. V minpromtorge predlagayut ne snizhat v blizhaishie pyat let poshliny na vvoz v Rossiyu novyh inomarok. Rossiiskaya gazet - Federal nyi vypusk #5139 (60) from 24 March Available from < >

105 Crisis and Modernisation 97 Another important step towards the development of the industry was the Development strategy of the Automobile industry up to 2020, as well as the business development plan of Russian car giant AutoVaz up to Another Russian circumstance to be taken into account are mono-cities. ThusTolyatti, a city of 750,000 people, is totally dependent on the production of cars at AutoVaz. The government has introduced the programme that will allow this city to become less dependent on this car giant. The Russian government envisages around 60 billion US dollars being invested according to the Strategy of the Car Industry development up to 2020, but with the majority of that investment coming from foreign and domestic businesses and automotive component suppliers, and 6 billion US dollars coming from the state. (The full list of measures and their cost is in Table 5.4) Taking into account that the Russian domestic car industry is not an industry in which Russia has a comparative advantage, the government s attention and support for this industry motivated by the concept of import substitution is unprecedented in the modern history of Russia. What could be the motivation for this behaviour? The car industry is still the leading sector in Russian mechanical engineering, which is closely interdependent with other industries such as metallurgy, light industry, chemical, electrical, defense industries and others. As a result the car industry supports more than around 5 million jobs. The government s decision to provide this unprecedented support in terms of measures and volume of money up to 2020 for a mostly Soviet era technological base rather than opening the boarders and making foreign cars affordable is determined by social pressure and interest in economic (national) security. In order to conduct this support policy the government has to take into account not only the ordinary fall in demand due to the economic crisis, but also unique factors existing in Russia. The factors include, for example, the already traditional strong preferences of consumers towards foreign used cars over new Russian produced cars, the facts of the large territory and the delivery of new cars to Siberia and Far East at the same price as in the western part of the country, as well as the existence of mono-cities such as Tolyatti with AutoVaz. In the event of AutoVaz failing, Russia may be faced with significant social conflict that may move towards political unrest. The government wants to avoid this situation, particularly during such an economic performance demonstrated by Russia in 2009 where incipient strikes could potentially cause huge resonance. Therefore, it was cheaper to pay whatever it costs for AutoVaz and at the same time to conduct some programmes of restructuring, as referred to earlier. If one adds up all the subsidy support to the industry in 2009 and divide it by the amount of domestically produced cars which were sold in the Russian market, the average support paid per car is at least 138,258 rubles, or 4,600 US dollars.. It is also important to take into account that the average salary in Russia is about 500 US dollars a month (or 6,000 US dollars a year). There are also some domestically produced cars which cost about 6,000 US dollars. Support in the year 2010 will increase and might reach 197,000 rubles (6,550 US dollars) and even more spent per sold domestically produced light car. And this is only subsidies; the effect of tariffs and other measures is not considered here. These figures reveal

106 98 Unequal Compliance: The 6th GTA report the considerable financial support the Russian government is affording its car industry. 4. Conclusion The world has changed in many ways during the current global recession, and such changes can compel governments to formulate new priorities. During the current crisis Russia has demonstrated a most remarkable commercial policy reaction in terms of changing its priorities from a multilateral framework towards regional reform (the Custom Union) and industrial development. The Customs Union Code, effective from 1 January 2010, happened to be the most striking example of entrenching the crisis-related measures into a permanent trade environment. This remarkable commercial policy reaction is reflected in the Global Trade Alert (GTA) database which, on 9 June 2010, contained 103 measures introduced by Russia since October 2008 (ie, 10 percent of all measures in the GTA database up to that point), 73 of which are considered to be almost certainly discriminatory measures (colour-coded red ). Russia is ranked first in the GTA database as the country that has introduced the largest amount of discriminatory measures; it is also positioned amongst the top countries according to other rankings contained in the database. 87 By 2008 the Russian Federation was on enough strong and stable ground (so it thought) to undertake structural reforms at all levels in the country and society. What became apparent through 2009 however, was that reliance on natural resources financing was insufficient to advance the programme. It is clear now that at some point the concept of modernisation will stall, even if oil price rises again. Modernisation as a concept is, in reality, a much greater challenge than originally envisaged and will require additional impetus, such as deep social and political changes in order to facilitate an improved economic performance. The light car industry is a special case in Russia therefore it was chosen by author to demonstrate Russia s commercial policy during Crisis & Modernisation. The purpose of this paper was to investigate the nature of the Russian car industry support during current crisis as well as the motivation for government intervention in such a scale. The Russian breach of the commitment undertaken at Washington Summit of G20 in November 2008 started with an introduction of (in)famous import tariff increase on new cars and introduction of prohibitive tariffs on used imported cars. Later the various subsidies followed: to the Russian Railways to transfer the domestically produced cars to the Russian Far East, the subsidies to producers, to consumers, to leasing companies, subsidies for technology re-equipment of the industry, government procurement subsidies to purchase cars. Russia has even implemented sanitary and phytosanitory measures for the used cars at the Russian border as well as the stricter local content requirement for production of car and car parts in the territory of Russia. The Russian government was active in the negotiations on Opel deal with Germany and the US to advance Russian domestic automobile industry using German 87 Only EU27 as single entity is in front of Russia with 146 measures

107 Crisis and Modernisation 99 technology but this deal not was not ultimately concluded to Russia s satisfaction. A car scrappage scheme was introduced at the Federal level as well as at regional levels. Finally, the Development Strategy for the Automobile industry up to 2020 was developed as well as Development Business Plan for the restructuring of the Russian car giant AutoVaz up to The programme of reduced economic dependency of mono-city Tolyatti from car giant AutoVaz was also introduced by the Government. The full list of measures is provided in Table 5.4. If one adds up all the subsidy support to the industry in 2009 and divide it by the amount of domestically produced cars which were sold in the Russian market, the figure arrived at is at least 138,258 rubles, or 4,600 US dollars, which the government paid to sell each domestically produced car on average. It is also important to note that the average salary in Russia is about 500 US dollars a month (or 6,000 US dollars a year). There are also some domestically produced cars which cost about 6,000 US dollars. Support in the year 2010 will increase and might reach 197,000 rubles (6,550 US dollars) per domestically produced light car. And this is only subsidies; the effect of tariffs and other measures have not been considered here. Once more data is available, by the end of 2010, the analysis could be developed into several respects: more substantial analysis could be done with regard to the impact of various measures introduced to support automobile industry (tariffs, subsidies and so on) on trade flows, employment, domestic production and other parameters. In order to support car industry (in which Russia does not have a comparative advantage) the government implemented all those measures within 1.5 years ( ). The main motivation to my mind is the real possibility of losing the industry entirely during the current recession. The government s decision to provide the unprecedented support of a mostly Soviet-era technological base rather than opening the borders and making cars affordable is determined by social pressure (the threat of potential conflicts in mono-city Tolyatti, for example in case AutoVaz is closed) and considerations of economic (national) security and national pride. The purpose of this paper was to describe the key features of Russian modernization and Russia s economic performance in 2009, as well as Russian commercial policy during current crisis with a focus on a symbol of the modern Russian crisis namely, its car industry. While it is too early to say whether the Russian commercial policies are going to work, the year 2009 demonstrated that dependency on oil money do not move modernisation too far forward. The car industry case study is an example of what a Government is ready to undertake to keep the industry going during the times when it would otherwise face extinction, an outcome that could cause significant social conflict. In times of crisis, even minor labour unrest could potentially resonate widely. The Russian Government currently faces an extremely challenging mission: not only must they respond to the socio-economic crisis but also introduce the concept of modernisation of all aspects of life in Russia, which may not be possible without substantial socio-political changes. Without such changes the R in BRIC may well find itself dropped.

108 100 Unequal Compliance: The 6th GTA report List of References Arsyuhin,Evgenii. Udarim neparnym shelkopryadom po inomarkam. Veterinary vzyalis pomogat otechestvennomu avtopromu. From 14 July Available from < > Babenkov, Vladimir, Dmitrenko, Ol ga. AvtoVAZu zapretili sokrashat sya. Igor Shuvalov oproverg informaciyu o massovyh uvol neniyah. Rossiiskaya gazeta website news from 8 October Available from < rg.ru/2009/10/08/reg-svolga/avtovaz.html > Brailovskaya, Svetlana. Krizis pritormozil avtopromю Rossiiskaya gazeta - Federal nyi vypusk #4770 from 10 October Available from < > Brailovskaya, Svetlana. Pravo rulya. From 25 February Rossiiskaya gazeta. Available from < > Chernysheva,Viktoriya,Ponosov, Il ya, Dmitrenko, Ol ga, Brailovskaya,Svetlana. Razgon s mesta. Za schet chego otechestvennyi avtoprom budet vyhodit iz krizisa. Rossiiskaya gazeta - Ekonomika Povolzh ya # 5105 from 9 February Available from < html > Chernysheva, Viktoriya.Ul yanovskie vlasti doplatyat 50 tysyach rublei zhelayushim priobresti avtomobil UAZ. Rossiiskaya gazeta. From 17 February Available from < html > Dmitrenko, Ol ga. Tol yatti menyaet profil. Gorod razbavit AvtoVAZ Zhigulevskoi dolinoi. Rossiiskaya gazeta - Federal nyi vypusk #5166 (87) from 23 April Available from < > Drobysheva, Irina. Na Dal nem Vostoke Lada obognala po ob emam prodazh Toiotu. Rossiiskaya gazeta website news from 2 September Available from < > Evplanov, Andrei. Chetyre kolesa iz Podnebesnoi. V 2006 godu v Rossii otkroyutsya srazu tri proizvodstva po sborke kitaiskih avtomobilei. Rossiiskaya Biznes-gazeta # 524, 20 September Available from < rg.ru/2005/09/20/avtosborka.html > Fomchenkov, Taras. Konveier bez kadrov i zapchastei. Inostrannye sborochnye proizvodstva stalkivayutsya s nehvatkoi komplektuyushih i kvalificirovannyh rabochih. Rossiiskaya Biznes-gazeta #594 from 6 March Available from < > Gerasimenko, Darya (2009) Russia: From Collapse to an Economic Modernization Programme (pages 51-78) in The Unrelenting Pressure of Protectionism: The 3rd GTA Report edited by Simon J. Evenett, Centre for Economic Policy Research (CEPR) and Global Trade Alert (GTA), December Available from < > Gerasimenko, Darya (2010) Tamozhennyi soyuz - mezhdu sotrudnichestvom I protekcionizmom / The Customs Union - between cooperation and protectionism, (in Russian), Bridges Russia (Issue 3: April 2010), International Centre for Trade and Sustainable Development (ICTSD), Geneva, Switzerland.

109 Crisis and Modernisation 101 Available from < pdf > Gladunov, Oleg. Otvertochnyi avtoprom. Rossiiskie avtomobili proigryvayut inomarkam. Rossiiskaya gazeta - Central nyi vypusk #4408 from 9 July Available from < > Gricyuk, Marina, Dmitrenko, Ol ga, Smolyakova, Tat yana.vaz sokrashayut. Zavod reshilsya na uvol nenie kazhdogo chetvertogo rabotnika. Rossiiskaya gazeta - Central nyi vypusk #5005 (181) from 25 September 2009.Available from < > Imukov, Andrei, Chernysheva, Viktoriya. VAZ tronulsya. A na Ul yanovskom avtozavode prodolzhayutsya vynuzhdennye kanikuly. Rossiiskaya gazeta - Federal nyi vypusk #4845 from 10 February Available from < > Kukol, Elena. Pri svoei cene. V minpromtorge predlagayut ne snizhat v blizhaishie pyat let poshliny na vvoz v Rossiyu novyh inomarok. Rossiiskaya gazet - Federal nyi vypusk #5139 (60) from 24 March 2010.Available from < > Krueger Anne, Tuncer Baran (1982). An Empirical Test of the Infant Industry Argument. In American Economic Review, Vol. 72, #5 (December 1982), pp Lebedeva, Natal ya. Kruti baranku. Pochemu rossiyane otdayut predpochtenie otechestvennym avtomobilyam? Rossiiskaya gazeta - Federal nyi vypusk #4983 (159) from 27 August Available from < avtoprom.html > Munkirs, John and others (1993). The automobile industry, political economy, and a new world. in Journal of Economic Issues, June 1993; 27, 2, p. 628 Petrov, Vitalii. Vladimir Putin: Otkaz GM ot sdelki po Opel ne nanosit usherba interesam Rossii. Rossiiskaya gazeta website news from 5 November Available from < > Proskuryakova, Yuliya. Avtoprom s akcentom. Proizvodstvo avtomobilei pod inostrannymi markami k 2010 godu vyrastet do 1 milliona. Rossiiskaya Biznes-gazeta #579 from 7 November Available from < rg.ru/2006/11/07/inomarki.html > Prasolov, Oleg. Rossiya otmenyaet moratorii na novye soglasheniya po promsborke avtokomponetov. From 30 October Available from < > Shadrina, Tat yana.poladili Avtostroiteli i zheleznodorozhniki dogovorilis o skidkah na perevozki otechestvennyh legkovushek na Dal nii Vostok. Rossiiskaya gazeta - Federal nyi vypusk #4835 from 27 January 2009.Available from < > Shuvalov, Igor. The Speech at the Conference (21 January 2010) Russia and the world: the challenges of new decade. Available from < ru/docs/9111/ > Stepura, Irina. UAZy idut na Vostok. Dal nevostochnaya tamozhnya otmetila godovshinu vvedeniya povyshennyh poshlin na inomarki. Rossiiskaya gazeta

110 102 Unequal Compliance: The 6th GTA report - Federal nyi vypusk #5103 (24) from 5 February Available from < > Vasil eva, Yuliya. Bol shie den gi na bol shuyu sborku. Ob em investicii v rossiiskii avtoprom v 2008 godu sostavit okolo 2 milliardov dollarov. Rossiiskaya Biznes-gazeta #636 from 15 January Available from < rg.ru/2008/01/15/otrasl.html > Volkova, Mariya. Nizhegorodskie vlasti zapustili programmu obmena staryh avto. Rossiiskaya gazeta website news from 13 August Available from < > Vylegzhanina, Ul yana. Avtorynok povernulsya k svoim. Krizis dobavil populyarnosti mashinam rossiiskoi sborki. Rossiiskaya gazeta - Federal nyi vypusk 4957 (133) from 22 July Available from < rg.ru/2009/07/22/avtorynok.html > Zhebit,Mariya, Zykova, Tat yana. Rosavto uzhe v puti. Novyi avtomobil nyi holding nameren stat liderom rossiiskogo avtoproma. Rossiiskaya gazeta - Central nyi vypusk #4983 (159) from 27 August Zykova, Tat yana. Lada ot Reno. Vchera AvtoVAZ na chetvert stal francuzskim. Rossiiskaya gazeta - Federal nyi vypusk #4602 from 1 March Available from < > Zykova, Tat yana. Avtoprom tronulsya. Ozhivlenie rynka avtoprodazh v Rossii ozhidaetsya v seredine fevralya. Rossiiskaya gazeta - Federal nyi vypusk #4827 from 15 January Avaliable from < avtorynok.html > Zykova, Tat yana. Kreditnyi avtomobil. Letom avtorynok mogut ozhivit prodazhi zalogovyh mashin. Rossiiskaya gazeta - Federal nyi vypusk #4849 from 13 February 2009.Available from < avtoprom.html > Rossiiskaya Gazeta # 3792 from 10 June Pravyi bunt. Available from < > Rossiiskaya Gazeta web site news. Prem er Vladimir Putin nashel reshenie voprosa podderzhki otechestvennogo avtoproma. 19 December Available from < > Rossiiskaya gazeta website news. Pravitel stvo primet reshenie ob ob eme finansirovaniya AvtoVAZa. 30 March Available from < rg.ru/2009/03/30/avtovaz-anons.html > Rossiiskaya gazeta website news. Angela Merkel snova vyskazalas v podderzhku Magna i Sberbanka v bor be za Opel. Rossiiskaya gazeta website news from 14 August Available from < > Rossiiskaya gazeta website news. Vladimir Putin: Gosudarstvo ne dopustit likvidacii AvtoVAZa. Rossiiskaya gazeta website news from 5 October Avaliable from < > Rossiiskaya gazeta website news. Pravlenie GM prinyalo reshenie ne prodavat Opel Sberbanku. Rossiiskaya gazeta website news from 4 November Available from < >

111 Crisis and Modernisation 103 Rossiiskaya gazeta website news. Pravitel stvo odobrilo 183-milliardnyi biznesplan AvtoVAZa. From 23 March Available from < rg.ru/2010/03/23/plan-anons.html > Rossiiskaya gazeta website news. Dlya gosnuzhd budet zakupleno otechestvennoi avtomobil noi tehniki na 100 mlrd rublei. From 20 April Available from < > Notes to the Cabinet Meeting of the Russian Government on 5 November Available from < rfgovernmentsession/2009/zas051109/materials/ htm > The Concept of the Long-Term Economic Development of the Russian Federation for period until (Decree of the Russian Government from 17 November 2008 # 1662-p) The Main Directions of the Activity of the Government of Russia until (Decree of the Government from 17 November 2008 #1663-p) The Main Directions of External Economic Policy of the Russian Federation until 2020, November 2008 The Main Directions of Customs Tariff Policy for the year 2010 and for the period Presented by the Minister of Economic Development, Mrs. Elvira Nabiullina at the Russian Cabinet meeting on 11 June 2009 The Programme of the Anti-Crisis measures of the Russian Government for 2009, 19 June 2009 The Main Directions of Anti-crisis measures of the Government of the Russian Federation for 2010 from 30 December 2009 The Russian Strategy for the Development of the Automobile Industry up to 2020 from 23 April Available from < auto/news/189 > The Annual Report of the Central Bank of the Russian Federation Available from < > The Speech of the Russian President Dmitriy Medvedev to the Federal Assembly. Poslanie prezidenta RF Dmitriya Medvedeva Federal nomu Sobraniyu Rossiiskoi Federacii. Rossiiskaya Gazeta # 5038 (214) from 13 November Available from < > Ministry of Economic Development of the Russian Federation (2009). Report on the Influence of Custom Tariffs and Non-Tariff Measures on the Competition Environment of Certain Markets. 30 December Available from < doc > Ministry of Economic Development of the Russian Federation (2010). New Modified Trade Strategy for Available from < gov.ru/minec/activity/sections/foreigneconomicactivity/regulation/ doc _06 > Ministry of Economic Development of the Russian Federation (2010). Report on the Conditions of the Market Access of Russian Products to Foreign Markets. 24 May Available from < structure/deptorg/doc _05 >

112 104 Unequal Compliance: The 6th GTA report Analytical Agency Autostat. Available from < > Central Bank of the Russian Federation. Available from < > Global Trade Alert (GTA) database. Available from < > Ministry of Economic Development of the Russian Federation, website. Available from < > Ministry of Industry and Trade of the Russian Federation, website. Available from < > Rossiiskaya Gazeta. Available from < > Russian Federal Customs website. Available from < > The Government of the Russian Federation website. Avaliable from < > UN Comtrade database. Avaiable from < > World Development Indicators (WDI) online database. Avaliable from < publications.worldbank.org/wdi/ > Darya Gerasimenko is a Ph.D. candidate and Research Assistant to Professor Simon Evenett at the Swiss Institute for International Economics at the University of St. Gallen, Switzerland. She is a graduate from the MILE programme (summa cum laude) at the World Trade Institute in Bern (WTI). She has working experience with the Trade in Services Section of the International Trade Center (ITC) as well as with the Investment Trends Section of the United Nations Conference on Trade and Development (UNCTAD) where she contributed to the World Investment Report She is currently working as the analyst of the Global Trade Alert for the CIS region. Her professional interests and expertise are trade policies in post soviet area (CIS region), Russian trade and industrial policy, regional integration, trade in services as well as the WTO accession process. She can be contacted at darya.gerasimenko@unisg.ch.

113 SECTION 3 Jumbo Measures: Potentially Far- Reaching Discriminatory State Measures

114

115 Jumbo Measures: Potentially Far-Reaching Discriminatory State Measures 107 China: Export tax rebates Jumbo Measure No. 1 Potential extent of trade impact: Total trade that could be affected by this measure: US$ bn Total trading partners that could be affected by this measure: 155 Total G20 trading partners that could be affected by this measure: 17 Share of implementing jurisdiction s tariff lines that could be affected by this measure: 22.17% Implementing jurisdiction: China Measure type: Export taxes or restrictions Description of measure On 1 April 2009 China s Ministry of Finance and State Administration of Taxation published a Notice in which it was stated that the rebates to exporters from Value Added Tax (previously running at 17 percent in China) would be increased. A wide range of products including iron and steel, non ferrous metals, petrochemicals, electronic and information technology products, and textiles and clothing, were said to be involved. It may be of interest to readers that news reports suggest that China has raised these VAT rebates for exporters on six other occasions since August Source: The Permanent Delegation of China to the WTO confirmed the increases in VAT rebates to exporters that were announced on 1 April See WTO document JOB(09)/62. JUMBO MEASURE NO. 1

116 108 Unequal Compliance: The 6th GTA report USA: Buy American provisions in stimulus package Jumbo Measure No. 2 Potential extent of trade impact: Total trade that could be affected by this measure**: US$ bn Total trading partners that could be affected by this measure: 106 Total G20 trading partners that could be affected by this measure: 16 Share of implementing jurisdiction s tariff lines that could be affected by this measure: 9.63% **As indicated in the main body text, our confidence in this estimate is lower than average. Implementing jurisdiction: United States of America Measure type: Local content requirement, public procurement JUMBO MEASURE NO. 2 Description of measure Congress included a Buy American requirement in the American Recovery and Reinvestment Act of 2009 (designated as H.R.1, now Public Law 111-5), an omnibus measure that is better known as the stimulus package. Both houses of Congress approved the stimulus bill in January-February, 2009, which was then signed into law by president Obama on February 17, The $787 billion stimulus bill generally requires that all of the iron, steel, and other manufactured goods used in the program (including $48 billion for transportation projects) be made in the United States. After the House of Representatives attached this amendment to the stimulus package it set off a heated domestic and international debate. In response to the administration s concerns over sending a protectionist message, the Senate amended the bill to specify that these provisions shall be applied in a manner consistent with United States obligations under international agreements. That language remained in the final bill that President Obama signed into law. The reference to obligations under international agreements alludes to the fact that the United States discriminates in its government procurement practices between trading partners according to the agreements that they have signed. The World Trade Organization s Government Procurement Agreement (GPA) is a plurilateral undertaking, meaning that only those countries that signed it are subject to its disciplines and entitled to its benefits. The current signatories to the GPA consist primarily of industrialized...

117 Jumbo Measures: Potentially Far-Reaching Discriminatory State Measures countries. In addition to the GPA, the United States has also entered into reciprocal commitments with some of its free trade agreement partners; it is also U.S. law and practice to grant exceptions to the Buy American rules to beneficiary countries of the Caribbean Basin Initiative, as well as the leastdeveloped countries. Among the more notable partners that do not enjoy the benefit of one or more of these exemptions are the so-called BRICs (i.e., Brazil, Russia, India, and China), as well as other developing and transition economies that have not signed the GPA nor reached FTAs with the United States. The rules have been further elaborated upon by the Office of Management and Budget in its Updated Implementing Guidance for the American Recovery and Reinvestment Act of 2009 (April 3, 2009); by the Department of Defense, General Services Administration, and National Aeronautics and Space Administration in Federal Acquisition Regulation; FAR Case , American Recovery and Reinvestment Act of 2009 (the Recovery Act)- -Buy American Requirements for Construction Material, Federal Register (March 31, 2009); and by the Federal Highway Administration in American Recovery and Reinvestment Act of 2009 Implementing Guidance (April 1, 2009). Another and less-noticed provision of the law (section 604) generally requires that funds appropriated or otherwise available to the Department of Homeland Security may not be used for the procurement of certain covered items unless grown, reprocessed, reused, or produced in the United States. The items covered by this provision include clothing and the materials and components thereof, other than sensors, electronics, or other items added to, and not normally associated with, clothing (and the materials and components thereof); tents, tarpaulins, covers, textile belts, bags, protective equipment (including but not limited to body armor), sleep systems, load carrying equipment (including but not limited to fieldpacks), textile marine equipment, parachutes, or bandages; cotton and other natural fiber products, woven silk or woven silk blends, spun silk yarn for cartridge cloth, synthetic fabric or coated synthetic fabric (including all textile fibers and yarns that are for use in such fabrics), canvas products, or wool (whether in the form of fiber or yarn or contained in fabrics, materials, or manufactured articles); or any item of individual equipment manufactured from or containing such fibers, yarns, fabrics, or materials. Sources: American Recovery and Reinvestment Act of 2009 [H.R.1]. Available at bills&docid=f:h1enr.txt.pdf American Recovery and Reinvestment Act of 2009 Implementing Guidance. Available at Federal Acquisition Regulation; FAR Case , American Recovery and Reinvestment Act of 2009 (the Recovery Act)--Buy American Requirements... JUMBO MEASURE NO. 2

118 110 Unequal Compliance: The 6th GTA report...for Construction Material. Available at E htm Updated Implementing Guidance for the American Recovery and Reinvestment Act of Available at assets/memoranda_fy2009/m09-15.pdf JUMBO MEASURE NO. 2

119 Jumbo Measures: Potentially Far-Reaching Discriminatory State Measures 111 China: Implementation of State Council Opinions on imported goods Jumbo Measure No. 3 Potential extent of trade impact: Total trade that could be affected by this measure**: US$ bn Total trading partners that could be affected by this measure: 61 Total G20 trading partners that could be affected by this measure: 15 Share of implementing jurisdiction s tariff lines that could be affected by this measure: 7.64% **As indicated in the main body text, our confidence in this estimate is lower than average. Implementing jurisdiction: China Measure type: Local content requirement, government procurement Description of measure On 26 May 2009, the National Development and Reform Commission (NDRC) officially announced its implementation of measures to prioritise local content in government contracts. The notification was also signed by the Ministries of Industry and Information Technology (MII), Supervision (MS), Housing and Urban-Rural Development (MHURD), Transport (MT), Railways (MR), Water Resources (MWR) and Commerce (MC), and the Legislative Affairs body of the State Council. The announcement calls for the use of domestically produced goods in any project that is funded by government investment and that is classified as government procurement, except in those circumstances in which the required goods or services cannot be sourced locally. In situations in which imports must be purchased, the procurement of such goods and services will only be permitted after approval is obtained from the appropriate ministry. The document also calls on the NDRC, MII and MS to strengthen supervision of procurement of imported machinery and electrical equipment. It explicitly states that limiting the use of domestically-produced goods in favour of the acquisition of imported goods will be investigated and punished by the appropriate authorities. The NDRC s announcement follows the release of a document by the General Office of the State Council on 10 April 2009 entitled Opinions for Further... JUMBO MEASURE NO. 3

120 112 Unequal Compliance: The 6th GTA report...strengthening the Management of Government Procurement. The document, which did not have legal force, urged government ministries and agencies to consider means of encouraging the use of local content in government procurement. Source: The Central People s Government of the People s Republic of China, NDRC Legislation (2009) NO.1361, 26 May 2009, JUMBO MEASURE NO. 3

121 Jumbo Measures: Potentially Far-Reaching Discriminatory State Measures 113 Belarus and Russia: Increase in export tariffs on crude oil and oil products Jumbo Measure No. 4 Potential extent of trade impact: Total trade that could be affected by this measure: US$ bn Total trading partners that could be affected by this measure: 78 Total G20 trading partners that could be affected by this measure: 15 Share of implementing jurisdiction s tariff lines that could be affected by this measure: 0.90% Implementing jurisdiction: Belarus, Russian Federation Measure type: Export taxes or restrictions Description of measure The Government of Russia has issued a Decree on 26 June 2009 which increases export tariffs on crude oil to 39%, on (non-crude) oil, petroleum jelly, mineral waxes and similar products, petroleum coke and cyclic hydrocarbons to 35% from 2006 levels. According to the Russia - Belarus State Union Agreement, the Belarusian Government has increased export tariffs on the same rage of oil products and crude oil to the new Russian export tariff levels (the Decree of the Belorussian Government # 846 from 29 June 2009). Source: Decree of Russian Government # 536, dated 26 June 2009, On approval of export tariff rates on crude oil and some or products from oil exported from the territory of the Russian Federation beyond the borders of the Customs Union. Rossiyskaya Gazeta # official newspaper of the Russian Government from 29 June 2009 (in Russian) as well as the Decree of the Belorussian Government # 846 from 29 June 2009, attached to this webpage. JUMBO MEASURE NO. 4

122 114 Unequal Compliance: The 6th GTA report UK: Temporary aid for the production of green products Jumbo Measure No. 5 Potential extent of trade impact: Total trade that could be affected by this measure: US$ bn Total trading partners that could be affected by this measure: 98 Total G20 trading partners that could be affected by this measure: 18 Share of implementing jurisdiction s tariff lines that could be affected by this measure: 10.65% Implementing jurisdiction: United Kingdom Measure type: Bail out/state aid measure JUMBO MEASURE NO. 5 Description of measure On 10 February 2009, the United Kingdom notified the European Commission of its Temporary aid for the production of green products (N 72/2009). The United Kingdom considers that the financial crisis is affecting its whole economy at local, regional and country level. The notified measure is aimed at remedying a serious disturbance in the economy of the UK. The UK authorities identified the common budgetary ceiling of GBP 8 billion (EUR 9 billion) for the implementation of this notified measure (N 72/2009) and the aid measures Temporary aid in the form of Subsidised Interest Rate (N 257/2009) and Temporary Aid in the form of Loan Guarantees (N 71/2009). The scheme applies to all companies: SMEs as well as large firms. Its geographic scope covers the whole territory of the United Kingdom. The UK authorities estimated that the number of beneficiaries will exceed 1000 firms. The aid will be granted in the form of interest rate subsidies for investment loans related to the production of green products. The subsidized interest rate applies during a maximum period of 2 years after the loan has been granted. The scheme is explicitly based on Article 87(3)(b) EC Treaty, and relies on the Commission communication Temporary Framework for State aid measures to support access to finance in the current financial and economic crisis ( the Temporary Framework ), in particular on its Section 4.5 concerning aid for the production of green products....

123 Jumbo Measures: Potentially Far-Reaching Discriminatory State Measures The Commission stated that the notified measure constitutes state aid within the meaning of Article 87 (1) of the EC Treaty and gave the following assessment: State resources are involved in the notified scheme since the aid is granted from national, regional and local State resources, via the respective aid granting authorities at national, regional, or local level. The measure is selective since it will be granted only to certain firms. The measure conveys an advantage to beneficiaries by granting them investment loans with subsidised interest rates which would not be probably available on the market in the absence of the notified measure. Consequently, the aid will strengthen the financial position of beneficiaries in relation to its competitors in the Community and therefore will have potentially distorting effects on competition. The measure affects trade between Member States since the scheme is not limited to beneficiaries which are active in sectors where no intra-community trade exists. (par of the letter from the EC to the UK - Brussels, C(2009) 1504 final). Article 87(3)(b) of the EC Treaty enables the Commission to declare aid compatible with the Common Market if it is to remedy a serious disturbance in the economy of a Member State. This aid has to be applied restrictively and must tackle a disturbance in the entire economy of the Member State according to the interpretation of the Article 87(3)(b) by the Court of First Instance. The Commission referred to its Communication on the financial crisis (the Temporary Framework ) and concluded that the measure complies with the conditions laid therein. Therefore, despite the measure constituting state aid pursuant to the Article 87(1) EC, it is compatible with the Common Market according to the Article 87(3)(b) EC Treaty. The Commission raised no objections against the measure and authorizes it as emergency intervention in the face of the current financial crisis (par of the letter). A state measure in the GTA database is assessed solely in terms of the extent to which its implementation affects the extent of discrimination against foreign commercial interests. On this metric, the state aid proposed here is discriminatory. Source: Letter from the EC to the UK - Brussels, C(2009) 1504 final. Available at cfm?id=3_ JUMBO MEASURE NO. 5

124 116 Unequal Compliance: The 6th GTA report China: Adjustment of tariff policy on key technical equipment Jumbo Measure No. 6 Potential extent of trade impact: Total trade that could be affected by this measure: US$ bn Total trading partners that could be affected by this measure: 52 Total G20 trading partners that could be affected by this measure: 15 Share of implementing jurisdiction s tariff lines that could be affected by this measure: 7.83% Implementing jurisdiction: China Measure type: Tariff measure JUMBO MEASURE NO. 6 Description of measure On 4 September 2009, through the website of the Ministry of Finance (MOF), the MOF and the National Development and Reform Committee (NDRC), the Ministry of Industry and Information Technology (MIIT), the General Administration of Customs, State Administration of Taxation, and National Energy Administration, jointly released the Notice on Adjustment of Imported Taxation Policy. With the purpose of boosting domestic innovation and greater industrial restructuring and upgrading, in accordance with the Notice, key components and raw materials imported by domestic enterprises for manufacturing major technological equipment and products are exempted from import tariffs and value-added tax (VAT) as of 1 July However, the abolition of the existing import and VAT exemption of completely finished machinery was set aside. According to the Notice in question this measure applies to: Large-scale clean and high-efficiency power generation equipment. Extra-high voltage electric transmission and transformation equipment. Large-scale petrochemical equipment. Large-scale coal chemical equipment. Large-scale metallurgical integral equipment. Large-scale comprehensive coal equipment. Large-scale ship and marine engineering equipment. High-speed railway and urban metro system equipment.

125 Jumbo Measures: Potentially Far-Reaching Discriminatory State Measures 117 Large-scale equipment for environmental protection and comprehensive utilization of resources. Sources: Chinese version of Notice originally available at: t _ html For media reports see: JUMBO MEASURE NO. 6

126 118 Unequal Compliance: The 6th GTA report Venezuela: Devaluation of the Bolivar Jumbo Measure No. 7 Potential extent of trade impact: Total trade that could be affected by this measure: US$ bn Total trading partners that could be affected by this measure: 71 Total G20 trading partners that could be affected by this measure: 17 Share of implementing jurisdiction s tariff lines that could be affected by this measure: % Implementing jurisdiction: Venezuela Measure type: Competitive devaluation JUMBO MEASURE NO. 7 Description of measure On 8 January 2010, the Venezuelan government announced the devaluation of the Bolivar. Instead of the existing fixed exchange rate at 2.15 Bs/US Dollar, the government now operates a two-tier system. For designated transfers, Bolivars can be exchanged against US Dollars at a rate of 2.60 Bs/US$. The categories defined as a priority are imports for the public sector as well as enumerated priority imports. Also subject to the first tier are family remittances, transfers to exchange students, pensioners, consulates or embassies in Venezuela. For non-priority transfers, a second tier named petrol dollar has been constituted. Transfers in this tier will receive foreign exchange at the rate of 4.3 Bs/US$. This category includes all non-public, non priority sector imports to Venezuela. The measure is effective from 11 January A detailed list of exchange rates associated with each tariff line has been published in the Gaceta Oficial on 13 January Sources: Gaceta Oficial. (8 January 2010). Ministerio del poder popular para economia y finanzas, p Available at Enero/812010/ pdf Gaceta Oficial. (13 January 2010). Ministerio del poder popular para economia y finanzas, p Available a Enero/ / pdf#page=2

127 Jumbo Measures: Potentially Far-Reaching Discriminatory State Measures 119 Kazakhstan: Announced 25% devaluation of the national currency Jumbo Measure No. 8 Potential extent of trade impact: Total trade that could be affected by this measure: US$ bn Total trading partners that could be affected by this measure: 96 Total G20 trading partners that could be affected by this measure: 19 Share of implementing jurisdiction s tariff lines that could be affected by this measure: % Implementing jurisdiction: Kazakhstan Measure type: Competitive devaluation Description of measure In the beginning of February 2009, as an anti-crisis measure, the Kazakh Government announced a 25% devaluation of the national currency (the Tenge). The President of the Republic of Kazakhstan emphasised that this anti-crisis measure was very painful, but was necessary to protect the domestic producers. It was argued that Russia, China, and Ukraine had already devalued their currencies and that accounted for Kazakh industries being unable to compete with producers from those countries. The government announced a new band for the national currency: 150 Tenge to the US dollar plus or minus 3%. Source: Speech of the Kazakh President Nursultan Nazarbaev www/www_akorda_kz.nsf/004e7184b5a94c8f462571ea0014b JUMBO MEASURE NO. 8

128 120 Unequal Compliance: The 6th GTA report Nigeria: Deliberate devaluation of the Naira Jumbo Measure No. 9 Potential extent of trade impact: Total trade that could be affected by this measure: US$ bn Total trading partners that could be affected by this measure: 105 Total G20 trading partners that could be affected by this measure: 19 Share of implementing jurisdiction s tariff lines that could be affected by this measure: % Implementing jurisdiction: Nigeria Measure type: Competitive Devaluation JUMBO MEASURE NO. 9 Description of measure According to numerous and consistent press reports, the Central Bank of Nigeria has deliberately devalued the local currency at the end of Professor Chukwuma Soluda, Governor of the Nigerian Central Bank, said the move was designed to stop the decline in fiscal revenues as a result of falling oil prices. Sources: Daily Independent. (16 December 2008). Naira Devaluation Deliberate, Says Soludo. Available at Daily Trust. (11 January 2009). Naira Depreciation Takes Toll an Economy. Available at Les Afriques. (23 February 2009). Central Bank of Nigeria Intervenes to Stabilize Naira. Available at

129 Jumbo Measures: Potentially Far-Reaching Discriminatory State Measures 121 Russia: The programme of the anti-crisis measures of the Russian Government 2009 Jumbo Measure No. 10 Potential extent of trade impact: Total trade that could be affected by this measure: US$ bn Total trading partners that could be affected by this measure: 95 Total G20 trading partners that could be affected by this measure: 18 Share of implementing jurisdiction s tariff lines that could be affected by this measure: 12.33% Implementing jurisdiction: Russian Federation Measure type: Bail out/state aid measure Description of measure On 19 June 2009 the Government of the Russian Federation approved certain measures of support to industries that substitute imports and contribute to increases in domestic demand. Those industries are agriculture, construction, food and textile industries pharmaceutical industry as well as car industry. Agriculture Subsidies to the agriculture and fishery sectors in 2009, as envisaged by the Government Anti-Crisis Plan, will total 212 billion rubles (5 billion Euro), almost 45% more than in A further 95 billion rubles will be provided by the Russian regional governments. These are to include subsidizing of 100% of the refinancing rate for banking credits to meat and milk producers, and additional capitalization of Rosselkhozbank (45bn roubles = 1bn Euro) and Rosagrolizing (25bn ruble = 0,6bn Euro), which grant lax credits to framers and organize leasing of agricultural machines and equipment. Car industry 39 billion rubles (0,9 bn Euro), in additional subsidies for the automotive industry envisaged by the Government Anti-Crisis Plan for 2009, was approved on 19 June (See also the separate chapter in this report for the totality of support for the Russian car sector during the global economic downturn.)... JUMBO MEASURE NO. 10

130 122 Unequal Compliance: The 6th GTA report JUMBO MEASURE NO The upper limit for prices of locally-produced cars subject to state subsidies is raised from 350K rubles to 600K rubles. The state subsidy takes the form of a two-thirds reduction in the interest rate paid on loans by private customers for qualifying cards. Foreign cars assembled in Russia are only partly included in this scheme, which is expected to cost a total of 2 billion rubles (46 million Euro). Government will subsidize also loans for the car industry from the Russian banks for technical restructuring of the production - 2,5 billion rubles (58 million Euro) Subsidies are also to cover costs of transportation by rail of locally produced cars (including some foreign cars assembled in Russia) - 2 billion rubles (46 million Euro). Military-industrial complex The military-industrial complex, according to the Government Anti-Crisis Plan, is to receive 969 billion rubles (22,6 billion Euro) in subsidies in 2009, or 38% more than in Subsidies are to boost the capitalization of the leading firms, such as MiG, Gorbunov,and Khrunichev. Other subsidies are to prevent bankruptcies of enterprises producing weaponry. Timber processing complex 325 million rubles (7,6 million Euro) are allocated in 2009 in order to subsidize interest rates on banking credits for the wood sector, and to create seasonal reserves of rough wood and fuels. Source: The programme of the anti-crisis measures of the Russian Government Available from antikrizismeriprf/

131 Jumbo Measures: Potentially Far-Reaching Discriminatory State Measures 123 Japan: State endorsement of private initiative to raise food selfsufficiency Jumbo Measure No. 11 Potential extent of trade impact: Total trade that could be affected by this measure: US$ bn Total trading partners that could be affected by this measure: 110 Total G20 trading partners that could be affected by this measure: 15 Share of implementing jurisdiction s tariff lines that could be affected by this measure: % Implementing jurisdiction: Japan Measure type: Non tariff barrier Description of measure Food Action Nippon is a citizen movement that aims at raising self sufficiency rate in Japan by providing information about agriculture, domestic food, eating habits and food imports. Amongst its initiatives in 2009, an award was introduced. The purpose of this award is stated as follows This award is for the wider public to the efforts of businesses and organizations that contribute to improved food self-sufficiency rate, commended the efforts by good penetration into the wider society activities aimed at food self-sufficiency rate, we society is able to eat delicious and safe for children and the future. According to Food Action Nippon this particular initiative is sponsored by Japan s Cabinet Office and Ministry of Education. More generally, Food Action Nippon is sponsored by private companies and is officially supported by the Ministry of Agriculture, Forestry and Fisheries (MAFF). Relatedly, on 6 October 2008, the Ministry of Agriculture, Forestry and Fisheries of Japan (MAFF) had announced the creation of a Food Action Nippon task force whose function was to steer non-governmental Japanese organisations promoting self-sufficiency in food production. Sources: Relevant press releases from the Ministry of Agriculture, Forestry and Fisheries, JUMBO MEASURE NO. 11

132 124 Unequal Compliance: The 6th GTA report pdf#search= Food Action Nippon Food Action Nippon website and news about the award can be found at: JUMBO MEASURE NO. 11

133 Jumbo Measures: Potentially Far-Reaching Discriminatory State Measures 125 Brazil: New credit line for exports of consumer goods Jumbo Measure No. 12 Potential extent of trade impact: Total trade that could be affected by this measure: US$ bn Total trading partners that could be affected by this measure: 131 Total G20 trading partners that could be affected by this measure: 19 Share of implementing jurisdiction s tariff lines that could be affected by this measure: 25.29% Implementing jurisdiction: Brazil Measure type: Trade finance Description of measure The Brazilian Development Bank (BNDES) implemented a new credit line amounting to R$ 7 billions for the pre-shipment phase of exports of consumer goods, in a decision announced on 29 April The initial interest rate is 7% per year until the end of June when it will be increased to 8% per year. For reference it is worth noting that on 29 April 2010 the Brazilian central bank s target overnight interest rate was 9.5%, suggesting a degree of subsidisation is factored into the credit line. Source: BACEN Resolution nº Available at visualiza/index.jsp?jornal=1&pagina=63&dat JUMBO MEASURE NO. 12

134 126 Unequal Compliance: The 6th GTA report Russia: Subsidized loans to producers of certain type of machinery Jumbo Measure No. 13 Potential extent of trade impact: Total trade that could be affected by this measure: US$ bn Total trading partners that could be affected by this measure: 62 Total G20 trading partners that could be affected by this measure: 15 Share of implementing jurisdiction s tariff lines that could be affected by this measure: 8.94% Implementing jurisdiction: Russian Federation Measure type: Bail out / state aid measure JUMBO MEASURE NO. 13 Description of measure The Government Decree # 205 from 10 March 2009 establishes rules for granting subsidies (subsidized loans - 2/3 of CBR refinancing rate) from the federal budget to producers of agricultural machines and tractors, the wood processing sector, producers of equipment for the oil and gas sector, producers of machine tools in order to cover part of interest paid on credits for up to 5 years. The subsidies will be granted in the period , on a quarterly basis. Source: Government Decree # 205 from 10 March 2009.

135 Jumbo Measures: Potentially Far-Reaching Discriminatory State Measures 127 India: Extension of service tax refund for exporters Jumbo Measure No. 14 Potential extent of trade impact: Total trade that could be affected by this measure: US$ bn Total trading partners that could be affected by this measure: 122 Total G20 trading partners that could be affected by this measure: 18 Share of implementing jurisdiction s tariff lines that could be affected by this measure: 17.40% Implementing jurisdiction: India Measure type: Export subsidy Description of measure As of 7 December 2008, the Indian government has extended its service tax refund scheme to another constituency. Now, exporters who have paid commissions to a foreign clearing or forwarding agent are also eligible for the benefits of such a refund. The maximum share of service tax to be refunded has been set at 10 percent of the freight on board (f.o.b.) value of exports. This measure will benefit firms that contract out for freight-forwarding services. On the assumption that most of these firms are small and medium sized enterprises, then the tariff lines affected are those typically associated with exports by such enterprises from India. Source: Government of India. (7 December 2008). Notification nr 33/2008-Service Tax. To be obtained at JUMBO MEASURE NO. 14

136 128 Unequal Compliance: The 6th GTA report India: Pre- and post-shipment export credit Jumbo Measure No. 15 Potential extent of trade impact: Total trade that could be affected by this measure: US$ bn Total trading partners that could be affected by this measure: 122 Total G20 trading partners that could be affected by this measure: 18 Share of implementing jurisdiction s tariff lines that could be affected by this measure: 17.40% Implementing jurisdiction: India Measure type: Export subsidy JUMBO MEASURE NO. 15 Description of measure On 1 December 2008, the Bank of India implemented an export credit scheme as part of the Indian government s crisis response programme. Under the scheme, companies from designated sectors will have access to low-interest export credit. The scheme was initially set up to last until 31 March 2009 but has been extended to 31 September As specified by the Bank of India, companies may apply for rupee preshipment credit for up to 270 days and post-shipment credit for up to 180 days. Participating firms will receive an interest rate that is at maximum 2 percent lower than comparable market rates. This subsidy is limited for the definitive interest rate not to fall below 7 percent. Sectors and companies eligible to the interest rate reduction: Textiles (including handlooms) Handicrafts, carpets, leather Gems and jewellery Marine products Sources: Reserve Bank of India. (16 December 2008). Interest Rates on Rupee Export Credit. To be obtained at NotificationUser.aspx?Id=4712.

137 Jumbo Measures: Potentially Far-Reaching Discriminatory State Measures 129 Reserve Bank of India. (11 June 2009). Rupee Export Credit Interest Rates. To be obtained at Reserve Bank of India. (31 July 2009). Rupee Export Credit Interest Rates. To be obtained at JUMBO MEASURE NO. 15

138 130 Unequal Compliance: The 6th GTA report Indonesia: Import tariff increases on certain products that compete with locally manufactured products Jumbo Measure No. 16 Potential extent of trade impact: Total trade that could be affected by this measure: US$ bn Total trading partners that could be affected by this measure: 92 Total G20 trading partners that could be affected by this measure: 17 Share of implementing jurisdiction s tariff lines that could be affected by this measure: 24.00% Implementing jurisdiction: Indonesia Measure type: Tariff measure JUMBO MEASURE NO. 16 Description of measure The Ministry of Finance Decree 19/2009 raised import tariffs on certain products that compete with locally manufactured products. The product affected (and tariff increase were known) are milk, animal or vegetable oils, fruit juices, coffee and tea, chemicals, silver, steel, electronic products (machines, TVs etc.), packaged juices (10 to 15%), instant coffee (5 to 10%), iron wire (7.5 to 10%), wire nails (0 to 7.5%) and electrical and nonelectrical milling machines (0 to 7.5%). At the same time certain tariffs are reduced, mainly on input products needed for local manufacturing (e.g. dairy products and base chemicals). The latter tariff reductions, however, are likely to increase the effective rates of protection of the downstream buyers/ manufacturers. The Decree was adopted on 13 February Source: Measure listed as verified see WTO monitoring report 26 March 2009 (Annex I). Measure also noted in the EC monitoring report 12 June 2009 (Annex 2.1)

139 Jumbo Measures: Potentially Far-Reaching Discriminatory State Measures 131 Indonesia, Malaysia, and Thailand: Limiting rubber exports to 915,000 tons during 2009 Jumbo Measure No. 17 Potential extent of trade impact: Total trade that could be affected by this measure: US$ bn Total trading partners that could be affected by this measure: 105 Total G20 trading partners that could be affected by this measure: 18 Share of implementing jurisdiction s tariff lines that could be affected by this measure: 3.48% Implementing jurisdiction: Indonesia, Malaysia, Thailand Measure type: Export taxes or restriction Description of measure It would appear that the Indonesan, Malaysian, and Thai rubber producers, acting through the International Tripartite Rubber Council (ITRC), have sought to restrict exports of rubber so as to increase world prices. These three countries are the largest exporters of rubber in the world, accounting for 70 percent of total supplies according to one recent estimate. Numerous news reports include quotes from leading business executives and business associations that are consistent with the above summary. Moreover, a recent report from the United Nations Development Programme makes reference to this alleged scheme. As of July 2009, however, it is not clear that any such concerted action has proved to be successful. One recent commentary stated: Weakness was visible in Asian rubber futures despite the fact that International Tripartite Rubber Council members Thailand, Indonesia and Malaysia announced a decision to remove 915,000 tons from the market in 2009 to bolster prices. A reduction of this magnitude has been estimated as being equivalent to a sixth of the total world sales. According to the following quotation, found on an official Thai website, the alleged cooperation began in the fourth quarter of Deputy Minister of Agriculture and Cooperatives Teerachai Saenkaew said that the three countries met at a special meeting between the International Tripartite Rubber Council and International Rubber Consortium on October 29. They... JUMBO MEASURE NO. 17

140 132 Unequal Compliance: The 6th GTA report JUMBO MEASURE NO discussed ways to improve the rubber situation, which was facing falling prices following the global financial crisis. He said that the meeting agreed to implement short-and long-term measures, which were worked out in 2002 to remedy the situation at that time. In the short-term measures, controls must be imposed on rubber exports and marketing strategies must be carried out. The long-term measures involve production management in order to stabilize prices. The meeting urged all members of both the International Tripartite Rubber Council and International Rubber Consortium to monitor the rubber market situation and cooperate more closely in easing rubber problems. Thailand, Indonesia, and Malaysia agreed to reduce total rubber production by planting new rubber trees to replace old ones. A target has been set to plant new rubber trees covering 700,000 rai, or 280,000 acres, of land to replace old rubber trees in about one million rai, or more than 420,000 acres. As a result, about 215,000 tons of rubber will not come up in the global market. Thailand will plant other crops to replace rubber as well, while Indonesia will control the issuance of licenses for planting new rubber trees. The three countries also agreed to encourage rubber growers to reduce their working days for tapping rubber trees and to stop using chemicals to stimulate latex production. A meeting of the ITRC on 13 December 2008 resulted in an accord, the details of which can be found here: 75&ShowContent=editorial+. This accord concerned export levels, export prices, and non-fulfilment of contracts. The parties agreed to reconvene in Jakarta in January In February 2009 the Indonesian Agriculture Minister is reported to have called on the three ITRC members to cooperate further to stop rubber prices falling. Sources: In addition to the official source cited above, other relevant sources include: 1. A one page account including information on this case contained in a June 2009 paper from the International Policy Centre for Inclusive Growth, providing information on this case, that can be downloaded here:

141 Jumbo Measures: Potentially Far-Reaching Discriminatory State Measures 133 Argentina: Extension of tax exemptions for locally produced capital goods Jumbo Measure No. 18 Potential extent of trade impact: Total trade that could be affected by this measure: US$ bn Total trading partners that could be affected by this measure: 63 Total G20 trading partners that could be affected by this measure: 17 Share of implementing jurisdiction s tariff lines that could be affected by this measure: 24.84% Implementing jurisdiction: Argentina Measure type: State aid measure Description of measure On February 4, 2010, the Government of Argentina announced an extension of a tax-exemption program that benefits capital goods producers. The program, first launched in 2001, grants a tax credit on locally-produced capital goods, amounting to 14% of sales price. The benefit will expire on June 30, On June 3, 2010, the Government of Argentina announced a new 6-month extension of the program. The benefit will now expire on December 31, Sources: Decree 376/2001 (created the benefit): infoleginternet/anexos/ /66567/norma... Decree 188/2010 (extending the benefit): infoleginternet/anexos/ /163784/no... JUMBO MEASURE NO. 18

142 134 Unequal Compliance: The 6th GTA report Russia: Public procurement price advantage to domestic producers Jumbo Measure No. 19 Potential extent of trade impact: Total trade that could be affected by this measure**: US$ bn Total trading partners that could be affected by this measure: 89 Total G20 trading partners that could be affected by this measure: 17 Share of implementing jurisdiction s tariff lines that could be affected by this measure: 18.50% **As indicated in the main body text, our confidence in this estimate is lower than average. Implementing jurisdiction: Russia Measure type: Public procurement JUMBO MEASURE NO. 19 Description of measure The Decree of the Russian Economic Development Ministry from 5 December 2008 # 427 has given preferences to domestic producers setting a 15% price advantage until 31 December 2010 in the procurement of certain products such as agricultural products, services in agricultural sector, food, textiles, cloth, leather, footwear, metal products, machinaries, medical equipment, watches, autos and others. Source: Decree of the Russian Economic Development Ministry from 5 December 2008 # 427. Avaliable from asp?id=9796&psc=1&pt=1&page=1

143 Jumbo Measures: Potentially Far-Reaching Discriminatory State Measures 135 Russia: Preferences to domestic producers in amendments to Government Procurement Law Jumbo Measure No. 20 Potential extent of trade impact: Total trade that could be affected by this measure**: US$ bn Total trading partners that could be affected by this measure: 88 Total G20 trading partners that could be affected by this measure: 17 Share of implementing jurisdiction s tariff lines that could be affected by this measure: 17.88% **As indicated in the main body text, our confidence in this estimate is lower than average Implementing jurisdiction: Russian Federation Measure type: Public procurement Description of measure Changes have been made in state procurement legislation. Amendments to the Federal Law from 30 December 2008 N 308-f3 On placement of orders for goods and services delivery for state and municipal needs entered into force on 1 March These changes give certain preferences to national producers. The Russian Government established terms of access to goods originated from a foreign state or group of states, works, services carried out by foreign persons for procurement purposes in one of the below cases: 1) If national regime towards Russian goods, services and works is not established in a foreign country; 2) If the procurement of goods, services, works originating from Russia enjoys privileges. Source: Federal law of 30 December 2008 N 308-f3 JUMBO MEASURE NO. 20

144 136 Unequal Compliance: The 6th GTA report Russia: Temporary import tariff introduction on certain type of machineries Jumbo Measure No. 21 Potential extent of trade impact: Total trade that could be affected by this measure: US$ bn Total trading partners that could be affected by this measure: 57 Total G20 trading partners that could be affected by this measure: 16 Share of implementing jurisdiction s tariff lines that could be affected by this measure: 2.67% Implementing jurisdiction: Russian Federation Measure type: Tariff measure JUMBO MEASURE NO. 21 Description of measure By the Government decree # 742 from 15 September 2009 the Russian government has introduced a 5% import tariff on certain type of machineries for 9 months. Source: Russian official newspaper Rossiyskaya Gazeta # 5001 from 22 September Government Decree # 742 dated 15 September 2009.

145 Jumbo Measures: Potentially Far-Reaching Discriminatory State Measures 137 France: More restrictive public procurement rules for construction work tenders Jumbo Measure No. 22 Potential extent of trade impact: Total trade that could be affected by this measure**: US$ bn Total trading partners that could be affected by this measure: 60 Total G20 trading partners that could be affected by this measure: 15 Share of implementing jurisdiction s tariff lines that could be affected by this measure: 2.08% **As indicated in the main body text, our confidence in this estimate is lower than average. Implementing jurisdiction: France Measure type: Public procurement Description of measure According to the Décret no , issued on 19 December 2008, relating to the implementation of the French stimulus plan, with respect to public procurement, the maximum threshold for the value of a construction project where an awarding authority can follow a loose public procurement procedure ( procédure adaptée ) was increased from EUR 206,000 plus state sales tax to EUR plus state sales tax. The EUR 5,150,000 plus state sales tax limit corresponds to the maximum threshold allowed by the EU. The modalities of a procédure adaptée can be freely fixed by the awarding authority. The modalities to be chosen include: the nature and features of the specifications required, the number and origins of the potential economic operators that can respond to the authority, and the circumstances of the purchase. Moreover, Décret no allows the awarding authority to negotiate - mainly with respect to prices - with those bidders that present an offer. Finally, the awarding authority can decide that the project does not go through a open tendering procedure if the circumstances justify it or the maximum expected value of the project is below EUR 20,000 plus state sales tax. This amount was increased in Décret no from previously EUR 4,000 plus state sales tax.... JUMBO MEASURE NO. 22

146 138 Unequal Compliance: The 6th GTA report... Investigating the official French public procurement database Bulletin officiel des annonces des marchés publics, it can be viewed that 118 out of 197 new construction tenders in 2009 follow the procédure adaptée. Although these amendments are likely to comply with EU law, the higher thresholds allow more French stimulus spending to fall outside EU procurement rules designed to open up public contracts to international competition. Sources: 1) Code des marchés publics, édition 2006 ( affichcode.do;jsessionid=196dc7b636e3d4ad8...) 2) Décret n du 19 décembre 2008 ( Decrets-.html) 3) Bulletin officiel des annonces des marchés publics ( index.php?action=afficherformrechsimple) JUMBO MEASURE NO. 22

147 SECTION 4 G20 Compliance and Commercial Interests: Country-by-Country Reports

148

149 Country-by-Country Reports 141 Argentina Table 7.1. Foreign state measures affecting Argentina s commercial interests Summary statistic of foreign state measures affecting Argentina s commercial interests Total number of measures affecting Argentina s commercial interests Total number of foreign measures found to benefit or involve no change in the treatment of Argentina s commercial interests [1] Total number of foreign measures that (i) have been implemented and are likely to harm Argentina s commercial interests or (ii) that have been announced but not implemented and which almost certainly discriminate against Argentina s interests [2] Total number of foreign measures that have been implemented and which almost certainly discriminate against Argentina s interests [3] Total number of implemented measures affecting Argentina s commercial interests Total number of pending foreign measures likely to affect Argentina s commercial interests Total number of pending foreign measures that, if implemented, are likely to harm Argentina s foreign commercial interests Total number of trading partners that have imposed measures that harm Argentina s commercial interests All measures All measures except antidumping, anti-subsidy, and safe-guard actions Note: As the Global Trade Alert database is updated frequently, the above data will change. Updates on the numbers in this table can be found by going to and selecting Argentina in the Affecting Trading Partner and clicking the button Get Stats. [1] These measures are classified green in the Global Trade Alert database. [2] These measures are classified amber in the Global Trade Alert database. [3] These measures are classified red in the Global Trade Alert database. ARGENTINA

150 142 Unequal Compliance: The Sixth GTA report Table 7.2. Argentina s state measures affecting other jurisdictions commercial interests. Summary statistic of foreign state measures affecting Argentina s commercial interests Total number of Argentina s measures affecting other jurisdictions commercial interests Total number of Argentina s measures found to benefit or involve no change in the treatment of other jurisdictions commercial interests [1] Total number of Argentina s measures that (i) have been implemented and are likely to harm foreign commercial interests or (ii) that have been announced but not implemented and which almost certainly discriminate against foreign interests [2] Total number of Argentina s measures that have been implemented and which almost certainly discriminate against foreign commercial interests [3] Total number of 4-digit tariff lines affected by measures implemented by Argentina that harm foreign commercial interests Total number of 2-digit sectors affected by measures implemented by Argentina that harm foreign commercial interests. Total number of trading partners affected by measures implemented by Argentina that harm foreign commercial interests All measures All measures except antidumping, anti-subsidy, and safe-guard actions ARGENTINA Note: As the Global Trade Alert database is updated frequently, the above data will change. Updates on the numbers in this table can be found by going to and selecting Argentina in the Affecting Trading Partner and clicking the button Get Stats. [1] These measures are classified green in the Global Trade Alert database. [2] These measures are classified amber in the Global Trade Alert database. [3] These measures are classified red in the Global Trade Alert database.

151 Country-by-Country Reports 143 Table 7.3. Foreign jurisdictions implementing measures affecting Argentina s commercial interests Foreign jurisdictions implementing measures Number of measures Russian Federation 18 France 8 Indonesia 7 Spain 6 Brazil 5 India 5 Netherlands 5 Belgium 4 Finland 4 Germany 4 Italy 4 United Kingdom of Great Britain and Northern Ireland 4 Austria 3 Bulgaria 3 Cyprus 3 Czech Republic 3 Denmark 3 Estonia 3 European Communities 3 Greece 3 Hungary 3 Ireland 3 Latvia 3 Lithuania 3 Luxembourg 3 Malta 3 Poland 3 Portugal 3 Romania 3 Slovakia 3 Slovenia 3 Sweden 3 Switzerland 3 Ukraine 3 Belarus 2 Bolivia 2 China 2 Ecuador 2 Kazakhstan 2 Morocco 2 Nigeria 2 Paraguay 2 United States of America 2 Venezuela 2 Algeria 1 ARGENTINA

152 144 Unequal Compliance: The Sixth GTA report Foreign jurisdictions implementing measures Number of measures Argentina 1 Australia 1 Chile 1 Ghana 1 Japan 1 Malaysia 1 Mexico 1 Pakistan 1 Republic of Korea 1 South Africa 1 Thailand 1 Viet Nam 1 Table 7.4. Foreign jurisdictions commercial interests affected by Argentina s state measures ARGENTINA Foreign jurisdictions affected Number of measures China 33 Brazil 16 India 14 Uruguay 14 Belgium 13 France 13 Germany 13 Japan 13 Spain 13 Chile 12 Italy 12 Sweden 12 Thailand 12 United Kingdom of Great Britain and Northern Ireland 12 United States of America 12 Canada 11 Israel 11 Netherlands 11 Republic of Korea 11 Singapore 11 South Africa 11 Czech Republic 10 Indonesia 10 Malaysia 10 Paraguay 10 Russian Federation 10 Colombia 9 Ecuador 9 Mexico 9

153 Country-by-Country Reports 145 Foreign jurisdictions affected Number of measures Peru 9 Poland 9 Portugal 9 Turkey 9 Viet Nam 9 Finland 8 Hong Kong 8 Norway 8 Romania 8 Switzerland 8 Venezuela 8 Australia 7 Bolivia 7 Dominican Republic 7 Egypt 7 Greece 7 Philippines 7 Trinidad and Tobago 7 Ukraine 7 United Arab Emirates 7 Algeria 6 Austria 6 Croatia 6 Cuba 6 Denmark 6 Ireland 6 Saudi Arabia 6 Bangladesh 5 Bosnia and Herzegovina 5 Bulgaria 5 Ghana 5 Hungary 5 Jordan 5 Libyan Arab Jamahiriya 5 Nigeria 5 Pakistan 5 Slovenia 5 Tunisia 5 Angola 4 Cameroon 4 Chinese Taipei 4 Congo 4 Democratic People's Republic of Korea 4 Jamaica 4 Lebanon 4 Lithuania 4 Luxembourg 4 ARGENTINA

154 146 Unequal Compliance: The Sixth GTA report ARGENTINA Foreign jurisdictions affected Number of measures Morocco 4 New Zealand 4 Panama 4 Serbia 4 Sri Lanka 4 Sudan 4 Albania 3 Burkina Faso 3 Costa Rica 3 El Salvador 3 Gambia 3 Honduras 3 Iran 3 Kazakhstan 3 Kuwait 3 Macedonia 3 Mali 3 Malta 3 Montenegro 3 Netherlands Antilles 3 Niger 3 Senegal 3 Slovakia 3 Afghanistan 2 Aruba 2 Azerbaijan 2 Cambodia 2 Cape Verde 2 Côte d'ivoire 2 Democratic Republic of the Congo 2 Equatorial Guinea 2 Estonia 2 Guatemala 2 Haiti 2 Iceland 2 Mauritania 2 Mauritius 2 Nicaragua 2 Palestinian 2 Yemen 2 Andorra 1 Argentina 1 Barbados 1 Benin 1 Botswana 1 Brunei Darussalam 1 Burundi 1

155 Country-by-Country Reports 147 Foreign jurisdictions affected Number of measures Central African Republic 1 Chad 1 Comoros 1 Cyprus 1 Djibouti 1 Dominica 1 Eritrea 1 Ethiopia 1 Gabon 1 Guinea 1 Guinea-Bissau 1 Guyana 1 Iraq 1 Kenya 1 Lao People's Democratic Republic 1 Latvia 1 Lesotho 1 Liberia 1 Madagascar 1 Malawi 1 Mozambique 1 Myanmar 1 Namibia 1 Qatar 1 Republic of Moldova 1 Rwanda 1 Saint Lucia 1 Sao Tome and Principe 1 Seychelles 1 Sierra Leone 1 Somalia 1 Swaziland 1 Syrian Arab Republic 1 Togo 1 Uganda 1 United Republic of Tanzania 1 Zambia 1 Zimbabwe 1 ARGENTINA

156 148 Unequal Compliance: The Sixth GTA report Table 7.5 Implemented measures that harm Argentina s commercial interests, by type Type of measure Number of measures As percentage of measures Tariff measure % Bail out / state aid measure % Export subsidy % Non tariff barrier (not otherwise specified) % Public procurement % Export taxes or restriction % Local content requirement % Trade defence measure (AD % Import ban % Quota (including tariff rate quotas) % Trade finance % Competitive devaluation % Consumption subsidy % Investment measure % Migration measure % Other service sector measure % Sanitary and Phytosantiary Measure % State-controlled company % Technical Barrier to Trade % Intellectual property protection % Total % ARGENTINA

157 Country-by-Country Reports 149 Table 7.6 Argentina s implemented measures that harm foreign commercial interests, by type Type of measure Number of measures As percentage of measures Trade defence measure (AD 29 60,42% Bail out / state aid measure 6 12,50% Non tariff barrier (not otherwise specified) 6 12,50% Export taxes or restriction 5 10,42% Import ban 1 2,08% Technical Barrier to Trade 1 2,08% Total ,00% ARGENTINA

158 150 Unequal Compliance: The Sixth GTA report ARGENTINA Map 7.1 Argentina: Worldwide incidence of harm done by this G20 member s discriminatory measures

159 Country-by-Country Reports 151 Map 7.2 Argentina: Harm done to this G20 member s commercial interests by others ARGENTINA

160 152 Unequal Compliance: The Sixth GTA report Australia Table 7.7. Foreign state measures affecting Australia s commercial interests Summary statistic of foreign state measures affecting Australia s commercial interests Total number of measures affecting Australia s commercial interests Total number of foreign measures found to benefit or involve no change in the treatment of Australia s commercial interests [1] Total number of foreign measures that (i) have been implemented and are likely to harm Australia s commercial interests or (ii) that have been announced but not implemented and which almost certainly discriminate against Australia s interests [2] Total number of foreign measures that have been implemented and which almost certainly discriminate against Australia s interests [3] Total number of implemented measures affecting Australia s commercial interests Total number of pending foreign measures likely to affect Australia s commercial interests Total number of pending foreign measures that, if implemented, are likely to harm Australia s foreign commercial interests Total number of trading partners that have imposed measures that harm Australia s commercial interests All measures All measures except antidumping, anti-subsidy, and safe-guard actions AUSTRALIA Note: As the Global Trade Alert database is updated frequently, the above data will change. Updates on the numbers in this table can be found by going to and selecting Australia in the Affecting Trading Partner and clicking the button Get Stats. [1] These measures are classified green in the Global Trade Alert database. [2] These measures are classified amber in the Global Trade Alert database. [3] These measures are classified red in the Global Trade Alert database.

161 Country-by-Country Reports 153 Table 7.8. Australia s state measures affecting other jurisdictions commercial interests. Summary statistic of foreign state measures affecting Australia s commercial interests Total number of Australia s measures affecting other jurisdictions commercial interests Total number of Australia s measures found to benefit or involve no change in the treatment of other jurisdictions commercial interests [1] Total number of Australia s measures that (i) have been implemented and are likely to harm foreign commercial interests or (ii) that have been announced but not implemented and which almost certainly discriminate against foreign interests [2] Total number of Australia s measures that have been implemented and which almost certainly discriminate against foreign commercial interests [3] Total number of 4-digit tariff lines affected by measures implemented by Australia that harm foreign commercial interests Total number of 2-digit sectors affected by measures implemented by Australia that harm foreign commercial interests Total number of trading partners affected by measures implemented by Australia that harm foreign commercial interests All measures All measures except antidumping, anti-subsidy, and safe-guard actions Note: As the Global Trade Alert database is updated frequently, the above data will change. Updates on the numbers in this table can be found by going to and selecting Australia in the Affecting Trading Partner and clicking the button Get Stats. [1] These measures are classified green in the Global Trade Alert database. [2] These measures are classified amber in the Global Trade Alert database. [3] These measures are classified red in the Global Trade Alert database. AUSTRALIA

162 154 Unequal Compliance: The Sixth GTA report Table 7.9 Foreign jurisdictions implementing measures affecting Australia s commercial interests AUSTRALIA Foreign jurisdictions implementing measures Number of measures Russian Federation 15 Indonesia 13 Argentina 7 France 7 India 7 Japan 7 United Kingdom of Great Britain and Northern Ireland 7 Germany 6 China 5 Netherlands 5 Poland 5 Spain 5 Belgium 4 Finland 4 Ireland 4 Italy 4 Austria 3 Brazil 3 Bulgaria 3 Cyprus 3 Czech Republic 3 Denmark 3 Estonia 3 European Communities 3 Greece 3 Hungary 3 Latvia 3 Lithuania 3 Luxembourg 3 Malta 3 Nigeria 3 Portugal 3 Republic of Korea 3 Romania 3 Slovakia 3 Slovenia 3 Sweden 3 Switzerland 3 United States of America 3 Algeria 2 Kazakhstan 2 Malaysia 2 Singapore 2 Viet Nam 2 Belarus 1

163 Country-by-Country Reports 155 Foreign jurisdictions implementing measures Number of measures Ethiopia 1 Mexico 1 South Africa 1 Thailand 1 Ukraine 1 Venezuela 1 Table 7.10 Foreign jurisdictions commercial interests affected by Australia s state measures Foreign jurisdictions affected Number of measures China 4 Germany 4 United Kingdom of Great Britain and Northern Ireland 4 India 3 Italy 3 Poland 3 United States of America 3 Austria 2 Belgium 2 Canada 2 Czech Republic 2 Denmark 2 Finland 2 France 2 Greece 2 Hong Kong 2 Hungary 2 Indonesia 2 Ireland 2 Malaysia 2 Netherlands 2 New Zealand 2 Portugal 2 Slovakia 2 South Africa 2 Spain 2 Sweden 2 Viet Nam 2 Argentina 1 Belarus 1 Brazil 1 Bulgaria 1 Chile 1 Cyprus 1 Estonia 1 AUSTRALIA

164 156 Unequal Compliance: The Sixth GTA report Foreign jurisdictions affected Number of measures Fiji 1 Japan 1 Latvia 1 Lithuania 1 Luxembourg 1 Malta 1 Mexico 1 Norway 1 Philippines 1 Republic of Korea 1 Romania 1 Singapore 1 Slovenia 1 Sri Lanka 1 Switzerland 1 Thailand 1 Turkey 1 United Arab Emirates 1 Table Implemented measures that harm Australia s commercial interests, by type AUSTRALIA Type of measure Number of measures As percentage of measures Bail out / state aid measure % Tariff measure % Export subsidy % Non tariff barrier (not otherwise specified) % Export taxes or restriction % Local content requirement % Migration measure % Trade defence measure (AD, CVD, safeguard) % Public procurement % Competitive devaluation % Import ban % Quota (including tariff rate quotas) % Sanitary and Phytosantiary Measure % Trade finance % Consumption subsidy % Investment measure % State-controlled company % Import subsidy % Intellectual property protection % Other service sector measure % State trading enterprise % Sub-national government measure % Technical Barrier to Trade % Total %

165 Country-by-Country Reports 157 Table Australia s implemented measures that harm foreign commercial interests, by type Type of measure Number of measures As percentage of measures Bail out / state aid measure % Public procurement % Investment measure % Migration measure % Trade defence measure (AD, CVD, safeguard) % Local content requirement % Total % AUSTRALIA

166 158 Unequal Compliance: The Sixth GTA report AUSTRALIA Map 7.3 Australia: Worldwide incidence of harm done by this G20 member s discriminatory measures

167 Country-by-Country Reports 159 Map 7.4 Australia: Harm done to this G20 member s commercial interests by others AUSTRALIA

168 160 Unequal Compliance: The Sixth GTA report Brazil Table Foreign state measures affecting Brazil s commercial interests Summary statistic of foreign state measures affecting Brazil s commercial interests Total number of measures affecting Brazil s commercial interests Total number of foreign measures found to benefit or involve no change in the treatment of Brazil s commercial interests [1] Total number of foreign measures that (i) have been implemented and are likely to harm Brazil s commercial interests or (ii) that have been announced but not implemented and which almost certainly discriminate against Brazil s interests [2] Total number of foreign measures that have been implemented and which almost certainly discriminate against Brazil s interests [3] Total number of implemented measures affecting Brazil s commercial interests Total number of pending foreign measures likely to affect Brazil s commercial interests Total number of pending foreign measures that, if implemented, are likely to harm Brazil s foreign commercial interests Total number of trading partners that have imposed measures that harm Brazil s commercial interests All measures All measures except antidumping, anti-subsidy, and safe-guard actions BRAZIL Note: As the Global Trade Alert database is updated frequently, the above data will change. Updates on the numbers in this table can be found by going to and selecting Brazil in the Affecting Trading Partner and clicking the button Get Stats. [1] These measures are classified green in the Global Trade Alert database. [2] These measures are classified amber in the Global Trade Alert database. [3] These measures are classified red in the Global Trade Alert database.

169 Country-by-Country Reports 161 Table Brazil s state measures affecting other jurisdictions commercial interests. Summary statistic of foreign state measures affecting Brazil s commercial interests Total number of Brazil s measures affecting other jurisdictions commercial interests Total number of Brazil s measures found to benefit or involve no change in the treatment of other jurisdictions commercial interests [1] Total number of Brazil s measures that (i) have been implemented and are likely to harm foreign commercial interests or (ii) that have been announced but not implemented and which almost certainly discriminate against foreign interests [2] Total number of Brazil s measures that have been implemented and which almost certainly discriminate against foreign commercial interests [3] Total number of 4-digit tariff lines affected by measures implemented by Brazil that harm foreign commercial interests Total number of 2-digit sectors affected by measures implemented by Brazil that harm foreign commercial interests Total number of trading partners affected by measures implemented by Brazil that harm foreign commercial interests All measures All measures except antidumping, anti-subsidy, and safe-guard actions Note: As the Global Trade Alert database is updated frequently, the above data will change. Updates on the numbers in this table can be found by going to and selecting Brazil in the Affecting Trading Partner and clicking the button Get Stats. [1] These measures are classified green in the Global Trade Alert database. [2] These measures are classified amber in the Global Trade Alert database. [3] These measures are classified red in the Global Trade Alert database. BRAZIL

170 162 Unequal Compliance: The Sixth GTA report Table Foreign jurisdictions implementing measures affecting Brazil s commercial interests BRAZIL Foreign jurisdictions implementing measures Number of measures Russian Federation 23 Argentina 16 Indonesia 10 India 8 France 7 Germany 6 Portugal 6 Spain 6 Italy 5 Kazakhstan 5 Netherlands 5 Nigeria 5 Belarus 4 Belgium 4 Finland 4 Poland 4 Ukraine 4 United Kingdom of Great Britain and Northern Ireland 4 Austria 3 Bulgaria 3 China 3 Cyprus 3 Czech Republic 3 Denmark 3 Estonia 3 European Communities 3 Greece 3 Hungary 3 Ireland 3 Japan 3 Latvia 3 Lithuania 3 Luxembourg 3 Malta 3 Paraguay 3 Romania 3 Slovakia 3 Slovenia 3 Sweden 3 Switzerland 3 United States of America 3 Bolivia 2 Canada 2 Ecuador 2 Morocco 2

171 Country-by-Country Reports 163 Foreign jurisdictions implementing measures Number of measures Republic of Korea 2 Venezuela 2 Australia 1 Brazil 1 Egypt 1 Ethiopia 1 Iran 1 Malaysia 1 Mexico 1 Saudi Arabia 1 South Africa 1 Thailand 1 Trinidad and Tobago 1 Table Foreign jurisdictions commercial interests affected by Brazil s state measures Foreign jurisdictions affected Number of measures China 14 Germany 9 United States of America 8 France 7 Belgium 6 Canada 6 Japan 6 Netherlands 6 Spain 6 United Kingdom of Great Britain and Northern Ireland 6 Argentina 5 Hong Kong 5 Italy 5 Sweden 5 Turkey 5 Austria 4 Denmark 4 Finland 4 India 4 Malaysia 4 Mexico 4 Republic of Korea 4 Russian Federation 4 South Africa 4 Australia 3 Indonesia 3 Singapore 3 Switzerland 3 Ukraine 3 BRAZIL

172 164 Unequal Compliance: The Sixth GTA report BRAZIL Foreign jurisdictions affected Number of measures Viet Nam 3 Bangladesh 2 Bolivia 2 Chile 2 Democratic People's Republic of Korea 2 Egypt 2 Ireland 2 Israel 2 Luxembourg 2 New Zealand 2 Norway 2 Pakistan 2 Paraguay 2 Peru 2 Poland 2 Portugal 2 Romania 2 Slovenia 2 Thailand 2 Uruguay 2 Algeria 1 Angola 1 Antigua and Barbuda 1 Armenia 1 Aruba 1 Bahamas 1 Bahrain 1 Barbados 1 Belarus 1 Benin 1 Bosnia and Herzegovina 1 Brazil 1 Cambodia 1 Cameroon 1 Cape Verde 1 Cayman Islands 1 Chad 1 Chinese Taipei 1 Colombia 1 Costa Rica 1 Croatia 1 Cuba 1 Cyprus 1 Czech Republic 1 Côte d'ivoire 1 Democratic Republic of the Congo 1 Djibouti 1

173 Country-by-Country Reports 165 Foreign jurisdictions affected Number of measures Dominican Republic 1 Ecuador 1 El Salvador 1 Equatorial Guinea 1 Estonia 1 Gabon 1 Gambia 1 Georgia 1 Ghana 1 Greece 1 Guatemala 1 Guinea 1 Guyana 1 Haiti 1 Honduras 1 Hungary 1 Iceland 1 Iran 1 Iraq 1 Jamaica 1 Jordan 1 Kenya 1 Kuwait 1 Latvia 1 Lebanon 1 Liberia 1 Libyan Arab Jamahiriya 1 Madagascar 1 Malta 1 Mauritania 1 Mauritius 1 Morocco 1 Mozambique 1 Netherlands Antilles 1 Nicaragua 1 Nigeria 1 Oman 1 Panama 1 Philippines 1 Qatar 1 Saint Lucia 1 Saudi Arabia 1 Senegal 1 Slovakia 1 Sri Lanka 1 Sudan 1 Suriname 1 BRAZIL

174 166 Unequal Compliance: The Sixth GTA report Foreign jurisdictions affected Number of measures Syrian Arab Republic 1 Tajikistan 1 Togo 1 Tunisia 1 Turks and Caicos Islands 1 United Arab Emirates 1 United Republic of Tanzania 1 Venezuela 1 Table Implemented measures that harm Brazil s commercial interests, by type Type of measure Number of measures As percentage of measures Bail out / state aid measure % Tariff measure % Export subsidy % Non tariff barrier (not otherwise specified) % Export taxes or restriction % Public procurement % Trade defence measure (AD, CVD, safeguard) % Local content requirement % Import ban % Quota (including tariff rate quotas) % Trade finance % Competitive devaluation % Consumption subsidy % Migration measure % Technical Barrier to Trade % Investment measure % Sanitary and Phytosantiary Measure % State-controlled company % Import subsidy % Intellectual property protection % Other service sector measure % Sub-national government measure % Total % BRAZIL

175 Country-by-Country Reports 167 Table Brazil s implemented measures that harm foreign commercial interests, by type Type of measure Number of measures As percentage of measures Tariff measure % Trade defence measure (AD, CVD, safeguard) % Trade finance % Export subsidy % Export taxes or restriction % Investment measure % Non tariff barrier (not otherwise specified) % Public procurement % Total % BRAZIL

176 168 Unequal Compliance: The Sixth GTA report BRAZIL Map 7.5 Brazil: Worldwide incidence of harm done by this G20 member s discriminatory measures

177 Country-by-Country Reports 169 Map 7.6 Brazil: Harm done to this G20 member s commercial interests by others. BRAZIL

178 170 Unequal Compliance: The Sixth GTA report Canada Table Foreign state measures affecting Canada s commercial interests Summary statistic of foreign state measures affecting Canada s commercial interests Total number of measures affecting Canada s commercial interests Total number of foreign measures found to benefit or involve no change in the treatment of Canada s commercial interests [1] Total number of foreign measures that (i) have been implemented and are likely to harm Canada s commercial interests or (ii) that have been announced but not implemented and which almost certainly discriminate against Canada s interests [2] Total number of foreign measures that have been implemented and which almost certainly discriminate against Canada s interests [3] Total number of implemented measures affecting Canada s commercial interests Total number of pending foreign measures likely to affect Canada s commercial interests Total number of pending foreign measures that, if implemented, are likely to harm Canada s foreign commercial interests Total number of trading partners that have imposed measures that harm Canada s commercial interests All measures All measures except antidumping, anti-subsidy, and safe-guard actions CANADA Note: As the Global Trade Alert database is updated frequently, the above data will change. Updates on the numbers in this table can be found by going to and selecting Canada in the Affecting Trading Partner and clicking the button Get Stats. [1] These measures are classified green in the Global Trade Alert database. [2] These measures are classified amber in the Global Trade Alert database. [3] These measures are classified red in the Global Trade Alert database.

179 Country-by-Country Reports 171 Table Canada s state measures affecting other jurisdictions commercial interests. Summary statistic of foreign state measures affecting Canada s commercial interests Total number of Canada s measures affecting other jurisdictions commercial interests Total number of Canada s measures found to benefit or involve no change in the treatment of other jurisdictions commercial interests [1] Total number of Canada s measures that (i) have been implemented and are likely to harm foreign commercial interests or (ii) that have been announced but not implemented and which almost certainly discriminate against foreign interests [2] Total number of Canada s measures that have been implemented and which almost certainly discriminate against foreign commercial interests [3] Total number of 4-digit tariff lines affected by measures implemented by Canada that harm foreign commercial interests Total number of 2-digit sectors affected by measures implemented by Canada that harm foreign commercial interests Total number of trading partners affected by measures implemented by Canada that harm foreign commercial interests All measures All measures except antidumping, anti-subsidy, and safe-guard actions Note: As the Global Trade Alert database is updated frequently, the above data will change. Updates on the numbers in this table can be found by going to and selecting Canada in the Affecting Trading Partner and clicking the button Get Stats. [1] These measures are classified green in the Global Trade Alert database. [2] These measures are classified amber in the Global Trade Alert database. [3] These measures are classified red in the Global Trade Alert database. CANADA

180 172 Unequal Compliance: The Sixth GTA report Table Foreign jurisdictions implementing measures affecting Canada s commercial interests CANADA Foreign jurisdictions implementing measures Number of measures Russian Federation 35 Argentina 11 Indonesia 9 France 8 India 7 Spain 7 Brazil 6 China 5 Germany 5 Italy 5 United Kingdom of Great Britain and Northern Ireland 5 United States of America 5 Belgium 4 Finland 4 Ireland 4 Japan 4 Kazakhstan 4 Netherlands 4 Poland 4 Sweden 4 Austria 3 Bulgaria 3 Cyprus 3 Czech Republic 3 Denmark 3 Estonia 3 European Communities 3 Greece 3 Hungary 3 Latvia 3 Lithuania 3 Luxembourg 3 Malta 3 Portugal 3 Republic of Korea 3 Romania 3 Slovakia 3 Slovenia 3 Switzerland 3 Ukraine 3 Australia 2 Belarus 2 Ecuador 2 Malaysia 2 Morocco 2

181 Country-by-Country Reports 173 Foreign jurisdictions implementing measures Number of measures Singapore 2 Algeria 1 Bolivia 1 Ethiopia 1 Ghana 1 Iran 1 Mexico 1 Nigeria 1 Saudi Arabia 1 South Africa 1 Thailand 1 Togo 1 Venezuela 1 Table Foreign jurisdictions commercial interests affected by Canada s state measures Foreign jurisdictions affected Number of measures China 4 Brazil 2 Czech Republic 2 France 2 Germany 2 Japan 2 Mexico 2 Spain 2 United Kingdom of Great Britain and Northern Ireland 2 United States of America 2 Austria 1 Croatia 1 Denmark 1 Finland 1 Hungary 1 India 1 Indonesia 1 Italy 1 Netherlands 1 Peru 1 Poland 1 Republic of Korea 1 Singapore 1 Sweden 1 Switzerland 1 Thailand 1 Ukraine 1 CANADA

182 174 Unequal Compliance: The Sixth GTA report Table Implemented measures that harm Canada s commercial interests, by type Type of measure Number of measures As percentage of measures Bail out / state aid measure % Tariff measure % Export subsidy % Non tariff barrier (not otherwise specified) % Export taxes or restriction % Public procurement % Migration measure % Local content requirement % Consumption subsidy % Import ban % Quota (including tariff rate quotas) % Trade defence measure (AD, CVD, safeguard) % Competitive devaluation % Trade finance % Investment measure % Other service sector measure % State trading enterprise % State-controlled company % Intellectual property protection % Sanitary and Phytosantiary Measure % Import subsidy % Sub-national government measure % Technical Barrier to Trade % Total % Table Canada s implemented measures that harm foreign commercial interests, by type Type of measure Number of measures As percentage of measures Trade defence measure (AD, CVD, safeguard) % Investment measure % Local content requirement % Migration measure % Trade finance % Total % CANADA

183 Country-by-Country Reports 175 Map 7.7 Canada: Worldwide incidence of harm done by this G20 member s discriminatory measures CANADA

184 176 Unequal Compliance: The Sixth GTA report CANADA Map 7.8 Canada: Harm done to this G20 member s commercial interests by others

185 Country-by-Country Reports 177 China Table Foreign state measures affecting China s commercial interests Summary statistic of foreign state measures affecting China s commercial interests Total number of measures affecting China s commercial interests Total number of foreign measures found to benefit or involve no change in the treatment of China s commercial interests [1] Total number of foreign measures that (i) have been implemented and are likely to harm China s commercial interests or (ii) that have been announced but not implemented and which almost certainly discriminate against China s interests [2] Total number of foreign measures that have been implemented and which almost certainly discriminate against China s interests [3] Total number of implemented measures affecting China s commercial interests Total number of pending foreign measures likely to affect China s commercial interests Total number of pending foreign measures that, if implemented, are likely to harm China s foreign commercial interests Total number of trading partners that have imposed measures that harm China s commercial interests All measures All measures except antidumping, anti-subsidy, and safe-guard actions Note: As the Global Trade Alert database is updated frequently, the above data will change. Updates on the numbers in this table can be found by going to and selecting China in the Affecting Trading Partner and clicking the button Get Stats. [1] These measures are classified green in the Global Trade Alert database. [2] These measures are classified amber in the Global Trade Alert database. [3] These measures are classified red in the Global Trade Alert database. CHINA

186 178 Unequal Compliance: The Sixth GTA report Table China s state measures affecting other jurisdictions commercial interests. Summary statistic of foreign state measures affecting China s commercial interests Total number of China s measures affecting other jurisdictions commercial interests Total number of China s measures found to benefit or involve no change in the treatment of other jurisdictions commercial interests [1] Total number of China s measures that (i) have been implemented and are likely to harm foreign commercial interests or (ii) that have been announced but not implemented and which almost certainly discriminate against foreign interests [2] Total number of China s measures that have been implemented and which almost certainly discriminate against foreign commercial interests [3] Total number of 4-digit tariff lines affected by measures implemented by China that harm foreign commercial interests. Total number of 2-digit sectors affected by measures implemented by China that harm foreign commercial interests Total number of trading partners affected by measures implemented by China that harm foreign commercial interests All measures All measures except antidumping, anti-subsidy, and safe-guard actions Note: As the Global Trade Alert database is updated frequently, the above data will change. Updates on the numbers in this table can be found by going to and selecting China in the Affecting Trading Partner and clicking the button Get Stats. [1] These measures are classified green in the Global Trade Alert database. [2] These measures are classified amber in the Global Trade Alert database. [3] These measures are classified red in the Global Trade Alert database. CHINA

187 Country-by-Country Reports 179 Table Foreign jurisdictions implementing measures affecting China s commercial interests Foreign jurisdictions implementing measures Number of measures Russian Federation 45 Argentina 33 India 21 Indonesia 16 Brazil 14 Germany 14 France 13 Spain 12 United Kingdom of Great Britain and Northern Ireland 12 Italy 11 Netherlands 11 Poland 10 Sweden 10 Austria 9 Belgium 9 European Communities 9 Finland 9 Greece 9 Ireland 9 Portugal 9 Bulgaria 8 Cyprus 8 Czech Republic 8 Denmark 8 Estonia 8 Hungary 8 Latvia 8 Lithuania 8 Luxembourg 8 Malta 8 Romania 8 Slovakia 8 Slovenia 8 United States of America 8 Ukraine 6 Viet Nam 6 Belarus 5 Japan 5 Nigeria 5 South Africa 5 Australia 4 Canada 4 Kazakhstan 4 Mexico 4 Republic of Korea 4 CHINA

188 180 Unequal Compliance: The Sixth GTA report Foreign jurisdictions implementing measures Number of measures Turkey 4 Algeria 3 Paraguay 3 Switzerland 3 Bolivia 2 Iran 2 Pakistan 2 Saudi Arabia 2 Singapore 2 Thailand 2 Venezuela 2 Bangladesh 1 Botswana 1 China 1 Colombia 1 Dominican Republic 1 Ecuador 1 Egypt 1 Ethiopia 1 Ghana 1 Iraq 1 Israel 1 Jordan 1 Kyrgyzstan 1 Malaysia 1 Mongolia 1 New Zealand 1 Philippines 1 Sierra Leone 1 Togo 1 Uganda 1 United Arab Emirates 1 United Republic of Tanzania 1 Table Foreign jurisdictions commercial interests affected by China s state measures CHINA Foreign jurisdictions affected Number of measures China 4 United States of America 12 Republic of Korea 10 Germany 9 Italy 9 Japan 9 Netherlands 9 Belgium 8

189 Country-by-Country Reports 181 Foreign jurisdictions affected Number of measures France 8 Russian Federation 8 United Kingdom of Great Britain and Northern Ireland 8 Spain 7 Thailand 7 Austria 6 Czech Republic 6 Indonesia 6 Sweden 6 Australia 5 Canada 5 Denmark 5 Finland 5 Greece 5 Hungary 5 India 5 Ireland 5 Malaysia 5 Philippines 5 Poland 5 Romania 5 Singapore 5 Slovakia 5 Switzerland 5 Viet Nam 5 Bulgaria 4 Costa Rica 4 Estonia 4 Israel 4 Lithuania 4 Luxembourg 4 Mexico 4 Norway 4 Portugal 4 Slovenia 4 Ukraine 4 Brazil 3 Chinese Taipei 3 Croatia 3 Latvia 3 Malta 3 New Zealand 3 South Africa 3 Turkey 3 Argentina 2 Belarus 2 Bosnia and Herzegovina 2 CHINA

190 182 Unequal Compliance: The Sixth GTA report CHINA Foreign jurisdictions affected Number of measures Chile 2 Cuba 2 Cyprus 2 Democratic People's Republic of Korea 2 Dominican Republic 2 Egypt 2 El Salvador 2 Gabon 2 Iceland 2 Iran 2 Iraq 2 Kazakhstan 2 Kuwait 2 Kyrgyzstan 2 Morocco 2 Myanmar 2 Saudi Arabia 2 Tunisia 2 United Arab Emirates 2 Uzbekistan 2 Venezuela 2 Yemen 2 Afghanistan 1 Albania 1 Azerbaijan 1 Bahamas 1 Bangladesh 1 Barbados 1 Belize 1 Benin 1 Bermuda 1 Bolivia 1 Botswana 1 Burkina Faso 1 Cambodia 1 Cameroon 1 Cape Verde 1 Chad 1 China 1 Colombia 1 Congo 1 Côte d'ivoire 1 Democratic Republic of the Congo 1 Ecuador 1 Equatorial Guinea 1 Eritrea 1 Ethiopia 1

191 Country-by-Country Reports 183 Foreign jurisdictions affected Number of measures European Communities 1 Fiji 1 Gambia 1 Georgia 1 Ghana 1 Guatemala 1 Guinea 1 Guyana 1 Haiti 1 Honduras 1 Hong Kong 1 Jamaica 1 Jordan 1 Kenya 1 Lao People's Democratic Republic 1 Lebanon 1 Lesotho 1 Liberia 1 Libyan Arab Jamahiriya 1 Madagascar 1 Malawi 1 Mali 1 Mauritania 1 Mauritius 1 Mongolia 1 Montenegro 1 Mozambique 1 Namibia 1 Nepal 1 Netherlands Antilles 1 New Caledonia 1 Nicaragua 1 Niger 1 Nigeria 1 Oman 1 Pakistan 1 Panama 1 Papua New Guinea 1 Paraguay 1 Peru 1 Qatar 1 Republic of Moldova 1 Rwanda 1 Senegal 1 Serbia 1 Sierra Leone 1 Somalia 1 CHINA

192 184 Unequal Compliance: The Sixth GTA report Foreign jurisdictions affected Number of measures Sri Lanka 1 Suriname 1 Swaziland 1 Syrian Arab Republic 1 Tajikistan 1 Togo 1 Trinidad and Tobago 1 Uganda 1 United Republic of Tanzania 1 Uruguay 1 Vanuatu 1 Zambia 1 Zimbabwe 1 Table Implemented measures that harm China s commercial interests, by type CHINA Type of measure Number of measures As percentage of measures Trade defence measure (AD, CVD, safeguard) % Tariff measure % Bail out / state aid measure % Export taxes or restriction % Non tariff barrier (not otherwise specified) % Export subsidy % Migration measure % Import ban % Public procurement % Local content requirement % Consumption subsidy % Investment measure % Other service sector measure % Trade finance % Competitive devaluation % Sanitary and Phytosantiary Measure % State trading enterprise % Quota (including tariff rate quotas) % State-controlled company % Technical Barrier to Trade % Import subsidy % Sub-national government measure % Total %

193 Country-by-Country Reports 185 Table China s implemented measures that harm foreign commercial interests, by type Type of measure Number of measures As percentage of measures Trade defence measure (AD, CVD, safeguard) % Public procurement % Tariff measure % Export taxes or restriction % Investment measure % Local content requirement % Import ban % Intellectual property protection % Non tariff barrier (not otherwise specified) % Quota (including tariff rate quotas) % Total % CHINA

194 186 Unequal Compliance: The Sixth GTA report CHINA Map 7.9 China: Worldwide incidence of harm done by this G20 member s discriminatory measures

195 Country-by-Country Reports 187 Map 7.10 China: Harm done to this G20 member s commercial interests by others CHINA

196 188 Unequal Compliance: The Sixth GTA report France Table Foreign state measures affecting France s commercial interests Summary statistic of foreign state measures affecting France s commercial interests Total number of measures affecting France s commercial interests Total number of foreign measures found to benefit or involve no change in the treatment of France s commercial interests [1] Total number of foreign measures that (i) have been implemented and are likely to harm France s commercial interests or (ii) that have been announced but not implemented and which almost certainly discriminate against France s interests [2] Total number of foreign measures that have been implemented and which almost certainly discriminate against France s interests [3] Total number of implemented measures affecting France s commercial interests Total number of pending foreign measures likely to affect France s commercial interests Total number of pending foreign measures that, if implemented, are likely to harm France s foreign commercial interests Total number of trading partners that have imposed measures that harm France s commercial interests All measures All measures except antidumping, anti-subsidy, and safe-guard actions FRANCE Note: As the Global Trade Alert database is updated frequently, the above data will change. Updates on the numbers in this table can be found by going to and selecting France in the Affecting Trading Partner and clicking the button Get Stats. [1] These measures are classified green in the Global Trade Alert database. [2] These measures are classified amber in the Global Trade Alert database. [3] These measures are classified red in the Global Trade Alert database.

197 Country-by-Country Reports 189 Table 7.2. France s state measures affecting other jurisdictions commercial interests. Summary statistic of foreign state measures affecting France s commercial interests Total number of France s measures affecting other jurisdictions commercial interests Total number of France s measures found to benefit or involve no change in the treatment of other jurisdictions commercial interests [1] Total number of France s measures that (i) have been implemented and are likely to harm foreign commercial interests or (ii) that have been announced but not implemented and which almost certainly discriminate against foreign interests [2] Total number of France s measures that have been implemented and which almost certainly discriminate against foreign commercial interests [3] Total number of 4-digit tariff lines affected by measures implemented by France that harm foreign commercial interests Total number of 2-digit sectors affected by measures implemented by France that harm foreign commercial interests Total number of trading partners affected by measures implemented by France that harm foreign commercial interests All measures All measures except antidumping, anti-subsidy, and safe-guard actions Note: As the Global Trade Alert database is updated frequently, the above data will change. Updates on the numbers in this table can be found by going to and selecting France in the Affecting Trading Partner and clicking the button Get Stats. [1] These measures are classified green in the Global Trade Alert database. [2] These measures are classified amber in the Global Trade Alert database. [3] These measures are classified red in the Global Trade Alert database. FRANCE

198 190 Unequal Compliance: The Sixth GTA report Table Foreign jurisdictions implementing measures affecting France s commercial interests FRANCE Foreign jurisdictions implementing measures Number of measures Russian Federation 49 Argentina 13 Indonesia 11 China 8 Brazil 7 India 7 Nigeria 7 Belarus 6 Germany 6 Italy 5 Japan 4 Kazakhstan 4 Spain 4 United States of America 4 Algeria 3 Saudi Arabia 3 Switzerland 3 Ukraine 3 Australia 2 Canada 2 Ecuador 2 Finland 2 Netherlands 2 Poland 2 Republic of Korea 2 Singapore 2 Sweden 2 United Kingdom of Great Britain and Northern Ireland 2 Venezuela 2 Austria 1 Belgium 1 Cameroon 1 Ethiopia 1 Gambia 1 Ghana 1 Greece 1 Iran 1 Israel 1 Malaysia 1 Mauritania 1 Mexico 1 Morocco 1 Pakistan 1 Paraguay 1 Portugal 1

199 Country-by-Country Reports 191 Foreign jurisdictions implementing measures Number of measures South Africa 1 Thailand 1 Togo 1 Trinidad and Tobago 1 Turkey 1 United Arab Emirates 1 Viet Nam 1 Zambia 1 Table Foreign jurisdictions commercial interests affected by France s state measures Foreign jurisdictions affected Number of measures China 13 Argentina 8 Canada 8 South Africa 8 Turkey 8 United States of America 8 Australia 7 Brazil 7 Colombia 7 Japan 7 Mexico 7 New Zealand 7 Singapore 7 Switzerland 7 Thailand 7 Croatia 6 India 6 Israel 6 Malaysia 6 Pakistan 6 Peru 6 Russian Federation 6 Serbia 6 Armenia 5 Austria 5 Belarus 5 Belgium 5 Bosnia and Herzegovina 5 Bulgaria 5 Costa Rica 5 Czech Republic 5 Denmark 5 Egypt 5 FRANCE

200 192 Unequal Compliance: The Sixth GTA report FRANCE Foreign jurisdictions affected Number of measures Greece 5 Ireland 5 Italy 5 Kenya 5 Norway 5 Philippines 5 Portugal 5 Republic of Korea 5 Romania 5 Sweden 5 Tunisia 5 Ukraine 5 United Arab Emirates 5 Chile 4 Côte d'ivoire 4 Dominican Republic 4 Estonia 4 Germany 4 Guatemala 4 Lithuania 4 Netherlands 4 Nicaragua 4 Oman 4 Paraguay 4 Republic of Moldova 4 Senegal 4 Slovakia 4 Slovenia 4 Trinidad and Tobago 4 United Kingdom of Great Britain and Northern Ireland 4 Viet Nam 4 Algeria 3 Azerbaijan 3 Bolivia 3 Cyprus 3 El Salvador 3 Ethiopia 3 Finland 3 Hong Kong 3 Hungary 3 Iceland 3 Indonesia 3 Jordan 3 Kazakhstan 3 Lebanon 3 Luxembourg 3 Madagascar 3

201 Country-by-Country Reports 193 Foreign jurisdictions affected Number of measures Mauritius 3 Morocco 3 Namibia 3 Poland 3 Spain 3 Uruguay 3 Zambia 3 Albania 2 Cuba 2 Ecuador 2 Georgia 2 Ghana 2 Honduras 2 Latvia 2 Mali 2 Netherlands Antilles 2 Panama 2 Sri Lanka 2 Uganda 2 United Republic of Tanzania 2 Venezuela 2 Yemen 2 Zimbabwe 2 Barbados 1 Belize 1 Benin 1 Burkina Faso 1 Burundi 1 Cameroon 1 Chinese Taipei 1 Guyana 1 Iran 1 Jamaica 1 Kyrgyzstan 1 Macedonia 1 Malawi 1 Niger 1 Nigeria 1 Palestinian 1 Qatar 1 Saint Lucia 1 Saudi Arabia 1 Sudan 1 Suriname 1 Togo 1 FRANCE

202 194 Unequal Compliance: The Sixth GTA report Table Implemented measures that harm France s commercial interests, by type Type of measure Number of measures As percentage of measures Bail out / state aid measure % Tariff measure % Non tariff barrier (not otherwise specified) % Trade defence measure (AD, CVD, safeguard) % Export subsidy % Export taxes or restriction % Public procurement % Local content requirement % Migration measure % Import ban % Trade finance % Consumption subsidy % Quota (including tariff rate quotas) % Competitive devaluation % Other service sector measure % State trading enterprise % Investment measure % State-controlled company % Intellectual property protection % Sanitary and Phytosantiary Measure % Technical Barrier to Trade % Import subsidy % Sub-national government measure % Total % Table France s implemented measures that harm foreign commercial interests, by type FRANCE Type of measure Number of measures As percentage of measures Trade defence measure (AD, CVD, safeguard) % Export subsidy % Bail out / state aid measure % Investment measure % Consumption subsidy % Export taxes or restriction % Local content requirement % Public procurement % Total %

203 Country-by-Country Reports 195 Map 7.11 France: Worldwide incidence of harm done by this G20 member s discriminatory measures FRANCE

204 196 Unequal Compliance: The Sixth GTA report FRANCE Map 7.12 France: Harm done to this G20 member s commercial interests by others.

205 Country-by-Country Reports 197 Germany Table Foreign state measures affecting Germany s commercial interests Summary statistic of foreign state measures affecting Germany s commercial interests Total number of measures affecting Germany s commercial interests Total number of foreign measures found to benefit or involve no change in the treatment of Germany s commercial interests [1] Total number of foreign measures that (i) have been implemented and are likely to harm Germany s commercial interests or (ii) that have been announced but not implemented and which almost certainly discriminate against Germany s interests [2] Total number of foreign measures that have been implemented and which almost certainly discriminate against Germany s interests [3] Total number of implemented measures affecting Germany s commercial interests Total number of pending foreign measures likely to affect Germany s commercial interests Total number of pending foreign measures that, if implemented, are likely to harm Germany s foreign commercial interests Total number of trading partners that have imposed measures that harm Germany s commercial interests All measures All measures except antidumping, anti-subsidy, and safe-guard actions Note: As the Global Trade Alert database is updated frequently, the above data will change. Updates on the numbers in this table can be found by going to and selecting Germany in the Affecting Trading Partner and clicking the button Get Stats. [1] These measures are classified green in the Global Trade Alert database. [2] These measures are classified amber in the Global Trade Alert database. [3] These measures are classified red in the Global Trade Alert database. GERMANY

206 198 Unequal Compliance: The Sixth GTA report Table Germany s state measures affecting other jurisdictions commercial interests. Summary statistic of foreign state measures affecting Germany s commercial interests Total number of Germany s measures affecting other jurisdictions commercial interests Total number of Germany s measures found to benefit or involve no change in the treatment of other jurisdictions commercial interests [1] Total number of Germany s measures that (i) have been implemented and are likely to harm foreign commercial interests or (ii) that have been announced but not implemented and which almost certainly discriminate against foreign interests [2] Total number of Germany s measures that have been implemented and which almost certainly discriminate against foreign commercial interests [3] Total number of 4-digit tariff lines affected by measures implemented by Germany that harm foreign commercial interests. Total number of 2-digit sectors affected by measures implemented by Germany that harm foreign commercial interests Total number of trading partners affected by measures implemented by Germany that harm foreign commercial interests All measures All measures except antidumping, anti-subsidy, and safe-guard actions GERMANY Note: As the Global Trade Alert database is updated frequently, the above data will change. Updates on the numbers in this table can be found by going to and selecting Germany in the Affecting Trading Partner and clicking the button Get Stats. [1] These measures are classified green in the Global Trade Alert database. [2] These measures are classified amber in the Global Trade Alert database. [3] These measures are classified red in the Global Trade Alert database.

207 Country-by-Country Reports 199 Table Foreign jurisdictions implementing measures affecting Germany s commercial interests Foreign jurisdictions implementing measures Number of measures Russian Federation 50 Argentina 13 Indonesia 13 Brazil 9 China 9 India 9 Belarus 7 Nigeria 7 Kazakhstan 6 Italy 5 Japan 5 Ukraine 5 United States of America 5 Australia 4 France 4 Spain 4 Algeria 3 Saudi Arabia 3 Switzerland 3 Austria 2 Bolivia 2 Canada 2 Denmark 2 Ecuador 2 Finland 2 Malaysia 2 Morocco 2 Netherlands 2 Poland 2 Republic of Korea 2 South Africa 2 United Kingdom of Great Britain and Northern Ireland 2 Viet Nam 2 Belgium 1 Cameroon 1 Egypt 1 Ethiopia 1 Gambia 1 Ghana 1 Greece 1 Iran 1 Israel 1 Mexico 1 Pakistan 1 Paraguay 1 GERMANY

208 200 Unequal Compliance: The Sixth GTA report Foreign jurisdictions implementing measures Number of measures Portugal 1 Sweden 1 Thailand 1 Togo 1 Turkey 1 Venezuela 1 Table Foreign jurisdictions commercial interests affected by Germany s state measures GERMANY Foreign jurisdictions affected Number of measures China 14 Japan 9 Republic of Korea 8 Switzerland 8 United States of America 8 Australia 6 Brazil 6 Denmark 6 France 6 India 6 New Zealand 6 Turkey 6 Austria 5 Canada 5 Egypt 5 Finland 5 Iceland 5 Italy 5 Netherlands 5 Norway 5 Pakistan 5 Russian Federation 5 Singapore 5 Spain 5 Sweden 5 Thailand 5 Argentina 4 Belarus 4 Bolivia 4 Colombia 4 Croatia 4 El Salvador 4 Guatemala 4 Hungary 4 Ireland 4

209 Country-by-Country Reports 201 Foreign jurisdictions affected Number of measures Latvia 4 Oman 4 Paraguay 4 Romania 4 Serbia 4 South Africa 4 United Kingdom of Great Britain and Northern Ireland 4 Armenia 3 Bahrain 3 Belgium 3 Chile 3 Chinese Taipei 3 Costa Rica 3 Dominican Republic 3 Greece 3 Hong Kong 3 Iran 3 Jordan 3 Kazakhstan 3 Lebanon 3 Liechtenstein 3 Malaysia 3 Mexico 3 Nicaragua 3 Panama 3 Peru 3 Philippines 3 Poland 3 Saudi Arabia 3 Slovakia 3 Trinidad and Tobago 3 United Arab Emirates 3 Uruguay 3 Viet Nam 3 Yemen 3 Zambia 3 Algeria 2 Azerbaijan 2 Bosnia and Herzegovina 2 Czech Republic 2 Côte d'ivoire 2 Ecuador 2 Ethiopia 2 Indonesia 2 Israel 2 Kenya 2 Kyrgyzstan 2 GERMANY

210 202 Unequal Compliance: The Sixth GTA report GERMANY Foreign jurisdictions affected Number of measures Lithuania 2 Luxembourg 2 Mauritius 2 Namibia 2 Netherlands Antilles 2 Nigeria 2 Republic of Moldova 2 Sudan 2 Tunisia 2 Uganda 2 Ukraine 2 United Republic of Tanzania 2 Zimbabwe 2 Albania 1 Bangladesh 1 Barbados 1 Belize 1 Bulgaria 1 Burundi 1 Cayman Islands 1 Cyprus 1 Georgia 1 Ghana 1 Guyana 1 Honduras 1 Jamaica 1 Lao People's Democratic Republic 1 Libyan Arab Jamahiriya 1 Macedonia 1 Madagascar 1 Malawi 1 Mali 1 Mongolia 1 Morocco 1 Myanmar 1 Nepal 1 Niger 1 Palestinian 1 Papua New Guinea 1 Portugal 1 Qatar 1 Senegal 1 Slovenia 1 Somalia 1 Sri Lanka 1 Syrian Arab Republic 1 Tajikistan 1

211 Country-by-Country Reports 203 Foreign jurisdictions affected Number of measures Turkmenistan 1 Uzbekistan 1 Venezuela 1 Table Implemented measures that harm Germany s commercial interests, by type Type of measure Number of measures As percentage of measures Tariff measure % Bail out / state aid measure % Export taxes or restriction % Non tariff barrier (not otherwise specified) % Trade defence measure (AD, CVD, safeguard) % Public procurement % Export subsidy % Local content requirement % Import ban % Migration measure % Investment measure % Trade finance % Consumption subsidy % Other service sector measure % Quota (including tariff rate quotas) % Competitive devaluation % State trading enterprise % Intellectual property protection % State-controlled company % Technical Barrier to Trade % Import subsidy % Sanitary and Phytosantiary Measure % Sub-national government measure % Total % Table Germany s implemented measures that harm foreign commercial interests, by type Type of measure Number of measures As percentage of measures Bail out / state aid measure % Trade defence measure (AD, CVD, safeguard) % Export subsidy % Export taxes or restriction % Investment measure % Total % GERMANY

212 204 Unequal Compliance: The Sixth GTA report GERMANY Map 7.13 Germany: Worldwide incidence of harm done by this G20 member s discriminatory measures.

213 Country-by-Country Reports 205 Map 7.14 Germany: Harm done to this G20 member s commercial interests by others GERMANY

214 206 Unequal Compliance: The Sixth GTA report India Table Foreign state measures affecting India s commercial interests Summary statistic of foreign state measures affecting India s commercial interests Total number of measures affecting India s commercial interests Total number of foreign measures found to benefit or involve no change in the treatment of India s commercial interests [1] Total number of foreign measures that (i) have been implemented and are likely to harm India s commercial interests or (ii) that have been announced but not implemented and which almost certainly discriminate against India s interests [2] Total number of foreign measures that have been implemented and which almost certainly discriminate against India s interests [3] Total number of implemented measures affecting India s commercial interests Total number of pending foreign measures likely to affect India s commercial interests Total number of pending foreign measures that, if implemented, are likely to harm India s foreign commercial interests Total number of trading partners that have imposed measures that harm India s commercial interests All measures All measures except antidumping, anti-subsidy, and safe-guard actions Note: As the Global Trade Alert database is updated frequently, the above data will change. Updates on the numbers in this table can be found by going to and selecting India in the Affecting Trading Partner and clicking the button Get Stats. [1] These measures are classified green in the Global Trade Alert database. [2] These measures are classified amber in the Global Trade Alert database. [3] These measures are classified red in the Global Trade Alert database. INDIA

215 Country-by-Country Reports 207 Table India s state measures affecting other jurisdictions commercial interests. Summary statistic of foreign state measures affecting India s commercial interests Total number of India s measures affecting other jurisdictions commercial interests Total number of India s measures found to benefit or involve no change in the treatment of other jurisdictions commercial interests [1] Total number of India s measures that (i) have been implemented and are likely to harm foreign commercial interests or (ii) that have been announced but not implemented and which almost certainly discriminate against foreign interests [2] Total number of India s measures that have been implemented and which almost certainly discriminate against foreign commercial interests [3] Total number of 4-digit tariff lines affected by measures implemented by India that harm foreign commercial interests Total number of 2-digit sectors affected by measures implemented by India that harm foreign commercial interests Total number of trading partners affected by measures implemented by India that harm foreign commercial interests All measures All measures except antidumping, anti-subsidy, and safe-guard actions Note: As the Global Trade Alert database is updated frequently, the above data will change. Updates on the numbers in this table can be found by going to and selecting India in the Affecting Trading Partner and clicking the button Get Stats. [1] These measures are classified green in the Global Trade Alert database. [2] These measures are classified amber in the Global Trade Alert database. [3] These measures are classified red in the Global Trade Alert database. INDIA

216 208 Unequal Compliance: The Sixth GTA report Table Foreign jurisdictions implementing measures affecting India s commercial interests INDIA Foreign jurisdictions implementing measures Number of measures Russian Federation 20 India 14 Indonesia 9 France 6 Germany 6 Spain 6 China 5 Netherlands 5 Nigeria 5 United Kingdom of Great Britain and Northern Ireland 5 United States of America 5 Brazil 4 Algeria 3 Australia 3 Austria 3 Belgium 3 Finland 3 Ireland 3 Italy 3 Japan 3 Kazakhstan 3 Poland 3 Portugal 3 Republic of Korea 3 Saudi Arabia 3 Sweden 3 Ukraine 3 Belarus 2 Bulgaria 2 Cyprus 2 Czech Republic 2 Denmark 2 Ecuador 2 Estonia 2 European Communities 2 Greece 2 Hungary 2 Latvia 2 Lithuania 2 Luxembourg 2 Malaysia 2 Malta 2 Romania 2 Singapore 2 Slovakia 2

217 Country-by-Country Reports 209 Foreign jurisdictions implementing measures Number of measures Slovenia 2 United Arab Emirates 2 Canada 1 Ethiopia 1 Ghana 1 Kenya 1 Mexico 1 Paraguay 1 South Africa 1 Thailand 1 Togo 1 United Republic of Tanzania 1 Venezuela 1 Viet Nam 1 Zambia 1 Table 7.46 Foreign jurisdictions commercial interests affected by India s state measures Foreign jurisdictions affected Number of measures China 21 Japan 13 Republic of Korea 11 Thailand 11 Singapore 10 Germany 9 Indonesia 9 Italy 9 United Kingdom of Great Britain and Northern Ireland 9 United States of America 9 Bangladesh 8 Belgium 8 Brazil 8 Spain 8 Australia 7 Canada 7 France 7 Mexico 7 Ukraine 7 Israel 6 Malaysia 6 Mauritius 6 Netherlands 6 Pakistan 6 Romania 6 Russian Federation 6 Saudi Arabia 6 INDIA

218 210 Unequal Compliance: The Sixth GTA report INDIA Foreign jurisdictions affected Number of measures South Africa 6 Sweden 6 Switzerland 6 Turkey 6 Algeria 5 India 5 Austria 5 Benin 5 Democratic People's Republic of Korea 5 Denmark 5 Egypt 5 Finland 5 Kenya 5 New Zealand 5 Norway 5 Philippines 5 Poland 5 Viet Nam 5 Afghanistan 4 Azerbaijan 4 Bahamas 4 Cambodia 4 Chile 4 Czech Republic 4 Ghana 4 Greece 4 Hong Kong 4 Ireland 4 Kazakhstan 4 Nepal 4 Nigeria 4 Oman 4 Portugal 4 Qatar 4 Senegal 4 Sri Lanka 4 Togo 4 United Arab Emirates 4 Yemen 4 Angola 3 Bulgaria 3 Colombia 3 Congo 3 Croatia 3 Côte d'ivoire 3 Djibouti 3 Dominican Republic 3

219 Country-by-Country Reports 211 Foreign jurisdictions affected Number of measures Ecuador 3 Ethiopia 3 Fiji 3 Gambia 3 Guatemala 3 Guinea 3 Honduras 3 Hungary 3 Iran 3 Jordan 3 Kuwait 3 Kyrgyzstan 3 Latvia 3 Lebanon 3 Lesotho 3 Libyan Arab Jamahiriya 3 Lithuania 3 Madagascar 3 Malawi 3 Mali 3 Mauritania 3 Morocco 3 Mozambique 3 Myanmar 3 Netherlands Antilles 3 Niger 3 Panama 3 Peru 3 Slovenia 3 Sudan 3 Syrian Arab Republic 3 Trinidad and Tobago 3 Tunisia 3 Turkmenistan 3 United Republic of Tanzania 3 Uruguay 3 Venezuela 3 Zimbabwe 3 Armenia 2 Bhutan 2 Bosnia and Herzegovina 2 Burkina Faso 2 Cameroon 2 Estonia 2 Gabon 2 Luxembourg 2 Macedonia 2 INDIA

220 212 Unequal Compliance: The Sixth GTA report Foreign jurisdictions affected Number of measures Maldives 2 Slovakia 2 Uganda 2 Zambia 2 Belarus 1 Costa Rica 1 European Communities 1 Republic of Moldova 1 Somalia 1 Swaziland 1 Table Implemented measures that harm India s commercial interests, by type Type of measure Number of measures As percentage of measures Bail out / state aid measure 38 20,11% Tariff measure 37 19,58% Non tariff barrier (not otherwise specified) 19 10,05% Migration measure 16 8,47% Export taxes or restriction 14 7,41% Trade defence measure (AD, CVD, safeguard) 10 5,29% Local content requirement 8 4,23% Import ban 7 3,70% Public procurement 7 3,70% Export subsidy 6 3,17% Competitive devaluation 4 2,12% Quota (including tariff rate quotas) 4 2,12% Investment measure 3 1,59% Trade finance 3 1,59% Consumption subsidy 2 1,06% Intellectual property protection 2 1,06% Other service sector measure 2 1,06% Sanitary and Phytosantiary Measure 2 1,06% Technical Barrier to Trade 2 1,06% Import subsidy 1 0,53% State-controlled company 1 0,53% Sub-national government measure 1 0,53% Total ,00% INDIA

221 Country-by-Country Reports 213 Table India s implemented measures that harm foreign commercial interests, by type Type of measure Number of measures As percentage of measures Trade defence measure (AD, CVD, safeguard) 23 52,27% Export subsidy 5 11,36% Export taxes or restriction 4 9,09% Tariff measure 3 6,82% Migration measure 2 4,55% Non tariff barrier (not otherwise specified) 2 4,55% Import ban 1 2,27% Investment measure 1 2,27% Local content requirement 1 2,27% Public procurement 1 2,27% Trade finance 1 2,27% Total ,00% INDIA

222 214 Unequal Compliance: The Sixth GTA report INDIA Map 7.15 India: Worldwide incidence of harm done by this G20 member s discriminatory measures

223 Country-by-Country Reports 215 Map 7.16 India: Harm done to this G20 member s commercial interests by others INDIA