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Can export bans be challenged at the WTO?

03/07/11 by  
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Russian grain harvest

Russia’s ban on grain exports as a heat wave parches crops in the world’s third biggest wheat exporter has raised questions whether such export curbs break World Trade Organization rules. Russia is not a member of the WTO, and it remains to be seen how its new grain policy will affect its 17-year-old bid to join. But other grain exporters, such as Ukraine, which is also considering export curbs, are part of the global trade referee.

WTO rules are quite clear that members cannot interfere with imports and exports in a way that disrupts trade or discriminates against other members. But in practice most WTO rules aim to stop countries blocking imports – shutting out competitor’s goods to give their own domestic producers an unfair advantage.

WTO protest

 

 

Saudi Arabia and other members of the oil cartel OPEC (not all of whom are members of the WTO) routinely control the production and hence export of oil to defend target prices, but have not faced challenges at the WTO.

What can be challenged are restrictions on exports designed to hurt competitors. The United States, European Union and Mexico are currently suing China at the WTO over Beijing’s export duties and other restraints on raw materials. They argue that these make the raw materials more expensive for foreign competitors, putting them at a disadvantage to Chinese processors.

The fact is that many WTO rules have an opt-out for national security, whether that is defence, censorship to protect public morals, special treatment of banks to protect the financial system, or food security.

Article XI of the core treaty of the WTO, the General Agreement on Tariffs and Trade, says that apart from duties, taxes and similar charges, you cannot impose any bans or restrictions on imports or exports such as quotas or import or export licences.

But it goes on to say:
“The provisions of paragraph 1 of this Article shall not extend to the following:

(a) Export prohibitions or restrictions temporarily applied to prevent or relieve critical shortages of foodstuffs or other products essential to the exporting contracting party; …”

While the right of a country to protect its own food supply is unchallenged, many economists argue that export bans or other restrictions can make a global food shortage worse.

That was certainly the case in the 2008 food crisis when food prices rose to record levels, triggering shortages and riots from Bangladesh to Haiti. There are fears that rising grain prices now could stoke unrest again.

 

Haiti protest

 

A proposal in early 2008 by Japan and Switzerland to tighten rules on export restrictions in the light of rising prices drew little support from developing countries.

Even inside the countries that use them, export restrictions can be unpopular and have perverse effects. Export taxes on grains imposed by the Argentine government prompted a rebellion by Argentine farmers in 2008 and have made it unprofitable for small farmers to grow corn and wheat, shrinking harvests of those crops.

 

Argentina protest

 

Now the World Bank has called on countries to avoid policies that could precipitate a crisis – such as a food export ban. As the problem won’t be resolved at the WTO, it seems likely that the question of some kind of global “architecture” for food and agriculture will come up at next month’s United Nations conference on the Millenium Development Goals,  or at the next G20 summit in Seoul.

PHOTO CREDIT: Russian grain harvest REUTERS/Mikhail Voskresenskiy, WTO protest REUTERS/Denis Balibouse, Haiti demonstration REUTERS/Eduardo Munoz, Argentine protest REUTERS/Enrique Marcarian

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