What is neo (new) protectionism under WTO?

WTO is the institution known for promoting trade liberalization. At the same time, it gives right to members to impose trade barriers including import duty during special circumstances. These restrictive trade practices should be for legitimate objectives such as the protection of human, animal or plant life or health, or the protection of consumers, counteract dumping and export subsidies.

           The WTO sanctions the following import restriction measures under special circumstances. The member countries can impose these measures, as the circumstance requires.

  1. Anti-Dumping duty – can be used by the importing country against large quantity of cheap imports. If the imported commodity is priced lower than that of the price existing in the domestic market of the exporting country an anti- dumping duty can be imposed
  2. Countervailing duty – Here, an import duty can be imposed on imports if the country from which the imports are coming gives export subsidy there. For example, suppose that Chinese government is giving export subsidies to producers of iron and steel. Here, India can impose countervailing duties on Chinese iron and steel imports.  In some cases, countervailing duties are imposed to overcome excise duty concession extended to local firms by the government for producing this item.
  3. Special Safeguard Duty: (Product Safeguard measure)– if imports in large volume are posing injuries to the domestic industry, the importing county can safeguard its industry by imposing a special safeguard duty on imports.
  4. Agreement on the Application of sanitary and phytosanitary measures: If imports from other countries are causing environmental, health and safety problems, the country can impose heavy import taxes.
  5. Agreement or Technical Barriers to Trade: Its objective is to ensure that technical regulation and standards including packaging, labelling requirements and procedures do not create unnecessary obstacles to international trade.

       These measures are available to all countries to protect their domestic sectors against unfair practices like dumping. But complaints regarding the imposition of these measures can be filed with the WTO’s Dispute Settlement Body (DSB) whose verdict will be binding for the members.

       Working of WTO in the last two decades indicate that the developed countries are using these measures lavishly to restrict imports from developing world. Hence the use of these instruments in an unfair manner is called as neo-protectionism or new protectionism by developing countries.