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PRESS/565 
22 July 2009 
 
(09-3565) 
WORLD TRADE REPORT 
Keeping trade open in times of crisis 
In times of economic crisis, governments face pressure to adopt measures which may restrict 
trade and there are real dangers that such pressu res, if not addressed adequately, can lead to a 
dangerous escalation. Contingency measures can act as a safety valve in such instances and can 
play an important role in maintaining a rule-based system of multilateral trade.   
These are the conclusions of World Trade Organization economists in a report on contingency 
measures in the WTO’s 2009 World Trade Report.   
This year’s Report examines the range of measures in WTO trade agreements that governments 
may call upon when facing economic difficulties  (such as safeguards, anti-dumping, increase in 
tariffs up to allowed WTO ceilings etc) and the role that these measures can play. Trade growth 
will be strongly negative this year. Although this contraction appears to be slowing, the economic 
situation remains fragile. Continuing downside risks led WTO economists to revise further downward its forecast for 2009 world merchandise trad e from a decline in volume of 9 per cent to 
a decline of 10 per cent. The response of governments around the world will play a big part in 
determining the magnitude of this decline and its duration.   
“The topic for this year’s World Trade Report is highly relevant to the challenge of ensuring that 
the channels of trade remain open in face of economic adversity. Well-balanced contingency measures, designed primarily to deal with a variety of unanticipated market situations, are key to 
the effectiveness and the stability of trade agreements and to avoiding high intensity 
protectionism” said Director-General Pascal Lamy in his introductory comments to the Report.   
Through an economic, legal and political economy analysis of some measures of contingency, the 
Report explores the reasons why countries introduce contingency provisions in trade agreements, why they may resort to measures of contingency protection as well as the implications for an 
economy and for the trading system as a whole.  
 While these actions restrain trade flows, they also provide governments with a political margin of 
manoeuvre and can act as a safety valve when polit ical pressures build. Contingency measures can 
be seen as an instrument of adjustment polic y, to allow for temporary relief from import 
competition and to give the domestic firm the time to make the necessary adjustments. They can PRESS/565 
Page 2 of 2 
 
 also serve to deter certain trade actions employed by trading partners. Moreover, they can act as 
a means of helping to maintain the rule of law in international trade, in that they channel 
otherwise arbitrary protectionist actions into pre scribed and predictable policy measures. Finally, 
contingency measures may simply reflect the reality that the future is uncertain and it is either too 
costly or impossible to foresee all possible set of circumstances when to regulate government 
behaviours.   
The introduction of contingency measures in a trade agreement can be instrumental if 
governments are to agree to ambitious levels of trade opening. Governments may be more willing 
to accept deeper commitments knowing that they have adjustment policy tools in the form of 
contingency measures. In addition, contingency measures preserve the credibility of an 
agreement. An agreement that foresees the possibility to use certain measures to manage unforeseen circumstances of economic or non-ec onomic difficulties has a better chance of 
remaining robust than an agreement that results in regular non-compliance. 
 Trade policy flexibilities are not harmless. The Report highlights the importance to distinguish 
between the initial motivations for introducing flexibilities in a trade agreement and the 
consequences of using such flexibilities. The fact that trade contingency measures are necessary to ensure further opening and stability of a trade agreement does not mean they are without cost. 
First, in the absence of market failures, trade restrictions will cause losses in economic welfare. 
Second, flexibilities may be used to backslide on previous commitments.   
“The challenge in designing contingency measures is to strike a balance between flexibility and 
commitments. Too much flexibility may undermine the value of commitments but too little may render the rules unsustainable. It is for this reas on that the design of contingency measures is 
frequently a central element of negoti ations”, said Director-General Lamy. 
 The analysis of economic effects of the use of contingent measures reviewed in the World Trade 
Report suggests two main conclusions. First, the design of such measures should aim at limiting 
the circumstances when they can be used as a protectionist device. Second, the design of contingency measures should not undermine the role of trade agreements. Contingency measures 
should not be designed in a way that upsets  the balance of a trade agreement nor which 
undermines governments’ objective of making a binding commitment to the private sector. 
 
The Report also analyses whether WTO provisions provide a balance between giving governments 
necessary flexibility to face diffic ult economic situations and limiting the use of these measures for 
protectionist purposes. In so doing, the Report focuses primarily on safeguards, such as tariffs and 
quotas, which may be introduced to counter increased imports deemed injurious to domestic 
industry, anti-dumping duties which can be impo sed to respond to alleged injury caused by 
“dumped” imports, and countervailing duties which can be used to offset foreign subsidies 
considered injurious to the domestic industry. The Report also discusses policy options, such as 
the renegotiation of tariff commitments, the use of export taxes, and the increases in tariffs up to 
their legal maximum ceiling or binding.    
 
One overall conclusion of the Report is that since flexibility is not costless, exercising restraint is beneficial. Transparency and effective monitoring  may make a decisive contribution to help 
manage trade policy, especially in adverse economic circumstances. Free-flowing information on 
policies affecting trade is essential for cooperation among countries seeking to manage the crisis. Comprehensive and timely notification of trade co ntingency measures to the relevant WTO bodies 
is needed to ensure proper monitoring.  
END