Skip to content

Protectionism and Trade Barriers

A great many factors can make it difficult to export. When governments and public authorities prevent trade or make it difficult to trade, it may be a matter of protectionism and trade barriers. In addition, the finance crisis has reinforced protectionist tendencies in many export markets.

Please find here background information about the Government’s proactive trade policy strategy and about the financial crisis and trade barriers. There is also further information about the EU Market Access Strategy and about Dismantling of trade barriers in the WTO.
Open all sections
Close all sections

A Proactive Trade Policy Strategy

Against the background of the work performed by the Globalisation Council, the Government in April 2006 presented its strategy for Denmark in the global economy with 350 specific initiatives. One of these initiatives was to draw up a proactive trade policy strategy (in Danish only) with a view to identifying and lowering the trade barriers that Danish companies encounter in particular in the growth markets. The Government’s point of departure is that trade liberalisation is basically beneficial as it generates increased competition, economic growth and a better allocation of limited global resources.

Trade liberalisation may be achieved along three tracks. For the Government and a broad majority in the Folketing (Danish Parliament) the multilateral trading system in the WTO is the first priority: the WTO constitutes the best platform for fostering free and fair global trade. However, EU bilateral and regional free trade and investment agreements may constitute a good supplement to this if the agreements are ambitious and may be incorporated into the WTO at a later stage. Lastly, the cooperation between the Government and the business community is an important third track, which is often the swiftest way to solve specific trade policy problems.

On this trade policy foundation, the strategy has been built around a number of analyses many of which have been produced in close dialogue with the business community – both trade organisations in Denmark and companies in export markets. With focus on the growth markets outside the EU, the strategy considers from a Danish perspective which sectors and products may be particularly interesting in the years ahead. Subsequently, the strategy identifies the most significant trade barriers that prevent Danish companies from making use of the potential.

Especially three challenges are immediately apparent: first, targeted efforts need to be made, especially through the EU, to realise an ambitious trade policy dialogue not least in Asia where the EU has not yet concluded a single free trade agreement - in contrast to many of our competitors on global markets. Second, it is necessary to place enhanced Danish focus on the new growth markets where the greatest future economic and demographic developments are expected to take place in the forthcoming decades. Third, there is a need for strengthened dialogue between the Government and the business community on how to identify, prioritise and lower trade barriers on an ongoing basis.

With its 13 specific trade policy initiatives, the strategy plans to address these three challenges multilaterally, bilaterally and in cooperation with the Danish business community. The approach is proactive with focus on opportunities and shared benefits from liberalised trade – since protectionism and defensive measures do not lead to any sustainable results. With the 13 initiatives, the trade policy is to contribute to maintaining and developing Denmark’s position among the best in the global economy.

The Financial Crisis and Trade Barriers

One of the risk elements that have been in focus in the wake of the international financial crisis is increased protectionism and new trade barriers. Much attention has been given to whether countries would try to get through the crisis by erecting new trade and investment barriers.
The G-20 Heads of State and Government met in Washington in November 2008 and in London in April 2009. On both occasions, the countries committed themselves to refraining from introducing new trade barriers:
 
 
The plan is to hold a G-20 Summit in Canada in June 2010 and in Korea in November 2010. Subsequently, an annual G-20 Summit will be held, which will take place in France in 2011.
 

EU Market Acces Strategy

EU action against trade barriers is imbedded in the Directorate-General for Trade of the European Commission. A key element is a special database with trade barriers for EU exports.

The EU Commission is responsible for negotiating all trade agreements on behalf of EU Member States both at global level (WTO) and bilaterally (free trade agreements). As head of the Directorate-General for Trade (DG Trade), Commissioner for Trade Baroness Ashton is in charge of these negotiations.

In close cooperation with the Member States, the Commission is also responsible for ensuring that the market access achieved by concluding these agreements is guaranteed in practise.

In 2007, the EU Market Access Strategy was strengthened as part of "Global Europe".

The new strategy comprises the following significant elements:

  • A Market Access Advisory Committee (MACC) headed by the Commission including the participation of representatives of all Member States. The Committee convenes once a month in Brussels to discuss all questions in connection with the implementation of the Market Access Strategy as well as specific, important market access questions of general interest. Furthermore, under the Committee, special working groups known as Market Access Working Groups (MAWG) have been set up to discuss sector-specific issues.
  • Various Market Access Teams (MAT) in the affected third countries in which the EU has significant export interests. The individual teams are headed by local representatives of the Commission and include representatives of all Member States’ embassies. They convene on a regular basis in the individual third countries and report back to DG Trade on various market access problems encountered by European companies. Similarly, they meet with the authorities in the third country in question to solve specific problems. In the light of the fact that these groups represent the entire EU, it is vital that the problems encountered by Danish companies are given priority in this work.
  • A Market Access Database (MADB) that provides online registration of barriers that are under investigation by the EU.

On the basis of the information that is collected through the Market Access Teams and is reported to the Market Access Database, the Commission has a unique, updated picture of the market access problems that European companies are faced with in their exports to individual markets.

The Commission and the EU Presidency meet on a regular basis with EU trading partners to solve market access problems, both problems of an illegal nature (for example violations of WTO agreements and of bilateral free trade agreements), and problems in the form of legal obstacles that can be reduced (for example high tariff rates).

The collected information is also channelled to the Commission’s negotiating teams that are in charge of negotiating changes to existing trade agreements as well as new agreements.

Dismantling of Trade Barriers in the WTO

In the World Trade Organisation (WTO), the countries negotiate new agreements on the liberalisation of international trade by removing tariffs and other barriers and by drawing up common rules. In addition, it is also the task of the WTO to ensure that the countries comply with the rules that have been agreed.

The World Trade Organisation (WTO) was established in 1995 to replace the former GATT (General Agreement on Tariffs and Trade).

GATT was established after the Second World War against the background of the economic crisis in the 1930s. The point of departure was that the members were to freeze existing tariff levels, for example customs duties and quotas, and subsequently phase them out. At the same time, rules were laid down for the purpose of achieving transparency, predictability and equal treatment in international trade. The aim and objective was to prevent protectionism.

Between 1947 and 1994, eight rounds of negotiations were held. The result was, among other things, that tariffs between industrialised countries were reduced to less than 5 per cent on average. However, it meant that other obstacles to trade became more significant. In international trade, focus was at the same time also placed on other areas than trade in goods.

Following the so-called Uruguay Round, the WTO was established as an international organisation. Pascal Lamy has served as Director-General of the WTO since 2005. Within the framework of the WTO, special agreements have been made for

Furthermore, a special agreement has been concluded on the settlement of disputes between WTO members. The point of departure is that the countries themselves are to seek to negotiate a solution. If they do not succeed, a decision will be taken by the Dispute Settlement Body, which functions much like a court.

In addition, there is a special system for regular reviews of the members’ trade policy, known as Trade Policy Reviews (TPR).
 
In the light of the financial crisis, it was decided to enlarge the TPR to also include regular consultations on the most recent developments in international trade policy. The background to this was that the group of heads of state and government who met within the framework of G-20 in Washington in November 2008 to discuss the financial crisis had urged that no new trade barriers be introduced in the wake of the crisis.

The first WTO consultation on trade barriers as a result of the financial crisis took place in February 2009. Since then, consultations have been held on a regular basis. They take place on the basis of a report submitted by the Director-General regarding developments and steps taken by members. The reports are available here

Open all sections
Close all sections
Eksportrådet - The Trade Council
Ministry of Foreign Affairs of Denmark
The Trade Council
Asiatisk Plads 2
DK-1448 Copenhagen K

Phone: +45 33 92 05 00
eksportraadet@um.dk