Chad P.

Bown and Rachel McCulloch (2007), Trade adjustment in the WTO

system: are more safeguards the answer? , Oxford Review of Economic Policy,
Volume 23, Number 3, pages 415-439

The firms, workers and the industries need to adjust to the continuous changes in the
international markets and new conditions of competition in order to offer the posibility to
countries to engage succesfully in the international trading system. Thechnological innovation
and changes in input-market conditions produce shifts in comparative advantage and can also
allow trade in goods and services that were previously non-tradable.
This article examines and highlights the range of adjustment problems that are relevant for
developing countries, the WTO regime experiences two conceptually distinct types of
adjustment problems confronting the current and future international trading system.
The article is divided in five sections, the first setion is the Introduction, the second section
reviews the adjustment pressures induced by trade policy change and the resuts of shifting
economic fundamentals in the market economies of a liberal trading regime that most
commonly trigger the need to adjust, and then considers justifications as viewed from a global
perspective for policies to facilitate national adjustments by improving the functioning of the
markets for productive inputs and by providing a social safety net, without inreasing the
incentive for productive inputs to remain in the shrinking sector unless the sector is associated
with a significant positive externality. The third section presents our analysis of adjustment,
examining in turn the arguments for intervention on the grounds of economic efficiency. A
significant poitive externality may be the private adjustment activities, another kind of
externality that may be relevant in considering trade adjustment concerns the benefits to
partner countries from one countrys adjustment. The possibilities for using compensatory
transfers to reach an efficiency-enhancing agreement among subsets of countries when bound
by rules of consensus, and the potential role of capacity-building investments to promote
adjustment, poor countries may require help to realize the potential benefits from integration
into world markets.
The fourth section describes the current WTO Agreements that affect the adjustment
environment and it is pointed out the evidence of the increasing unse of the policies by WTO
members, especially developing countries, to postpone adjustment. In this section are
discussed the WTO rules allowing use of trade remedies- safeguards and antidumping
measures- and how the existence of these options may implicitly discourage adjustments in
countries that have agreed to liberalize their import markets. Tha data from 1995-2005 show
that many developing countries( 29) have joined the 7 developed countries as active users of
safeguard measures. The safeguar policies have some positive attributes like reqired
compenation, time limits, and MFN application. In principle, a national government could
apply a WTO-sanctioned safeguard policy to shield a domestic industry temporarily from
import competition while it facilitates the exit of firms and workers from the import impacted
industry and their transition to expanding sectors of the economy but in practice the
safeguards are rarely employed for this purpose. Instead, the law is typically used to
implement tariffs, quotas, or tariff-rate quotas that simply offer breathing space to domestic
import-competing producers by limiting competition from abroad. The WTO Agreement on

Antidumping permits a national government to implement legislation to impose import

restrictions after an investigation that determines less-than-normal-value pricing by foreign
firms and associated injury to the domestic import-competing industry. The recent adoption of
antidumping laws by many WTO members and their increasing use by developing as well as
developed countries may have a profound anti-adjustment impact.
In conclusion, we have found out that the WTO regime suffers from two conceptually
distinct types of adjustment problems. The fist one, achieving gains through multilateral
liberalization rewuires appropriate adjustment within member countries, with previously
protected import-competing industries shrinking in size, and current and potential export
industries growing. The second one, individual WTO members must also adjust to continuing
changes in competitiveness arising from the natural evolution of member economies.
I think that even though the antidumping measures are the easiest to apply from a political
point of view they shouldnt be applied because it is expensive to initiate and to prove a case
of antidumping and the developing economies dont have the necessary financial resources
and I also think that neither the safeguard measures shouldnt be applied because in order to
use a safeguard mesure the member states must have a related legislation in place and many
of the developing countries dont have it. I also disagree with these measures because by
implementing them, by restricting the imports, the firms and factor owners from the country
in which are implemented do not have anymore enough incentives to adjust to the continuous
changes in the international markets and new increasd international competition, so they
dont do nothing to become at least more competitive, to come with inovations or to move
into another sector of the industry that is in expansion.