WTO says governments restricting, distorting trade

GENEVA (Reuters) - Governments are continuing to restrict unfairly and distort commerce in response to the global economic downturn, the head of the World Trade Organisation said on Wednesday.

"In the past three months there has been further slippage towards more trade restricting and distorting policies, but resort to high-intensity protectionist measures has been contained overall," Pascal Lamy said in a report to WTO members, a copy of which was obtained by Reuters.

Dairy, iron, steel, cars, chemicals, plastics and textiles have been shielded most in the recession, and some countries have hampered trade in energy and financial services, the report found. It also cited undue import limits, mainly on pork, imposed after the outbreak of H1N1 flu.

Lamy described the global economic situation as "fragile" and said global merchandise trade would likely fall 10 percent in 2009, more than the WTO's previous estimate of a 9 percent drop.

Most pain would be felt in developed economies, whose exports are expected to drop 14 percent this year, while developing countries' exports would decline about 7 percent, according to the report.

The biggest export falls seen so far have been in cars, car parts and machinery, dealing a blow to rich nations such as Germany, the report said. It also detailed a slide in exports of primary and intermediate goods from emerging economies.

"In April (year on year), the value of China's exports of iron and steel dropped 67 percent and its exports of mineral ores and non-ferrous metals fell 64 percent," the report said.

"The risks to trade growth remain firmly on the downside," the report found, while opening the door to a quick improvement if global output picks up. "There is a possibility that even a small recovery in global demand will be associated with a much larger increase in trade," it said.