RECENT PATTERNS OF INTERNATIONAL TRADE RESTRICTIONS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP80T00702A000400020006-8
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 18
• Document Creation Date: December 20, 2016
• Document Release Date: February 5, 2004
• Sequence Number: 6
• Publication Date: September 1, 1978
• Content Type: REPORT

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Recent Patterns of International
Trade Restrictions
Central Intelligence Agency
National Foreign Assessment Center
Summary
This study analyzes the upsurge in international trade restrictions since
the OPEC oil price hikes in 1973 and 1974 and the subsequent slowdown in
global economic activity. It examines the factors behind protectionist pres-
sures and the reactions to these pressures by affected countries. Where
feasible, it presents examples for specific countries of the volume of trade
affected by recent import restrictions.
The recent restrictions have occurred despite periodic trade negotiations
that, under the General Agreement on Tariffs and Trade (GATT), have
dramatically reduced tariffs on imports since World War II. For example, the
Kennedy* Round of trade negotiations in the early 1960s cut industrial
country tariffs on manufactured goods by 35 percent to an average of about
10 percent. The present round of trade negotiations is trying to lower existing
tariffs by some 40 percent and formally to reduce nontariff trade barriers.
Tariff reductions since World War II have contributed to a eighteenfold
increase in world exports-from $53 billion in 1948 to more than $1 trillion in
1977--but nations adopting trade restrictions have shifted more and more to
nontariff measures that can be taken within the GATT framework in special
circumstances.
There are both cyclical and structural factors underlying the present
climate of trade restriction. The cyclical factors derive from the sluggish
global economic performance since 1973 that has raised unemployment in
several industrial countries to the highest levels in over 20 years. (Some 17
million workers are estimated to be presently unemployed in countries
associated with the Organization for Economic Cooperation and Development
(OECD), excluding Portugal and Turkey.) The structural factors stem from
fundamental changes in world production and consumption patterns since the
1960s that have been altering international trade flows. Because of shifting
cost advantages, Japan has strengthened its position as a major exporter of
ER 78-10545
CONFIDENTIAL September 1978
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higher technology industrial products. Developing countries like Hong Kong,
Taiwan, and South Korea have become important suppliers of lower technol-
ogy manufactures to industrial countries and are moving into higher technol-
ogy areas with a widening range of exports. Industrial countries affected by
these developments must make a long-run structural adjustment of produc-
tion and employment, but the adjustment is being delayed by the economic
pressures of the slow economic recovery and by the political pressures of
business and labor interests.
The nontariff barriers that have dominated recent trade restrictions
include import quotas, "voluntary" export agreements or orderly marketing
arrangements imposed on exporting countries, minimum price regulations on
imports, import licensing requirements, and antidumping regulations against
goods imported at "unfair" prices. The restraints have been directed mainly
at textiles, iron and steel, footwear, and selected consumer electronics, such as
television receivers. These categories represent around 10 percent of world
trade, but the value within the trade categories that have been affected by
restrictions since 1975 is estimated to be less than 5 percent of world trade.
Restrictions on textiles have been the most intensive, being based on a
GATT Multifiber Arrangement (MFA) between countries that together
account for over 80 percent of the $60 billion world trade in textiles. At the
present time, however, the restrictions are concentrated on imports valued at
about $7 billion a year. The value of steel imports subject to recent minimum
price regulations in the European Community (EC) and the United States
exceed $18 billion a year. The trade in footwear and consumer electronics
subject to recent restrictions is each worth less than $2 billion annually.
The United States, the EC, the European Free Trade Association
(EFTA), Canada, and Australia have imposed textiles restrictions that have
mainly affected Hong Kong, South Korea, and Taiwan-the largest exporters
among the less developed countries (LDCs). US, Canadian, and Australian
import restraints on footwear have been largely directed at South Korea and
Taiwan. Japanese television receivers have been restricted by the United
States and the United Kingdom. The United Kingdom has also restricted
television receivers from Singapore, South Korea, and Taiwan. The same
pattern of trade restrictions is likely to continue in the next year or two unless
there is a substantial economic upturn in the industrial countries.
1i
CONFIDENTIAL
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Recent Patterns of International
Trade Restrictions
Decline in Trade Restrictions Following World
War II
Since World War II, worldwide trade liberal-
ization has been spearheaded by the General
Agreement on Tariffs and Trade (GATT) of
1947. GATT membership mushroomed during
the next 20 years as newly independent countries
joined. Periodic tariff reductions resulted from
GATT negotiations. Since trade liberalization
arrangements made outside the GATT can re-
ceive GATT sanction, many regional organiza-
tions also encouraged trade liberalization among
their members.'
Resurgence of Trade Barriers Since 1975
Under the GATT, 'tariffs on imports have
fallen dramatically since World War II. For
example, the Kennedy Round of tariff negotia-
tions in the 1960s reduced industrial country
import tariffs on manufactures by 35 percent to
an average of about 10 percent. No similar gains
were made in nontariff trade barriers, and coun-
tries involved in the recent surge in protectionism
have taken advantage of provisions within exist-
ing trade liberalization programs that allow im-
port restrictions under special conditions. For
example, various articles of the GATT sanction
(a) quantitative restrictions for countries with
balance-of-payments difficulties, (b) safeguard
measures against import threats to domestic
producers, (c) antidumping duties, and (d) re-
taliatory protective measures. The GATT Multi-
fiber Arangement (MFA).-aimed at an orderly
promotion and expansion of international trade
in textile products-sanctions export restraints,
I Article I of the GATT requires import and export duties to be
nondiscriminatory and equal to the most favorable treatment
received by a GATT member. GATT exceptions to this "most
favored nation" provision have included reduced trade barriers
between associated members and preferential systems that favor
LDCs.
bilateral agreements, and various defensive ac-
tions against imports. Variable levies on agricul.
tural imports are basic to the EC Common
Agricultural Policy.
The Most Common Nontariff Restrictions*
Quantitative restrictions specify maximum
quantitites of imports of particular items
over a given period.
Discriminatory bilateral agreements are
trade agreements with individual exporting
countries that result in different degrees of
trade restraint on exporters of the same
product.
Export restraints restrict exports at the
urging of importing countries, which would
otherwise unilaterally apply import curbs.
Minimum price regulations specify the
minimum prices at which selected goods
may be imported, directed at foreign ex-
porters who are deemed to charge artificial-
ly low prices.
Licensing requirements allow the discre-
tionary administrative authorization of
imports.
Antidumping and similar regulations are
countervailing actions, usually in the form
of nontariff charges, against goods regard-
ed as being imported at "unfair" prices.
* For a more extensive list of nontariff barriers, sec
the appendix.
Weak global economic performance since
1973 has been the major impetus to the new
import restrictions. In developed countries, in-
dustrial employment has been generally de-
pressed since the massive oil price hikes of 1973
and 1974. The escalating import restrictions
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have, therefore, been directed largely at industri-
al products. Most countries already have long-
established protection against agricultural im-
ports. In the LDCs, the impact of higher oil
prices and sluggish exports to industrial countries
led to a belated tightening of imports, mainly
from industrial countries, after 1975. At the
same time, the LDCs sought to boost exports to
ease their financial plight. The surprisingly
strong recovery of LDC exports following the
mild economic expansion in industrial. countries
in 1.976 increased the penetration of markets in
developed countries by LDC manufactures. Rap-
idly rising exports of manufactures from LDCs
like Hong Kong, South Korea, and Taiwan to-
gether with excess capacity and unemployment
in industrial countries have spurred the latter to
curb imports.
Excess manufacturing capacity in industrial
countries has also put pressure on manufacturers
to sell output abroad below domestic prices or
production costs. Claims of dumping have multi-
plied against both industrial countries and
LDCs.
Restrictions Imposed by Major Countries
Recent import restrictions imposed by indus-
trial countries have concentrated on textiles, iron
and steel, footwear, and selected consumer elec-
tronics. Individual importing countries have also
restricted other product lines as circumstances
warrant. When restrictions are imposed, coun-
tries generally claim that the restrictions are
temporary.
Since 1975 the European Community has im-
posed several new restrictions. The most impor-
tant are:
? A voluntary export agreement with Ja pan to
reduce 1977 Japanese steel exports to 1.4
million tons, 15 percent below the 1976 level
(November 1976), and similar steel negotia-
tions in 1976 and 1977 with Spain, Sweden,
South Africa, and some East European coun-
tries without formal announcements of the
results.
? Import quotas on selected textile products
from Colombia, Egypt, India, Malaysia, Mo-
rocco, Pakistan, Spain, Tunisia, and Turkey
to hold the quota levels for the second half of
1977 at 50 percent of those for all of 1976,
(July 1977).
? The setting of minimum (reference) prices
for some 140 steel product imports, effective
January through March 1978, to be replaced
by voluntary export agreements through De-
cember 1978 with the EFTA, East European
countries, Japan, Brazil, South Korea, Spain,
and Finland (December 1977).
The EC restriction on steel imports was the
culmination of a gradual process that included
an antidumping duty on Japanese ball and ta-
pered roller bearings (February 1977) 2 and tem-
porary crisis measures on steel, which included
compulsory licensing of, but no formal restric-
tions on, steel imports (May 1977).'
EC import restrictions under safeguard, sur-
veillance, and antidumping provisions averaged
six a year from 1971 to 1974, but leaped to an
average of 26 a year in the period 1975-77.
Forty-four of the 77 total trade actions in 1975-
77 were against textile products and were in
addition to tile agreements under the
MFA
Among EC members, substantial import re-
straints have been introduced by the United
Kingdom, Ireland, and, to a lesser extent,
France. Measures taken by the United Kingdom
cover a broad range of products.
Television receivers:
? Import quotas of 70,000 units on mono-
chrome receivers from Taiwan for October
1976 to December 1977 (September 1976)
and 35,000 units for 1977-78 from South
Korea (July 1977); and an export limita-
tion agreement with Singapore (July
1977).
? An informal agreement with Japanese ex-
porters to hold the Japanese share of the
UK market constant, at around 10 percent
(November 1976).
'This duty was suspended after Japanese exporters agreed to
raise prices.
' This surveillance licensing facilitates the monitoring of imports.
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BIG SEVEN: Employment Trends
Index: 1975?=100, seasonally adjusted
120 United States
I IIIIIIV I 11111 IV I IIIIIIV I
197'1 72 73
577126 8-78
1 IIIIIIV I II III IV I IIIIIIV I II 111117 1,11 Ill IV I I IIIIV I IIIIV
1971 72 73 74 75 76 77
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Clothing:
? Import quotas on milled or handloomed
shirts and blouses from India which re-
duced the 1977 import volume by nearly 6
million units below 1976 (March 1977).
? Limitations for 1977 on import increases
from Macao to 5 percent or less for various
categories (April 1977).
Steel:
? Antidumping duties on stainless steel bars
from Spain (April 1977).
? A temporary ban on all steel imports from
the USSR after a sixfold increase in im-
port volume to 100,000 tons for 1977
(December 1977).
Footwear:
? A 12-month, 7.5-million-pair import quota
on Taiwanese nonrubber footwear from
August 1977 and surveillance licensing of
all footwear imports from Taiwan and
several other countries, effective Septem-
ber 1977 (August 1977) (Taiwan had
shipped 10.9 million pairs of footwear to
the United Kingdom between January and
July 1977).
Automobiles:
? An export agreement with Japan to hold
1978 shipments of automobiles and light
commercial vehicles at 1977 levels (March
1978).
Ireland was particularly active with antidump-
ing legislation in 1977. For example, levies were
made on hardboard from Czechoslovakia and
Poland, domestic refrigerators from the Soviet
Union, reinforcing steel bars and angles from
Spain and South Africa, wooden louvre doors
from Taiwan, and bond printing paper from
Brazil. France banned radio imports from
Taiwan (October 1976) and placed quantitative
restrictions on shirts, blouses, T-shirts, and cot-
ton thread imported from all countries except
those with preferential trade arrangements with
the EC (June 1977).'
Import restraint activity also intensified in
1976 and 1977 in non-EC industrialized coun-
tries.
Canada imposed a three-year global import
quota on double-knit fabrics and temporarily
restricted imports of various clothing items at
1975 levels (November 1976). More recently,
Canada applied a three-year global quota to
certain footwear, holding imports at the 1974-76
average level (December 1977).
Portugal set import quotas on 27 categories of
products amounting to about 6 percent of total
imports (February 1977).
Australia imposed quotas on imported assem-
bled passenger cars to keep the number fairly
constant through 1979 at 90,000 to 94,000 units
'The French textile restrictions were rescinded when the EC
imposed its July 1977 textile restraints.
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(July :1977). Australia also tightened curbs on
textiles, clothing, and footwear imports in 1977
and ended New Zealand's traditional exemption
from Australian import quotas by setting import
limits on clothing from New Zealand. Restric-
tions were also tightened by Sweden (textiles and
footwear), Norway (textiles), and Switzerland
(textiles and wines).
In contrast with most other industrialized
countries, Japan and West Germany have not
appreciably increased import restrictions since
1974. Japan already has substantial trade bar-
riers and is under international pressure to re-
duce its massive trade surplus, which was $17
billion in 1977. West Germany, with a more
liberal. foreign trade policy, has resisted increas-
ing import restrictions despite unemployment
pressures in the steel industry.
Recent import actions by the United States
have included:
? A three-year voluntary agreement with Ja-
pan to hold exports of Japanese color televi-
sion receivers at 1.75 million. units annually,
37 percent below 1976 shipments (May
1977).
? A three-year orderly marketing arrangement
with Japan and quotas on imports from other
foreign suppliers, for most categories of spe-
cialty steel (June 1977).
? Orderly marketing arrangements with South
Korea and Taiwan to limit average annual
increases in footwear imports to less than 2
percent and 4 percent, respectively, through
mid-1981, with quantities well below 1976
levels (June 1977).
? A. system of minimum import ("trigger")
prices for steel, effective February 1978, de-
signed to generate swift antidumping action
if violated (December 1977).
? A hike in sugar import tariffs and the levying
of an additional import fee, both designed to
establish an import price floor (January
1978).
? Increased tariffs on citizens' band radio
transceivers from 6 percent to 21 percent in
1978, with a graduated decline to 6 percent
in 1981 (April 1978).
Several LDCs, including Bolivia, Brazil, the
Dominican Republic, Ivory Coast, Jamaica,
Kenya, Panama, Peru, Tanzania, and Thailand,
have also increased import restrictions since
1975, largely because of balance-of-payments
constraints. A few countries like Argentina,
Bangladesh, Chile, Colombia, India, Pakistan,
and South Korea have relaxed their import poli-
cies because of improved balance-of-payments
positions or a desire to attain higher economic
growth rates.
Impact of Recent Trade Restrictions
The impact of recent trade restrictions on
exporting and importing countries depends on
several factors, including the types of controls,
the number of countries adopting restrictions on
particular commodities, the importance of the
commodities in a country's exports or imports,
and the flexibility with which exporting countries
adjust to the trade restraints. Exporting coun-
tries have different capabilities for increasing
sales to less restrictive markets and for shifting
the location of production facilities either to
importing countries or to less restricted exporting
countries. They also have different opportunities
for switching to higher valued exports within
quantitatively restricted categories or for placing
overshipped items in different classifications
when import quotas are applied.
Sometimes the impact of a new import control
is exaggerated in the trade data. For example,
US steel imports were a record 2.2 million tons in
February 1978 because of substantial purchases
in anticipation of the trigger price scheme that
became effective on 21 February. US imports of
Japanese color television receivers peaked in the
third quarter of 1977, probably because of accel-
erated shipments prior to the 1 July effective
date of the export agreement.
Textiles
Most industrial countries apply quantitative
textile import restrictions under Multifiber
Arrangement bilateral agreements, but addi-
tional emergency measures can be taken under
the MFA.S Many recent EC textile import re-
' The MFA is the latest form of international regulation of the
textile trade since 1961 by agreements between (mainly) LDC
exporters and developed country importers. The MFA of 1974-77
broadly provided for a 6-percent annual increase in imported textile
products that are subject to import restraint under bilateral agree-
ments. Import growth could be more or less than this figure as a
result of various qualifications to the MFA provisions. A weakened
import growth clause in the renewed MFA for 1978-81 permits the
EC to make "reasonable departures" from the 6-percent import
growth provision.
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strictions were outside of bilateral agreements
and were directed at several important suppliers?
particularly South Korea and Taiwan.' Mainly
safeguard actions, the restrictions were partly
due to delays in concluding bilateral agree-
ments' under the 1974-77 MFA
The Taiwan restrictions are unilateral since there arc no EC-
Taiwan diplomatic relations.
Some of these agreements, although applied do facto had not
been concluded by the December 1977 MFA expiration date, and
none had been concluded by March 1975.
Only one US textile trade action outside of
bilateral agreements was taken in 1974-77. Un-
der bilateral agreements for the same period, US
monitoring data on textile imports from the three
largest LDC suppliers (Hong Kong, South Ko-
rea, and Taiwan) show that aggregate imports
were generally smaller than aggregate quotas
(see table .3). Imports of a few textile categories
were larger than permitted, mainly due to differ- 25X1
ences in classification at the export and import
stages.
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United States: Textile Import Restrictions on Selected LDCs 1
Millions of Square
Yards Equivalent
Trade Category
HONG KONG
Cotton and manmade fiber
Period
Import
Limit
Imports
Percent of
Import Limit
Yarns and fabrics ..............................
Oct 74-Sep 75
227
123
54
Oct 75-Sep 76
242
211
87
Oct 76-Sep 77
326
161
49
Clothing ..............................................
Oct 74-Sep 75
516
404
78
Oct 75-Sep 76
549
594
108
Oct 76-Sep 77
741
639
86
Wool textiles and clothing ....................
Oct 74-Sep 75
41
16
38
Oct 75-Sep 76
42
26
63
Oct 76-Sep 77
53
19
37
Other made-up and
miscellaneous products ........................
Oct 74-Sep 75
51
34
66
Oct 75-Sep 76
55
56
102
Oct 76-Sep 77
74
63
86
Total ........................................................
Oct 74-Dec 75
835
577
69
Oct 75-Dec 76
887
886
Oct 76-Dec 77
1,193
883
100
74
SOUTH KOREA
Cotton and manmade fiber
Yarns and fabrics
Oct 74-Sep 75
101
50
49
Oct 75-Sep 76
119
91
77
Oct 76-Dec 77
167
89
54
Clothing ............... .................... _........
Oct 74-Sep 75
391
332
85
Oct 75-Sep 76
462
443
96
Oct 76-Dec 77
630
513
81
Wool textile products
Oct 74-Sep 75
13
11
81
Oct 75-Sep 76
15
13
91
Oct 76-Dec 77
18
18
100
Total ..... .................... ............... .......... ..
Oct 74-Sep 75
505
392
78
Oct 75-Sep 76
595
548
92
Oct 76-Dec 77
760'
620
82
TAIWAN
Cotton and manmade fiber
Yarns and fabrics .............................
1975
167
138
83
1976
173
150
87
1977
172
134
78
Clothing ..............................................
1975
640
568
89
1976
614
527
86
1977
615
510
83
Wool textile products
1975
6
4
62
1976
6
5
89
1977
5
5
94
Total ........... ............... _.............. ............
1975
813
710
87
1976
793
682
86
1977
791
649
82
'The components of the import data may not add to the totals due to rounding. The percentages were derived from
unrounded data.
'Sum of component limits exceeds total limit in order to allow flexibility in shipments.
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Under a bilateral textile agreement with the
United States covering October 1974 to De-
cember, 1977, Hong Kong filled 69 to 100 per-
cent of its aggregate quotas, but greatly exceeded
(up to 149 percent of the quota) the limit on
items like certain types of raincoats and men's
suits in 1976-77. South Korea supplied 78 to 92
percent of its aggregate quotas over the same
period, with most items kept within agreed lim-
its. Taiwan has fulfilled about 85 percent of its
aggregate quotas during the last three years,
with excessive shipments of some minor items.
For some countries, US textile import: re-
straints have had little impact, because other
factors precluded shipments in quantities any-
where close to aggregate quotas. Colombia, for
example, filled only 40 to 60 percent of its
aggregate quotas from July 1974 to June 1977
(see table 4).
Iron and Steel
The US quantitative restrictions on specialty
steel imposed in mid-1976 substantially reduced
the share of imports in domestic consumption.
United States: Specialty Steel Imports
Year
Imports
Apparent
Consumption
Imports as
Percent of
Consumption
1974
........ 137.1
1,201.9
11.4
1975
........ 139.4
771.4
18.1
1976
........ 1.51.4
987.2
15.2
1977
........ 1.28.3
1,036.5
12.4
Because import quotas were based on 1971-75
average exports to the United States, countries
like Argentina, South Korea, and Spain, with
relatively recently installed facilities to produce
specialty steel, were more adversely affected in
terms of permissible sales than traditional sup-
pliers. EC members had to compete among
themselves for an overall EC quota to the United
States, and France captured 61 percent of the
1977 EC share. The proportion of specialty steel
import quotas filled in the initial year of restric-
tions exceeded 90 percent in all cases (see table
5). Insufficient time has elapsed for an assess-
ment of the effectiveness of the EC and US
minimum price arrangements of early 1978.
United States: Textile Import Restrictions from Colombia '
Millions of Square Yards
Equivalent
Trade Category Period
Yarns ..... ................... ........._ Jul 74-Jun 75
Jul 75-Jun 76
Jul 76-Jun 77
Fabrics and Nonapparel .. ............ Jul 74-Jun 75
Jul 75-Jun 76
Jul 76-Jun 77
Clothing ............... ....... ...... Jul 74-Jun 75
Jul 75-Jun 76
Jul 76-Jun 77
Total .............................. ...... .._.. Jul 74-Jun 75
jul 75-Jun 76
Jul 76-Jun 77
Import
Limit
Imports
Percent
of Import Limit
20
3
14
27
8
28
29
4
15
25
15
59
34
32
95
36
25
68
0.7
1.2
155
30
15
48
32
10
31
46
19
40
91
54
60
97
39
40
Restrictions apply to cotton 1974-7:5, and to cotton, wool, and manmade fiber, 1975-77. The
components of import data may not add. to the totals due to rounding. The percentages were derived
from unrounded data.
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United States: Specialty Steel Restrictions
June 1976 - June 1977
Import Quota
Actual Imports
Total
(thousand
metric tons)
Share of
Total
(percent)
Total
(thousand
metric tons)
Imports as
a Share of
Import Quotas
All countries ..............................
133.4
100
125.5
94
Japan ........................................
60.2
45
56.0
93
European Community ........
31.4
24
28.8
92
Canada ....................................
9.4
7
9.2
97
Sweden ....................................
20.2
15
20.0
99
Other countries ......................
12.0
9
11.4
95
Footwear
US restrictions on footwear imports from
South Korea and Taiwan, and Australian, Brit-
ish, Canadian, and other restraints affecting
South Korea, Taiwan, and Hong Kong, left these
LDCs with some 60 million pairs shut off from
markets in 1977. Current excess capacity in the
three countries is estimated at over 75 million
pairs a year. The UK import quota on Taiwanese
footwear imposed in September 1977 contributed
to a 62-percent reduction in footwear import
volume for the last four months of 1977 com-
pared with the last four months of 1976. In the
first quarter of 1978, UK footwear import vol-
ume from Taiwan was 78 percent below the
volume of the first quarter of 1977. The US
orderly marketing arrangements to restrict foot-
wear imports from South Korea and Taiwan
have, so far, achieved their purpose.
United States: Import Restriction of Footwear
effective 1 July 1977, US imports of color televi-
sion receivers from Japan fell by 24 percent in
1977 from the previous year. The three next
largest suppliers of the US market-Taiwan,
South Korea, and Canada-were not subject to
restraint and increased their shipments of televi-
sion receivers by a combined 62 percent. Imports
from other sources, probably affected by East
Asian competition, declined substantially, contri-
buting to an overall US import decline of 23
percent (see table 6).
Data on the number of television receivers
imported to the UK for 1977 are not available.
Even though Japanese exporters adhered to the
informal November 1976 agreement to hold
constant their share of the UK television market,
the 1977 sterling value of television imports from
Japan rose by 34 percent compared to the pre-
vious year. UK television imports from Singa-
pore, covered by an export agreement from mid-
1977, were up by 13 percent.
Table 6
Imports Quotas Imports
(1977) (Jul 77-Jun 78) (Jul 77-Mar 78)
South Korea 59 40 30
Taiwan .......... 166 129 89
' Including wool felt footwear not subject to import restraints.
Consumer Electronics
Recent restraints on consumer electronics have
centered on television receivers. Largely as a
result of the orderly marketing arrangement
United States: Imports of
Color Television Receivers
Thousand Units
Total .......
................. 1,215
3,295
2,539
Japan ....................
1,044
2,682
2,029
Taiwan ................
143
238
322
South Korea ........
22
48
96
Canada ...............
2
17
74
Others ..................
4
310
18
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CONFIDENTIAL
Ships Japanese restrictions on Italian silk yarn and ski
Recent trade actions on international ship-
building, essentially Western Europe versus Ja-
pan, involve fewer countries than do most other
major restricted trade items, but could cause
future disputes. West European and Japanese
shipyards produce over 80 percent of the world's
shipping tonnage. The Japanese share of world
output and of new OECD orders usually has
been 50 percent and 55 percent, respectively.
With the shipbuilding industry facing worldwide
overcapacity in 1976 and with the Japanese
share of OECD orders leaping to 75 percent,
Japan agreed to a 5-percent export price hike
and a cutback of capacity to 65 percent. of the
1974 peak. These measures were intended to
reduce the Japanese share of the world market,
the OECD market in particular. With the export
price hike and the declining world demand, the
Japanese backlog of export orders shrank: after
mid-1977. The continuing appreciation of the
yen raised export prices further. The agreement
benefited other shipbuilding countries such as
Brazil and South Korea. West European produc-
tion rose by 8 percent in 1977, compared. with a
9-percent decline in Japanese output.
Reactions to Restrictions by Various Countries
Countries have reacted both politically and
economically to recent import restrictions. Politi-
cal reactions often take the form of representa-
tions to the GATT or to the governments of
restricting countries. Affected exporting coun-
tries have tried to cushion the shock by develop-
ing new markets abroad and by discouraging
investment in the sectors suffering from. excess
capacity. Some importing countries, anticipating
the redirection of exports becaue of the trade
restrictions, have been considering adding re-
strictions in new sectors.
Direct retaliatory action on import restraints
among industrial countries have been isolated
and minor. For example, British restrictions on
Turkish textile exports after 1974 were associ-
ated with Turkish restrictions on British machin-
cry. A 1977 Italian restriction on Japanese
motorcycles was claimed to be a response to
boots.
Japan has been affected by most of the import
restrictions imposed by industrial countries on
each other and has been a focal point of reactions
to these restrictions. Among other actions,
Japan:
? Refused to voluntarily restrain shaped steel
exports to the United Kingdom in mid-1977;
the British countered with antidumping
action.
? Formally protested to the GATT the 1977
US request for restricted color television
exports.
? Questioned the 1977 dumping allegations by
the United States and the European Commu-
nity regarding certain steel products.
? Turned down a November 1977 EC request
for additional restraints on shipbuilding
prices and production capacity.
Elsewhere in the non-Communist world, the
EC is seeking more favorable treatment for its
exports under the Canadian global import quota
on footwear. Effective May 1978, the EC has
launched a. new surveillance scheme for its foot-
wear imports from all major suppliers. Australia
has threatened action against EC imports if EC
restraints on Australian primary commodities
continue. To counter the repercussions of import
restrictions imposed on other countries the EC
informed Taiwanese business interests, and Hong
Kong and South Korean officials, of its reserva-
tions about any diversion of surplus footwear to
the Community. Canada is monitoring steel im-
ports and accelerating antidumping procedures
to head off steel diverted from restricted US and
EC markets.
Among the LDCs the three largest textile
exporters (Hong Kong, South, Korea, and
Taiwan) are making various adjustments to the
new restrictions imposed on them. Hong Kong,
with 47 percent of manufacturing employment
and 48 percent of exports based on textiles and
clothing, is seeking to expand sales of traditional
product lines in Africa and the Middle East and
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is placing more emphasis on higher fashion out-
put for industrial country markets. South Korea
has restricted the installation of additional ca-
pacity in the textile industry, which provides 24
percent of manufacturing employment and 32
percent of exports, and is encouraging shifts to
the higher quality textile product exports not yet
regarded as sensitive by industrial countries.
South Korea is also intensifying its long-estab-
lished export diversification program with em-
phasis on machinery and heavy industry.
Taiwan, less dependent on textiles for employ-
ment and exports than Hong Kong or South
Korea, expects light and heavy industry trade to
take up the slack in textile exports.
The author of this paper is
Industrial Nations Division, Once oj Economic
Research. Comments and queries are welcome
and should be directed to
25X1
25X1
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ILLUSTRATIVE LIST OF NONTARIFF BARRIERS
IMPOSED BY IMPORTING COUNTRIES
Government Participation in Trade
1. Export subsidies
2. Countervailing duties
3. State trading in market-economy countries
Customs and Administrative Entry Procedures
1. Valuation policies
2. Antidumping duties
3. Consular and customs formalities and documentation
Standards
1. Specifications of standards for imported goods
2. Packaging, labeling, and marketing regulations
Specific Limitations on Trade
1. Quantitative restrictions
2. Discriminatory bilateral agreements
3. Export restraints
4. Minimum price regulations
5. Licensing
Charges on Imports
1. Prior deposit requirements
2. Credit restrictions on importers
3. Variable levies
4. Special duties on imports
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