WTO urges U.S. to lower trade barriers

If U.S. agrees, it could mean lower prices on imported commodities in the long-term

By Maria Varmazis -- Purchasing, 5/16/2008 9:14:00 AM

A new trade policy review by the World Trade Organization recommends that the U.S. cut trade barriers to improve its position in global trade. In theory, if the U.S. takes this recommendation to heart, lower trade barriers would mean lower prices on commodities such as steel. But in practice, it remains to be seen whether this will happen. For buyers, any price savings may not show up for some time, says Patricia Mohr, vice president of economics at Scotiabank in Toronto.

“Usually when you lower trade barriers, import costs decrease,” Mohr says. “Whether or not this would happen in the case of steel is hard to call right now, simply because international steel prices continue to skyrocket from high global demand and production costs." Prices for coking coal as well as iron ore—which makes up 65%-71% of the total cost of steel—continue to climb, and these costs will still be pushed onto buyers, says Mohr. She emphasizes that any cost savings on commodities from lowered trade barriers depend on the time frame. “It should lower price over time, but not immediately,” she notes.

The WTO report, due out on June 9 and acquired in advance by Reuters, says: “In the face of the economic uncertainty prevalent in early 2008, U.S. welfare would be best promoted by exploiting the adjustment capacity of the U.S. economy and continuing to reduce barriers to market access and other distorting measures.”