Economic pressures are tempting G20 governments to resort to protectionism in a misguided bid to shield their domestic markets from problems that are unrelated to trade, the World Trade Organisation said in a biannual report on Wednesday.

Unilateral actions to shield domestic industries, although appealing from a narrow short-term perspective, will not solve global problems; on the contrary, they may make things worse by triggering a spiral of tit-for-tat reactions in which every country will lose, said the report issued by the office of WTO Director-General Pascal Lamy.

The situation is not yet alarming, but it is clearly adding to the downside risks to the global economy, it added.

There is a need for urgent attention by the G-20 to prevent any further deterioration in their collective trade policy stance and to place their faith in open markets and the benefits of freer trade at the heart of their economic policies to re-boot growth in the world economy.

The pledge had clearly been broken in many instances, the report said, with a more protectionist political climate and tendency towards industrial support combined with trade restrictions.

Calls have been made by some political leaders to give preference to domestic products over imported ones, or 'not to import what can be produced at home'.

The report, a review of G20 trade measures between May and mid-October 2011, found there had been no slowdown in trade-restrictive measures and no increase in steps to remove existing restrictions, despite an unwavering commitment to resist protectionism pledged at the last G20 summit in Seoul.

A new trend was governments acting to address what is perceived as currency undervaluation through trade measures. In some cases, governments were intervening in currencies or industries were asking for help because of exchange rate pressure.

Despite the worry about a resurgence of a protectionism, trade restrictions had not yet fed through into an increase in trade disputes at the WTO.

To counter the threat of protectionism, G20 leaders should show leadership, pragmatism and determination to find a way out of the deadlocked Doha round of global trade talks, the report said.

The Doha talks, which were intended to provide the biggest leap forward in global trade liberalisation since the creation of the WTO in 1995, collapsed this year, although none of the WTO's 153 member nations is willing to say the talks are dead.

BROKEN PROMISE

During the six months covered by the report, there were new import-restrictive measures covering around 0.6 percent of the G20's total imports, the same as in the previous six months.

The biggest impact was on trade in vehicles, estimated to account for more than half of the new restrictions. Other industries affected were machinery and mechanical appliances, iron and steel products, electrical machinery and equipment, organic chemicals, plastics and manmade staple fibres.

There was also an increase in export restrictions, which the report said went against a G20 pledge for a standstill. Most such restrictions were justified as responses to rising food prices or to secure supply or tackle resource depletion.

The cumulative share of world trade affected by new trade restrictions since the start of the financial crisis was now more than 2 percent, the report said.

This is far too high, and should be addressed urgently, it said.

The WTO has already cut its forecast for world export growth this year from 6.5 percent to 5.8 percent. It expects developed economies' exports to rise 3.7 percent and developing countries' exports to increase by 8.5 percent.

(Reporting by Tom Miles)

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