Lamy Renews Calls to Resist Protectionism, Conclude Doha Round

25 February 2009

On a trip through Asia this week, the head of the World Trade Organization repeated his recent appeals for a swift conclusion to the Doha Round of trade talks, which he called “the best insurance policy against protectionist moves.”
 
WTO Director-General Pascal Lamy also urged countries to coordinate their responses to the global economic crisis and to work to re-build confidence in banks and other financial institutions.
 
“The future is not clear and it is still early to judge whether we are at the bottom of this recession, or this is just a beginning,” Lamy said in a speech to Korean officials in Seoul on Monday.
 
“But one thing is clear: the depth and scope of the crisis will be a function of the capacity of individual countries to come to global joint action and to re-inject confidence in our economic and social systems.”
 
That confidence, he said, will come from reforming the financial system and cleaning up banks’ balance sheets.
 
“This matter cannot wait,” Lamy said. “Until and unless this happens, there is no turning point in sight.”
 
Turning to commerce, Lamy exhorted governments to refrain from erecting new trade barriers to protect domestic industries from the full brunt of the economic downturn. Resisting such measures – whether they come in the form of tariffs, anti-dumping duties, subsidy payments, or domestic-sourcing requirements – is critical to getting the global economy back on its feet, Lamy said.
 
“Rejecting these moves is not a question of ideology. Rejecting isolationist pressures is today a matter of self-interest,” he said. “Does anyone believe that they can protect themselves without the others doing the same? Beggar-thy-neighbour policies bear the risk of prompting retaliation by other countries and driving down the overall level of trade - thus destroying output and jobs around the world. ”
 
Reiterating a call that he has made several times already this year, Lamy stressed the importance of wrapping up the Doha Round of trade talks, which have been struggling forward in fits and starts since they were launched in the Qatari capital in the fall of 2001. By arriving at a new deal on global trade, Lamy said, the WTO’s 153 Member countries could limit the extent to which nations can increase tariffs and subsidies, thus providing an important assurance against protectionism.
 
“The Doha Round is a long and difficult journey. We are not there yet, but we are not far from the final destination. The last mile is understandably a difficult one, but it deserves our utmost efforts,” the Director-General said.
 
Finally, Lamy noted the importance of ensuring that the economic crisis does not prevent countries from gaining access to sufficient levels of trade financing, the oil in the wheels of global commerce. The Director-General noted that current financing falls an estimated US$ 25 billion short of what is needed, a fact that has already led to a drop in international trade flows (see Bridges Weekly, 18 November 2008, https://www.ictsd.org/bridges-news/bridges/news/financial-crisis-threatens-global-trade-flows-wto-says).  
 
Falling on deaf ears?
 
Some observers interpreted Lamy’s exhortations against protectionism, and particularly against domestic-sourcing provisions, as a negative reaction to the ‘Buy American’ requirements in the US stimulus package that US President Barack Obama signed into law last week (see Bridges Weekly, 18 February 2009, https://www.ictsd.org/bridges-news/bridges/issue-archive/criticism-grows-as-buy-american-rules-written-into-law). 

But speaking to journalists at a press conference the same day, the Director-General indicated that although the ‘Buy American’ rules send a protectionist message, they do not violate world trade law.
 
"The bad news is that protectionist pressures are there," Lamy said of the US’ domestic-sourcing requirements, Reuters reported. But he acknowledged that "the final compromise is that this provision will be implemented in a way that is consistent with US WTO obligations."
 
For its part, the Obama administration seems to have put trade on the backburner, focusing instead on reviving the domestic economy. The president’s pick for the post of US Trade Representative, the country’s top trade post, has yet to be confirmed by the Senate; the Secretary of Commerce post also remains vacant (see Bridges Weekly, 18 February 2009, https://www.ictsd.org/bridges-news/bridges/news/gregg-refuses-obama’s-offer-to-lead-commerce-department-citing-policy).  
 
And earlier this week, the administration announced that it would delay the first comprehensive round of talks towards the establishment of a Trans-Pacific Partnership, a deal that would effectively set up bilateral free trade deals between the US and New Zealand and between the US and Brunei. The negotiations, which had been scheduled for the end of March, will be the subject of an interagency hearing next week, Inside Trade reported. 
 
In the absence of strong leadership from the US on pushing for a global trade deal, many Geneva-based WTO delegates consider the Doha Round to be effectively on hold for the time being. Other potential political obstacles to the successful conclusion of the Round include pending changes of administration in the EU, India and Japan.

But Lamy remains ever insistent on the need to keep trade in the spotlight and conclude the Round this year. In closing his speech on Monday, the Director-General stressed that the upcoming G20 gathering of world leaders will amount to a “test of political will.”  
 
“The next G20 Summit in London will be a test of the capacity of major economies to work together, hand in hand, in searching for solutions to pull the world economy out of a deeper recession,” he said.
 
“It will also be a test of whether current global mechanisms are capable of dealing with global challenges.”
 
ICTSD reporting; “India to oppose any US move toward protectionism,” BLOOMBERG, 20 February 2009; “WTO chief says "Buy American" meets world trade rules,” REUTERS, 23 February 2009; “Obama administration delays trade negotiations for now,” INSIDE US TRADE, 25 February 2009.

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