The Multilateral Trading System of the Future - Pascal Lamy
ADDRESSING a meeting of CUTS (Consumer Unity & Trust Society) in New Delhi yesterday, WTO DG Pascal Lamy said,.
The world economy, which was showing signs of recovery at the beginning of this year, is again being confronted by serious challenges. These range from rising sovereign debt problems to a loss of confidence in financial markets and the lack of a coordinated reaction of governments to address the structural problems that underpin weak growth, high unemployment and unsustainable fiscal deficits in many developed countries.
We have now moved from a financial crisis to a growth crisis. Many economies are not growing at a pace sufficient to achieve the fiscal consolidation needed after the extraordinary measures taken during the financial crisis and to reduce the socially destructive high unemployment.
To turn to protectionist trade measures in the current circumstances would be a huge mistake — one that could send the global economy back into deep recession. This is a time when governments need to act with determination, political courage and in a coordinated manner.
The multilateral trading system of the future is likely to continue to feel the pressure of protectionist pressures. Trade protectionism would be a recipe for disaster. But continued support for more open trade will require other forms of protection, in the form of better social safety nets, investment in technology, in education and in infrastructure. These are issues outside the purview of the WTO, but they have to be part of the domestic policy mix to make trade opening viable at home.
The multilateral trading system of the future will also have to take better account of the growing importance of global value chains. The geographical fragmentation of the value chain is leading to a structural change in international trade, moving from the old theory of "trade in goods" to a new "trade in tasks" paradigm. What we have dubbed "Made in the World". Old concepts such as "country of origin" or "resident versus non - resident" are losing part of their analytical relevance in international economics.
The answer is to be found elsewhere. Where? Many arguments have been raised. I would like to flag three, which in my view need urgent attention.
One, political leadership. Trade agreements need political leadership both at home and in Geneva. Trade agreements are struck by governments, not by wise men, think tanks or Director-Generals. Leaders must act to convince and spend political capital to make them happen. The time for technical work is long past. It is the hour of politics.
Two, pragmatism and spirit of compromise. There has to be give and take. There has to be flexibility, and perhaps the way we have been pursuing the Doha deal has been too rigid and with limitations that do not help the politics. Smaller steps that show demonstrable progress might inspire the confidence and trust to weave all topics into a final package.
And, three, there has to be a spirit of realism. Asking for the moon and using empty rhetoric is normal in any negotiation but we are now past that point. We must now seek realistic and creative solutions. To stand behind redlines waiting for others to move only breeds mistrust and stalls the negotiations, postponing benefits to the world economy.