MAKING GLOBALISATION GOOD FOR ALL

By Pascal Lamy Reprint | | Print |

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GENEVA, Sep 17 2007 (IPS) - Increasing trade restrictions is the wrong response to anxieties generated by the rapid pace of globalization and would cause unthinkable damage, writes Pascal Lamy, Director-General of the World Trade Organization (WTO). In this analysis, Lamy writes that more often than not, the real cause of pain is not trade opening but the failure to accompany the efficiency gains it brings with economic policies that would amplify its benefits. Trade opening involves a built-in asymmetry: while the millions who experience gains in purchasing power from trade opening are usually unaware of the cause, the thousands whom it hurts can easily identify the source of their pain. For politicians, this asymmetry is difficult to cope with and too often the easy way out is to treat foreigners as scapegoats. The multilateral arena continues to be the most cost-effective way to negotiate trade matters. This is especially true for medium and small developing countries, who have much less negotiating power in bilateral negotiations with big partners than they do in a multilateral setting.

But globalisation has also contributed to an increasing number of worrisome phenomena — the scarcity of energy resources, the deterioration of the environment, the migratory movements provoked by insecurity, poverty, and political instability, and even the volatility of financial markets, as we have seen in recent weeks.

It can be argued that in some instances globalisation has reinforced the strong economies and weakened those that were already shaky. As public opinion has become considerably more anxious about the effects of globalization, there has been growing concern over the impact of increased competition on socioeconomic fabrics, the outsourcing labour-intensive services, and global trade imbalances.

However, increasing trade restrictions is certainly not the right response to anxieties generated by the rapid pace of globalization and would cause unthinkable damage. More often than not, the real cause of pain is not trade opening but the failure to accompany the efficiency gains it brings with economic policies that would amplify its benefits.

Memory of the great recession of the 1930s, which started with trade protectionism and finally led to WWII, now seems blurred in some people’s minds. The establishment of the Bretton Woods system, including the General Agreement on Tariffs and Trade (GATT, now The World Trade Organization-WTO) was an attempt to create an open and rules-based global economic system that would prevent the tragedy from happening again. To avoid repeating the mistakes of the past we should recognise that the politics of trade opening involve a built-in asymmetry: while the millions who experience gains in purchasing power from trade opening are usually unaware of the cause, the thousands whom it hurts can easily identify the source of their pain. For politicians, this asymmetry is difficult to cope with, and too often the easy way out is to treat foreigners as scapegoats.

The central issue is how to ensure that trade benefits all. This must occur at two levels: both within nations, and among them.

Regarding the latter level, two elements are fundamental: fairer multilateral trade rules, and the building of trade capacity in developing countries. A primary objective of the on-going WTO negotiations under the Doha Round is precisely to address the remaining imbalances in WTO rules that work against developing countries, whether in agriculture or in areas such as textiles or footwear. Over the coming months WTO members will have the opportunity to demonstrate that they want to fulfil the promises they made in Doha in 2001 to open their markets more and address the most egregious trade distortions.

At the intra-national level, trade opening can and does translate into greater growth and poverty alleviation, but this is neither automatic nor immediate. Rather it must be accompanied by a solid domestic agenda to spur on growth and cushion adjustment costs. Appropriate tax policies, competition policy, investment in quality education, social safety nets, and innovation to foster healthy environments must all be part of the mix needed for trade to translate into real benefits for the people.

At a time when free-trade agreements seem to be the fashion, the multilateral trading system deserves our full attention. Thanks to the commitment and vision of successive governments and groups of negotiators, the GATT/WTO has been one of the most successful examples ever of sustained international economic cooperation. Since 1950, world trade has grown 30-fold in volume terms. This expansion was more than 3 times faster than growth in world GDP, which expanded 8-fold during the same period..

The multilateral arena continues to be the most cost-effective way to negotiate trade matters. Market access resulting from WTO negotiations is global and cannot be matched by any bilateral trade agreements. This is especially true for medium and small developing countries, who have much less negotiating power in bilateral negotiations with big partners than they do in a multilateral setting. Key issues such as agricultural subsidies, anti-dumping, fishery subsidies discipline, or customs procedures cannot be addressed in bilateral agreements but only in the WTO.

Simply put, because of its inherent advantages, the multilateral trading system can be complemented but not replaced by free-trade agreements. (END/COPYRIGHT IPS)