WORLD TRADE IS INSURANCE AGAINST FINANCIAL TURBULENCES

By Pascal Lamy and - - Reprint | | Print |

This column is available for visitors to the IPS website only for reading. Reproduction in print or electronic media is prohibited. Media interested in republishing may contact romacol@ips.org.

GENEVA, Feb 25 2008 (IPS) - With clouds darkening over the world economy, the Doha Round of the WTO is the one global initiative that may boost the confidence of world businesses, workers, and consumers and send a powerful signal that more than 150 countries have the confidence to resist protectionism, to create a more just and balanced trading system, and to lay sustainable foundations for growth and development in the 21st Century, writes Pascal Lamy, Director-General of the World Trade Organisation (WTO). In this article, Lamy acknowledges that the economic growth resulting from the expansion of world trade has not been equitably distributed within our societies, which have seen a rise in inequality and disruptions in their economic and social fabrics. If we are to succeed in building on the achievements of the global trading system through more trade opening, it is essential that countries adopt necessary domestic reforms and sequence them properly. This means adequate social safety nets and widespread availability of education and training

In the post-war era, trade expanded rapidly and living standards rose in many countries as a result. But in spite of its successes, the global trading system suffered from notable shortcomings. Important areas of commerce, including agriculture and services, lay outside the General Agreement on Tariffs and Trade (GATT) rules, rendering the trading system both less equitable and less relevant than it should have been: less equitable because agriculture is a sector in which many developing countries are highly competitive, and less relevant because services in those days accounted for about half of GATT members’ economic output.

These omissions, coupled with the rise in protectionism after the oil shocks of the 1970s and the de-industrialisation in developed countries in the 1980s, made it necessary for GATT to re-invent itself, and in 1986, member countries responded by launching the Uruguay Round.

Agreement on this Round in 1994 led to the creation of the World Trade Organisation the following year, a development which enabled governments and the multilateral trading system they created to better meet the challenges of the new millennium. Not only was the WTO given responsibility for new areas of trade like agriculture, services, textiles and trade-related intellectual property, but the creation of binding new dispute settlement system assured members that their rights would be better protected.

With the launch of the Doha Round in 2001, the trading system has again tried to adapt to new geopolitical realities. Striking an ambitious development-oriented agreement would further strengthen a system which has already done much to make the world a better place.

Since 1950 world trade has grown more than 20-fold and has expanded three times faster than world output growth. International trade has been a great stabiliser for many countries, contributing to economic expansion even at times of slackening domestic demand.

Typically, gains are spread across the vast majority of silent consumers and input users. But there is no denying that there are losers too, and often those who lose out are better-organised and more vocal about the costs of trade opening. In many of our societies trade is the scapegoat for job destruction and declining living standards. On this point there is general agreement among economists that it is not trade but productivity enhancements from technology improvements that is the primarily cause of losses of manufacturing jobs.

It is true that international trade speeds the transfer of technology. The opening of services markets to foreign providers has facilitated the movement of ideas and persons. For consumers this new range of options has been of tremendous benefit. The downside is that it has raised concerns among blue and white-collar workers in developed countries that technology has exposed entire new sectors of the economy to world competition.

It is also clear that the economic growth resulting from the expansion of world trade has not been equitably distributed within our societies, which have seen a rise in inequality and disruptions in their economic and social fabrics.

These issues, which are about fairness, draw our attention to what may be the most important lesson of these 60 years, which is that whether we speak of developed or developing countries, there must be a continuum in the articulation of trade and domestic policies. If we are to succeed in building on the achievements of the global trading system through more trade opening, it is essential that countries adopt necessary domestic reforms and sequence them properly. This means adequate social safety nets and widespread availability of education and training

If their growth and development programmes are to succeed, developing countries need capital. They can either attract it as foreign investment, borrow it, or import it through international trade. The safest, cheapest, and most sustainable way is to import it. Open policies have considerably changed the face of emerging economies. China, India, Mexico, Korea, Thailand, Indonesia, Argentina, South Africa and Chile, not to mention countries in Central and Eastern Europe, have done extremely well in a range of manufacturing sectors.

But to meet all the challenges, our ever-growing WTO membership needs to show leadership and cross the last mile to conclude the Doha Round in 2008. At a time when clouds are darkening over the world economy, the Round is the one global initiative that may boost the confidence of world businesses, workers, and consumers. Such an agreement would send a powerful signal that more than 150 countries have the confidence to resist protectionism, to create a more just and balanced trading system, and to lay sustainable foundations for growth and development in the 21st Century. (END/COPYRIGHT IPS)