Major Bodies Call For Free Trade As Economies Recover

by Ulrika Lomas, Tax-News.com, Brussels

18 September 2009

The Organization for Economic Co-operation and Development (OECD), the World Trade Organisation (WTO), and the UN’s Conference of Trade and Development (UNCTAD) have called on the leaders of the G20 countries to make a stronger commitment to open trade and investment as the global economy begins its recovery from the crisis.

In a combined report on G20 Trade and Investment Measures, Angel Gurría, Secretary-General of the OECD, Pascal Lamy, Director-General of the WTO, and Supachai Panitchpakdi, Secretary-General of UNCTAD, urged that G20 leaders remain vigilant against protectionism.

“The global crisis cannot be deemed to be over yet, despite welcome recent indications of economic recovery in some parts of the world. Growing unemployment due to the crisis will continue to fuel protectionist pressures for the years to come,” their statement said.

“It is the responsibility of all world leaders, in particular those of the G20 members, to take the appropriate policy actions so that trade and international investment can help economies recover from the global crisis on a sustained basis. In this regard, G20 leaders should undertake a stronger commitment to open markets and commit more strongly to the conclusion of the Doha Round in 2010.”

WTO and OECD rules have acted as a safety harness preventing the adoption of wide-scale protectionist policies. The heads of the three organizations said they were encouraged by investment policies in the G20 countries as they had, on the whole, increased openness and clarity for foreign investors. At the same time, some governments have established support schemes that can discriminate against foreign-controlled companies or raise barriers to outward investment flows.

The OECD, WTO and UNCTAD heads also warned that some of the fiscal stimulus packages introduced to tackle the crisis contain elements that favor domestic goods and services at the expense of imports.

“It is urgent that governments start planning a coordinated exit strategy that will eliminate these elements as soon as possible,” they said.

A report has been prepared for G20 leaders at the Pittsburgh Summit on the back of the aforementioned principles, which notes that the volume of world merchandise trade is due to fall by 10% in 2009 and foreign direct investment by 30-40%, due largely to a sharp collapse of investment flows in OECD countries.

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