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Lamy Warns Of The Rise of Protectionism

by Ulrika Lomas,, Brussels

23 June 2011

World economies must be vigilant of protectionism, and resist pressures in this direction as the recovery from recession continues, the World Trade Organisation's (WTO) director general has said.

Speaking to the Trade Policy Review Body (TPRP), Pascal Lamy outlined his views on recent trade policy developments. He said that while economic growth is returning to most countries, the global recovery is uneven and fragile, with unemployment remaining unacceptably high in many places.

Moreover, he added, "new risks have emerged more recently that call for prudence and collective responses particularly in the areas of macroeconomic imbalances, commodity price fluctuations, sovereign debt problems, and geopolitical tensions".

In particular, the rise of protectionist pressures is a cause for concern. World merchandise exports rose by 14.5% in 2010, and are expected to grow still further, by 6.5% this year. Lamy argued that such figures demonstrate the role trade played in helping the world emerge from recession, and that this was made possible by the continued openness of world markets.

Nonetheless, as he pointed out, "the paradox is that while protectionism was all in all well contained during the peak of the crisis, the collective resolve and political courage to resist protectionism may be under stress, at a time when conventional wisdom is that we are at the exit".

Trade restrictions have become more pronounced over the past six months, and Lamy pointed to cases of import tariff increases, more non-automatic import licensing, and new export restrictions.

Lamy's answer to such trends is an increased vigilance, "to prevent the situation from getting worse". He fears the possibility of a domino effect, with "a risk that trade restrictions by one would be matched by trade restrictions by others". Therefore, WTO members ought to work towards the opening, rather than the closure of markets.

The WTO itself must play an important role, Lamy said. He concluded by stressing that, "in these difficult circumstances, the WTO must continue to act as a catalyst of multilateral trust and global co-operation. The multilateral trading system successfully resisted intense protectionist pressures during the recent global recession. It is vital to preserve and strengthen this system in order to be able to face future crises".

The TPRP is due to hold a symposium on "The financial and economic crisis and the role played by the WTO" on July 1.

TAGS: economics | tariffs | World Trade Organisation (WTO) | unemployment | trade

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