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Pascal Lamy Preaches The Merits Of Trade Globalization

by Jeremy Hetherington-Gore,, London

20 August 2007

In a speech in Kuala Lumpur last week, World Trade Organization chief Pascal Lamy said that globalization has been the cause of the massive increases seen in world trade in the last 50 years, and emphasized the need to continue the fight against protectionism.

Said Lamy: 'A key feature of globalization is the internationalisation of economies through trade. 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.

'When the GATT was first established 60 years ago, there were only 23 signatory countries; today we have 151 WTO Members. This simply shows that more countries are now involved in global trade and agree to abide by the same set of global trade rules. In the past, tariff and quantitative restrictions were major barriers to trade. Following several rounds of multilateral trade negotiations, quantitative restrictions have basically been abolished and tariff levels of countries have been gradually reduced, with the exception of agriculture. Today's and tomorrow's barriers to trade are and will be more in the area of standards, sanitary and phytosanitary measures, rules of origin or antidumping measures. Today almost all countries are involved in foreign trade, they trade much more, and at much lower costs.'

But he admitted that globalization had brought with it 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 or even financial markets volatility. He said that many countries today are at a crossroads, whether to continue to support more open trade or erect new walls to imported goods and services or foreign investments.

He reminded his audience of the underlying need for international cooperation over trade: 'The memory of 1930s' great recession, 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 GATT/WTO in pursuit of an open and rules-based global economic system was designed to prevent the tragedy from happening again. We should avoid committing the same mistakes, starting with the recognition that the politics of trade opening suffers from an inbuilt asymmetry: those who benefit from gains in purchasing power stemming from trade opening are millions, but they are little aware of the source of their gains. Those who suffer from trade opening are thousands who can easily identify the source of their pain. For politicians, such an asymmetry is difficult to cope with and too often the easy way out is to treat foreigners as scapegoats, which we know is one of the safest old tricks of domestic politics.'

Mr Lamy said he was convinced that raising trade restrictions is surely not part of the answer to anxieties generated by the rapid pace of globalization, but discussed whether trade opening should take place multilaterally, or through bilateral FTAs or regional integration, or both at the same time. 'Market access resulting from WTO negotiations is global and cannot be matched by those of any bilateral trade agreements,' he said. '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. Third, key issues such as agricultural subsidies, antidumping, fisheries subsidies disciplines or customs procedures cannot be addressed in bilateral agreements, but only in the WTO.

'Put simply, due to its inherent advantages, the multilateral trading system can be complemented but not replaced by FTAs. However, there are risks in keeping a double-faceted strategy, which should be carefully avoided. For example, given that trade negotiators are scarce human resources, especially in many developing countries, prioritizing FTAs could affect the active participation of that country in the WTO activities.'

Completing the Doha Round is not only technically possible, it is also a political must, said Lamy: 'Concluding the round will boost international trade and economic growth, and it will ensure that the WTO continues to play a key role in managing globalisation and economic cooperation on a political level. Given what is already on offer on the negotiating table, and what remains to be done, my sense is that concluding this negotiation is both necessary and doable. Of course, trade negotiators are clever tacticians and they only go the extra mile if they feel this will be reciprocated by their counterparts. Like many economic challenges, at the end of the day, it is a matter of trust between partners.'

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