WTO Head Warns Stimulus Measures May Have Impact on Trade

By | December 2, 2010

Stimulus and bailout packages undertaken to cope with the economic crisis can have an impact on trade and investment and need to be managed carefully, according to the head of the World Trade Organization.

Director-General Pascal Lamy said the WTO would hold a special meeting in early spring of next year to examine the effect of those measures on trade and competition.

“In the meantime, exit strategies to unwind them should be transparent and accountable and should not be used as a pretext to discriminate, directly or indirectly, against foreign traders or investors,” he said in his annual report to the WTO on the international trading environment.

WTO members will review the report, published on the WTO website last week, on Dec. 9.

Argentina, Ecuador, India and South Africa have expressed concern that stimulus packages or bailouts for industries like automobiles or banking undertaken by rich and emerging economies amounted to subsidies that poor nations could not afford and which in other times would be open to challenge under WTO rules.

Lamy’s report also repeats previous recent warnings of an increase in protectionist pressures generated by global imbalances.

Large trade imbalances, high unemployment and disorderly currency moves had macro-economic causes, he said.

“Restricting trade cannot correct those problems, but it could easily provoke retaliation which would seriously threaten jobs and growth worldwide,” Lamy said.

Another danger to international trade was the accumulation of restrictive measures, which since the end of 2008 had grown to cover 1.9 percent of total imports while only 15 percent of measures introduced since the crisis have been removed.

New measures introduced between November 2009 and October 2010 cover around 1.2 percent of world imports, especially in base metals and products, machinery and transport equipment.

Lamy confirmed the WTO’s forecast that world trade (measured by export volume) would grow by 13.5 percent this year, despite weaker growth in recent months, with the strongest growth seen in developing countries in Asia.

World trade recovered to pre-crisis levels in the middle of the year following a record 12 percent contraction in 2009.

But in value terms it has not yet fully regained pre-crisis levels, data issued by the WTO on Wednesday showed. World trade in the third quarter of this year was 18 percent higher than a year earlier, slowing from a 26 percent year-on-year increase in the second quarter.

But economic recovery has not been strong enough to have much impact so far on unemployment levels in many countries, where the consensus in favor of open trade and investment was under strain from high jobless rates, he said.

Despite an improvement in the environment for trade finance since mid-2009, traders in low-income countries, especially Africa, still faced difficulties accessing funds at affordable prices, he said.

New regulatory requirements were also deterring international banks from doing business in these areas, he said in an apparent reference to stricter international banking rules known as Basel III.

(Editing by Ron Askew)

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