WTO Director-General Pascal Lamy has one of the more difficult jobs around. His most immediate hurdle--one that has occupied his attention ever since he became the organization's head--is how to move the Doha Development Round forward. Much ink has already been spilled on why Doha is not progressing: Industrialized countries are not willing to offer deep enough cuts in agricultural subsidies to please LDCs; LDCs are not willing to offer enough concessions in terms of market access to manufacturing goods imports from industrialized countries; and my favourite of them all--applied tariffs are already quite low. In an indirect manner, I have already alluded to the relatively small gains to be had from further trade liberalization in terms of global GDP compared to allowing further migration. Those who are looking for big gains from further trade liberalization will likely be disappointed. In other words, Doha is being treated as inconsequential because it is inconsequential.But, don't try that last line on Pascal Lamy. I am honestly befuddled by his latest idea: successful completion of Doha will comfort a world being rocked by a subprime crisis. According to Lamy, the WTO played a stabilizing force when the Asian financial crisis was underway [!] I may not be Einstein, but it seems to me that the current round of global instability was brought about by mounting economic imbalances related to further trade liberalization: the US has been importing boatloads of stuff from the rest of the world without the requisite savings. In turn, those exporting their wares to the US--especially Middle East oilers and Asian export-oriented economies--have engaged in an act of "vendor finance" to fund US profligacy. Cheap money from abroad has resulted in a housing bubble which is now popping Stateside to dramatic effect, while borrowing against rising property prices to spend on consumption has faded. If you follow this turn of events, it seems to me that greater trade openness has, if anything, helped facilitate the current crisis--especially as China's accession to the WTO in 2001 allowed it greater market access elsewhere. Lamy's line of argument is truly baffling.
For an alternative take, here is the WTO Director-General. This is your brain [I show the audience an egg]. This is your brain on whatever Pascal Lamy is smoking. Any questions?
In this period of increased financial uncertainty around the world, the rules-based trading system of the WTO provides a hugely important source of economic stability for governments, for business and for consumers. It played that role very well ten years ago during the Asian financial crisis, acting as a shock absorber between the financial and the real sectors of the world economy. By keeping international trade in goods and services flowing, at the time the WTO system contributing to ensuring that the financial shock would not deteriorate into a far worse economic recession worldwide.
In the current circumstances, counting on the WTO and on concluding the Doha Round is the nearest available message of reassurance for world financial markets.
Last year I told you about the risks of a failure in the Doha Round. A sort of half empty glass. This year I am completely convinced that we have it within our means, politically and technically, to finish the Doha Round this year. To do so, the first step we need is for WTO Member governments to agree at Ministerial level by the end of May on the framework for cutting agricultural tariffs, agricultural subsidies and industrial tariffs.
This is a task that has eluded us now for far too long. The differences between negotiating positions is not great. Technically, there is no doubt in my mind that it can be bridged. What we need, urgently, is political input from all of the key players to allow the bridges to be built.
The next few weeks will be crucial at the WTO. So please help us to push for the conclusion of the Doha Round now.
