WTO Panel Warned of Protectionism Threat

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By Edward J. Cody
Washington Post Foreign Service
Tuesday, February 10, 2009

PARIS, Feb. 9 -- The director-general of the World Trade Organization, Pascal Lamy, called Monday for a freer flow of trade information to help guard against protectionism as governments struggle to overcome the global economic crisis.

Lamy, addressing the WTO's new Trade Policy Review Body in Geneva, gave voice to rising fears, particularly among poor nations, that governments might succumb to pressure to restrict imports or subsidize home industries in the face of financial instability and economic troubles that have spread around the world since the Wall Street banking turmoil erupted last September.

Lamy said protectionist steps have been noted by the review body, but added that "the situation is, broadly speaking, under control." He singled out President Obama and his Brazilian counterpart, Luiz InĂ¡cio Lula da Silva, for resisting what he described as protectionist pressures from industry and legislators.

Lamy did not specify what pressures Obama had resisted. But the WTO and U.S. trading partners previously have cautioned against the "Buy American" measure that was included in the administration's economic stimulus bill under consideration in Congress.

In a report last month, Lamy noted the tariff increases, bank bailouts and industrial support packages that have raised the specter of protectionism by distorting the competitive relationship among trading countries. Ujay Sing Bhatia, the Indian ambassador to the WTO, told Reuters that such measures announced by a number of governments since the fall amounted to as much as $3 trillion.

Ambassadors of several developing nations warned the review body that trade distortions were building because of economic recovery and bank rescue plans in rich nations. Bhatia, for instance, said "clarifications are necessary" on how such plans could affect competitiveness, Agence France-Presse reported.

Lamy said WTO experts have had trouble tracking measures taken or under consideration among the WTO's 153-member governments because of a lack of official information. He called on governments to be more forthcoming so the review body could get an accurate picture and publish timely alarms if necessary.

"One of the problems dealing with services is the information deficit that we have about what governments are doing, what regulators are doing, what measures are being taken," a Lamy lieutenant, Hamid Mamdouh, told reporters at a WTO briefing Friday.

Neither Bhatia nor Lamy named the countries that have accumulated the anti-crisis measures they were referring to. But coincidentally, French President Nicolas Sarkozy announced Monday an $8.3 billion support package for his country's sagging automobile industry. The step comes on top of a $33 billion economic stimulus plan and billions more loaned to teetering French banks in November.

Sarkozy depicted the aid as encouragement for development of environmentally friendly cars, which he said would give French carmakers a competitive edge after an economic recovery. But at the same time, he said, the money should encourage Renault, Peugeot and Citroen, the main French producers, to keep their factories in France and staunch the loss of jobs.

Other European countries have taken similar steps since the fall that earlier would have been considered violations of the European Union's free trade and deficit rules. The commission has not yet ruled on Sarkozy's rescue plan for the auto industry. But it has responded to the crisis by declaring what amounts to a softening of the financial and trade discipline that was one of its main missions.

Lamy said the WTO's export-dependent poor nations run the risk of seeing trade barriers erected by richer nations as unemployment grows and economic growth stagnates in the months ahead. In the end, he added, this would hurt not only the poorer nations but, in the era of globalized trade, the wealthier countries as well. In any case, the World Bank has predicted global trade will sink by more than 2 percent in 2009.


© 2009 The Washington Post Company

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