Interviews
"Financial crisis wake-up call"- Pascal Lamy, WTO
13 Nov '08
9 min read
A second task, that needs to be viewed over more of the medium term, is to improve mechanisms of information sharing, risk assessment techniques, and data collection on trade finance. That would expand the scope for co-financing trade between private banks themselves and between the banks and public sector institutions such as the IFIs and the ECAs. We heard some concrete proposals on how to move ahead on these issues this morning. Naturally, this is not a task for the WTO, but we do have something to contribute in my view and we shall continue to work with the various actors on these issues.
The costs of taking these steps and actions is not exaggerated. The market for trade finance is one of the most secure areas of banking and insurance activities and it has a strong multiplier effect on trade. At a time of decelerating trade and economic growth, investing resources to keep trade finance flowing has a vital role to play. Contrast that with the costs of inaction. The countries most vulnerable to shortages of trade finance are the emerging market economies on whom we are counting to sustain trade and economic growth as the developed countries slow down.
The world economy is slowing and we are seeing trade decrease. If trade finance is not tackled, we run the risk of further exacerbating this downward spiral. The global slowdown, whether it is called a recession in some parts of the world, a slump elsewhere, will last for some time, and will affect all countries.
We simply cannot say that globalization is benefiting emerging economies when developed economies' global demand is expanding, and that no effect will be felt when such demand falls. At the national level, there will be risks, job losses, bankruptcies. There will inevitably be demand for greater safety nets and security which is legitimate. But there will also be demand for protectionist measures.
The political message that WTO members should send both inside the multilateral trading system and outside is that the WTO is ready to take this challenge with a strong sense of collective responsibility and solidarity. Members should resist calls for protectionists measures. In a globalised world, one protection is another ones lost opportunity.
And everyone's protection — the kind of beggar-thy-neighbour that we saw in the '30s — is a recipe for a severe contraction of international trade, depressed growth and rising unemployment, again the kind of situation we saw in the '30s. This was evident during the Asian and Latin American financial crisis of the '90s. Governments understood that keeping markets open was part of the solution, not of the problem, and WTO disciplines helped resist calls for closing trade.
The second message is of course to oppose financial chaos by further organized, regulated and balanced trade opening through the Doha Round. While countries struggle with the design of global financial rules, they could send a positive signal by better regulating international trade through the completion of the Doha Round.
The costs of taking these steps and actions is not exaggerated. The market for trade finance is one of the most secure areas of banking and insurance activities and it has a strong multiplier effect on trade. At a time of decelerating trade and economic growth, investing resources to keep trade finance flowing has a vital role to play. Contrast that with the costs of inaction. The countries most vulnerable to shortages of trade finance are the emerging market economies on whom we are counting to sustain trade and economic growth as the developed countries slow down.
The world economy is slowing and we are seeing trade decrease. If trade finance is not tackled, we run the risk of further exacerbating this downward spiral. The global slowdown, whether it is called a recession in some parts of the world, a slump elsewhere, will last for some time, and will affect all countries.
We simply cannot say that globalization is benefiting emerging economies when developed economies' global demand is expanding, and that no effect will be felt when such demand falls. At the national level, there will be risks, job losses, bankruptcies. There will inevitably be demand for greater safety nets and security which is legitimate. But there will also be demand for protectionist measures.
The political message that WTO members should send both inside the multilateral trading system and outside is that the WTO is ready to take this challenge with a strong sense of collective responsibility and solidarity. Members should resist calls for protectionists measures. In a globalised world, one protection is another ones lost opportunity.
And everyone's protection — the kind of beggar-thy-neighbour that we saw in the '30s — is a recipe for a severe contraction of international trade, depressed growth and rising unemployment, again the kind of situation we saw in the '30s. This was evident during the Asian and Latin American financial crisis of the '90s. Governments understood that keeping markets open was part of the solution, not of the problem, and WTO disciplines helped resist calls for closing trade.
The second message is of course to oppose financial chaos by further organized, regulated and balanced trade opening through the Doha Round. While countries struggle with the design of global financial rules, they could send a positive signal by better regulating international trade through the completion of the Doha Round.
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