These are not easy times. We know that in 2009,growth of real world GDP was negative, estimated at -2.2 per cent. Furthermore,the global unemployment rate reached its highest level ever, with theInternational Labour Organization estimating the number of jobless worldwide atover 200 million. The adverse impact of the recent financial crisis on theworld economy in terms of output and employment is undeniable

World trade has also been a casualty of this crisis,contracting in volume terms by around 12 per cent in 2009 the sharpest declinesince the end of the Second World War. The main explanation for this freefallin trade has been the simultaneous reduction in aggregate demand across allmajor world economies. The drying up of trade finance during this period hasalso been a contributing factor. To a much lesser degree, trade has beenadversely affected by some instances of increased tariffs and domestic subsidies,new non-tariff measures and more anti-dumping actions.

We started last year with a collapse in trade, a drying upof trade finance, concerns that donors would reduce funding for "Aid forTrade", and worries that protectionism would kick in. And yet one year onfrom the onset of the crisis, we see that, to this point at least, themultilateral trading system has proven its sturdiness as a bulwark againstrunaway protectionism.

In most developed economies, including the EU.stimuluspackages have been instrumental in preventing further deterioration in outputwhile preparing the path to recovery. The jury is still out though on whethersome of the measures introduced to stimulate economies contain provisions thatfavour domestic goods and services at the expense of imports.

But the positive impact of national stimulus packages isfleeting and worries are mounting over the huge budget deficits rung up bymany governments. Economies urgently need other sources of growth -- sustainableengines of growth which will not add to our already seriously indebtedeconomies. This is where trade can be an important part of the story, both inthe long-run and in the short to medium-term.

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Pascal Lamy is Director General, WTO

Based on the speech by Pascal Lamy to the EuropeanPolicy Centre in Brussels on 24 February 2010

Originallypublished in The Stitch Times: April 2010