WTO DG Pascal Lamy describes FTAs as "politically convenient" instruments
Bernama, Malaysia
WTO DG Pascal Lamy describes FTAs as "politically convenient" instruments
By Manik Mehta
NEW YORK, June 25 (Bernama) — Asean has been interested in using Free Trade Agreements (FTAs) as instruments for promoting trade in the globalised economy.
Pascal Lamy, the Director-General of the World Trade Organisation (WTO), said on Thursday, at the Council on Foreign Relations in New York, that FTAs have become "politically convenient" for individual countries that are not sure of the repercussions for them in a multilateral framework.
"FTAs are convenient for politicians and as such are politically efficient. However, FTAs do not cover 100 per cent of all products.
"There is always the problem that special interests will erode the FTA but as time progresses, there will be less obstacles to trade.
"Tariff barriers will be reduced but non-tariff barriers will be more difficult to address," Lamy told Bernama in an interview.
Malaysia held several rounds of talks in the past with the United States aimed at drawing up an FTA which, however, did not materialise because of failure on both sides to reach a consensus on a number of issues that would have constituted the basis of the accord.
Further negotiations were discontinued and, as one American diplomat succinctly put it in the aftermath of the breakdown of the talks, "with mutual consent".
Lamy tried to put the protectionism fears in perspective.
"We have not had a sort of protectionist tendencies we had expected (with rising unemployment in the recession-plagued developed economies).
"Today, the behaviour of many politicians is more disciplined than before as they stay within voluntary, agreed parameters," he added.
He pointed out the WTO had set up a machinery to monitor and caution countries against protectionism.
"We have not seen any serious form of protectionism. Protectionism pressure comes from the job market. As long as unemployment remains high, pressures will always be there," Lamy maintained.
He said trade policies would always remain difficult because of open debates.
"Trade policies have happy and unhappy constituencies. The number of issues remains high. We have, after all, 153 members of which 100 are active participants in negotiations with a large agenda," he said, adding that it was a complex and time-consuming process.
He saw parallels in the trade tensions between the USA and China in the tensions between the USA and Japan as also with Europe in the 1960s, 1970s and 1980s.
"I don’t think one can dream of a world where everything works smoothly," he said, adding that differences in macroeconomics and not trade policies were the cause of the imbalances between the different countries.
Lamy’s mantra for redressing these imbalances lay in addressing savings and consumption rather than shifting gears in trade policies.
When questioned about the currency-related tensions between the US and China, he replied that it was not for the WTO to comment on China’s currency regime which Beijing recently eased under US pressure, adding that it is not within the WTO’s ambit to get involved in currency matters because it was separate from trade.
China recently announced that it would be flexible on the question of the yuan’s rate of exchange, departing from a 23 month-old pegging to the US dollar.
America’s business world is buzzing with China’s yuan revaluation and its implications for global trade.
Some American analysts speak of adverse effects for technology companies that get materials from China while others, expect China, will have less money to put in the US Treasury market.
He spoke of historical experiences that showed that the impact of currency valuations on competitiveness and trade flows were very marginal.
Lamy, who was on his way to Toronto, Canada, to participate in the G-20 conference from June 25 to 27, rubbished any suggestion of the Doha round of talks being dead.
"International negotiations never die. Whether we talk about disarmament, whaling, trade, it never dies, it just takes longer," he quipped.
Lamy probably had his eye on the stance of the United States at Geneva where it severely criticised China for trying to stall the trade talks, warning that the Doha round would be stalled and no accord could be achieved until China and other emerging economies agreed to open their markets.
Meanwhile, Brazil and India have signalled that they are willing to negotiate, according to Michael Punke, the US ambassador to WTO.
Lamy’s belief is that the US trade deficit or China’s trade surplus had more to do with macroeconomic management with savings, investment, consumption than with trade policies.
With global trade taking a hit in 2009, many are questioning about the prudence of further pushing globalisation.
"I do not see any serious reason why world trade will deglobalise. We should look at various factors such as culture, environment and others while predicting the state of globalisation but the fact is that this is a technology-efficiency world.
"I do not see any structural reason for deglobalization. We will probably see more South-South trade because this part of the world is growing and showing greater dynamics," he observed.
