Fran O'Sullivan: Hopes ride on Obama's first dance

World Trade Organisation director-general Pascal Lamy is placing considerable faith in US President Barack Obama's debut appearance at this week's G20 meeting.

Lamy - like others - was disappointed when last November's G20 summit did not result in a kick-start to global trade, let alone make good on the leaders' promises to keep protectionist impulses at bay.

"It's the first dance of Barack Obama and the US Administration on trade, which gives to this exercise a certain visibility," Lamy said in an interview with this correspondent.

"It would be obvious with the same bunch of guys around the table that they would repeat the November prescription. But this time there is a bit of pep in the system, in that one of these guys is new.

"So, repeating the same thing with Barack Obama signing it has a meaning."

Lamy contends that the WTO disciplines have provided a "big insurance policy" ensuring there won't be a repeat of the 1930s era protectionist measures which deepened the Great Depression.

"It's not possible any more because of the disciplines [to] which WTO members have subscribed and which limit their margin to manoeuvre in trade policy severely - not totally - but severely.

"A test we had of this recently was Buy America, where Congress would have breached existing disciplines and where the President had to say 'stop, there's a red line which we can't cross' - which is the WTO disciplines".

He contends this episode provided good factual evidence that the WTO system works.

Lamy didn't attend the November summit. But he will be in London on Thursday to give G20 leaders a strong message.

The WTO director-general - who in a previous life was parachuted by the French Government to lead the rescue of the troubled Credit Lyonnais bank - is clear the effectiveness of the global economic stimulus is highly dependent on cleaning up the financial system.

"If you look at the IMF's evaluation of total amount of toxic assets, there is about US$2 trillion - the amount of write-offs on the table till now is US$800 million. We're not even half way there."

Since the Lamy interview, the Obama Administration has announced plans to sweep US$1 trillion of toxic assets from banks' balance sheets.

This ought to clear the way for a renewed focus on trade. The pragmatic Lamy has, however, pointed to other reasons why the world's consumer giant has been slow to get trade policy moving since the November presidential elections:

It has not been the priority - the financial crisis has been over-whelming.

US trade policy is a "cocktail" - one-third the Administration, two-thirds Congress - and getting consensus is difficult.

Trade policy is politically more devisive among the Democrats.

Anything that needs more inter-agency process than announcing a US$660 million health plan is "horribly painful" when a new Administration comes in, as teams are not merged. "It's messy."

There will be plenty of television footage this week of the "handbag summit" that Sarah Brown, wife of British Prime Minister Gordon Brown, is hosting for the spouses of G20 leaders, including France's celebrity phenomenon Carla Sarkozy and America's Michelle Obama.

Protest Nation has already assembled itself for its traditional drum roll against the bloated plutocrats of capitalism.

But will the plight of the poor nations whose citizens' future has been blighted by the financial malfeasance of the rich nations' citizens be taken into account?

Don't bet on it.

In November, the leaders ordered their trade ministers to hammer out the basis of a global trade deal by the end of 2008, and committed to a 12-month "standstill", or ban, against any new protectionist measures.

In fact, the trade ministers did not even go en masse to Geneva. The World Bank says 17 of the G20 countries have either increased trade-distorting subsidies or increased import tariffs. The WTO has also warned over "slippage" which could "slowly strangle" world trade.

The G20 nations are big enough, and (in most cases) wealthy enough, to survive the current crisis. But billionaire investor George Soros warns the G20 meeting is make or break because "unless they do something for the developing world, there will be serious collapse in that part of the world".

This potential also worries Lamy, who says the developing nations are impatient to access the gains that are already on the table from a draft Doha deal last July.

He plans to make the point to Obama that in the current situation many developing countries face a triple whammy. They are hit by a crisis which was constructed elsewhere; many of them are more dependent on trade and the level of official development assistance has been impaired.

"They don't have the big money for putting $800 million on the table in a stimulus package. Nothing is available - all they have is trade."

He contends the proposed WTO deal contains sufficient low hanging fruit to provide a much needed stimulus.

He also contends completing the Doha Round is less complex than regulating tax havens or hedge funds or rating agencies - all of which are on Thursday's G20 agenda.

A draft communique leaked to the Financial Times suggests the G20 leaders will endorse a raft of goals. Among them: The creation of 20 million jobs, a claim the global economy will expand again by the end of 2010, a boost to the International Monetary Fund, more aid for developing countries, support for free trade, and actions on bankers' pay and bonuses.

The FT's version notes world trade is falling for the first time in 25 years.

"We need to sustain the benefits of globalisation and open markets, and promote trade as a crucial driver of growth in the world economy.

"Therefore: we reaffirm the commitment made in Washington not to raise new barriers to investment or to trade in goods and services, including within existing WTO limits; not to impose new trade restrictions; and not to create new subsidies to exports."

On the face of it, this draft paragraph does encapsulate the "November Plus" outcome Lamy seeks.

The WTO director-general can probably count on strong support from a number of G20 leaders, among them: G20 host Brown, Germany's Angela Merkel, Brazil's 'Lula' da Silva, Australia's Kevin Rudd, South Korea's Lee Myung-bak, Japan's Taro Aso and Mexico's Felipe Calderon.

Lamy will not comment on which individual G20 leaders have sufficient conviction and verve to push for a stronger free trade outcome.

But he notes that when da Silva nullified the reintroduction of protectionist import licences in Brazil, "that's something that says more than speeches here and there".

The G20 leaders would be ducking their responsibilities to the rest of the world if they act only in their own interests.