We need Doha more than ever, says Lamy

Director-general Pascal Lamy says 'where we need rules we need rules for everybody'. Photo / Marty Melville

The state of the world economy means the value of the Doha Round as an insurance policy against protectionism has increased, World Trade Organisation director-general Pascal Lamy says.

"Eighty per cent of the job is done so 20 per cent remains to be done," he said during a visit to Wellington yesterday.

The change of administration in the United States and the need for the Senate to confirm senior trade officials had inevitably created a delay.

"As soon as they are up and running we will resume the political process, with the assumption by members of the WTO that we will resume from where we left off at the end of last year."

Lamy, a former European trade commissioner, is unambiguously critical of the European Union's decision to reinstate export subsidies on dairy products.

As part of the Doha negotiations Europe has offered to scrap export subsidies - which Trade Minister Tim Groser calls "the most reviled trade policy instrument" - and had stopped paying them. But in a world trade round nothing is agreed until everything is agreed, so the EU is within its legal rights to resume paying them.

"But it is still a negative development. It goes in the wrong direction," Lamy said.

It is one of the areas where there is a space between what countries have been doing in practice and what they are entitled to do under their existing WTO commitments, known in the jargon as "water in the tariff".

That water is the only asset whose value has grown in the past year, observed Lamy sardonically.

The elimination of that gap is a key objective of the Doha Round. The WTO estimates that the tariff burden would double if its members pushed actual tariffs up to their bound levels, and cites research that it could shrink world trade by 8 per cent, at a time when the International Monetary Fund already expects it fall by 2 per cent as a result of the global recession.

Lamy is also critical of the Buy America clause in the United States' recently passed US$1.5 trillion stimulus package - though it was qualified with a reference to the need to be consistent with the United States' obligations under the WTO agreement on government procurement.

"The good news on Buy America was that WTO disciplines worked," Lamy said. "The bad news is that the pressure was there in the first place."

The WTO's predecessor, the Gatt (General Agreement on Tariffs and Trade) arose from the ruins of World War II and reflected an understanding that the protectionism of the 1930 had contributed to that calamity.

But while the kinds of measures adopted in the 1930s would generally be forbidden under WTO rules, "the toolbox of trade-restrictive measures is much more sophisticated than it was in the 1930s", he said. It includes subsidies, non-tariff barriers and anti-dumping procedures.

"We have to be very vigilant."

In recent weeks New Zealand has concluded, with Australia, a free trade agreement with Asean (the Association of Southeast Asian nations) and launched FTA talks with India and Korea. And there are hopes the transpacific partnership will be expanded to include the United States. But such bilateral and plurilateral agreements are no substitute for a world trade round, Lamy said.

"They cannot substitute for a solid multilateral system and disciplines, not least for a country like New Zealand which cares a lot about farm subsidies, for instance, and fishing subsidies."

Bilateral trade deals create preferences (at the expense of third parties) the value of which erodes as more and more such deals are done.

It is sometimes argued that with the massive expansion of the WTO's membership, all of whom have to agree before a trade round is concluded, it has become too unwieldy to do the job.

"But you cannot on the one hand want developing countries to be more active and more expert stakeholders and then regret the good old days when the Quad [the US, EU, Japan and Canada] called all the shots," Lamy said.

"Where we need rules we need rules for everybody, otherwise there is regulatory arbitrage, which we know is terrible. We have seen that in the financial sector, which obviously lacks any serious international regulation."

Not that the WTO wants to expands its role into that space. Its tasks are daunting enough already.

CV
* Pascal Lamy has been director-general of the World Trade Organisation since 2005. His first term ends this year but he is an unopposed candidate for a second.
* The 61-year-old Frenchman served in his country's civil service before going to Brussels in 1985 as the right-hand man of European Commission President Jacques Delors.
* In November 1994, he joined the team in charge of rescuing Credit Lyonnais, and later became CEO of the bank until its privatisation in 1999.
* He returned to Brussels in 1999 as EU trade commissioner, helping launch the WTO's Doha Round - a work still in progress.