Amidst crisis, Lamy says fine balance needed between flexibilities and commitments


World Trade Organization
July 22, 2009

Director-General Pascal Lamy, in launching the WTO World Trade Report 2009 in Singapore on 22 July 2009, said well-balanced trade contingency measures like anti-dumping duties or safeguards act as “safety valves” to help WTO members deal with a variety of unanticipated market situations; but “they need to be used with care… especially so in times of crisis.” “There needs to be a balance between flexibility and commitments”. He welcomed the APEC Trade Ministers’ commitment to work for a conclusion of the Doha Round in 2010 as “a positive signal to Geneva as we chart a programme of work for the autumn.” This is what he said:

“Trade Policy Commitments and Contingency Measures”

Honourable Ministers,
Distinguished Guests,
Ladies and Gentlemen,

Welcome, and thank you for being here today. It gives me great pleasure to launch the WTO’s flagship World Trade Report for 2009. This is the first time we launch our Report outside the present WTO Headquarters in Geneva and I should like to extend my sincere thanks to the Government of Singapore and to the Lee Kwan Yew School of Public Policy for making this event possible. I should particularly like to thank the Dean of the Lee Kwan Yew School, Kishore Mahbubani, for agreeing to preside over this event.

Each year we choose a specific topic as the centrepiece of the World Trade Report. We give the topic thorough analytical treatment in order to raise awareness and deepen understanding about trade policy issues — the sort of issues that are the daily fare of decision-makers and that often figure in multilateral trade negotiations. This year the topic is the design, use and effects of contingency trade measures and the place of such provisions in international agreements.

The Report takes a broad view of “contingency” measures. It goes beyond anti-dumping, countervailing duties and safeguards to consider tariff re-negotiations, access to the “overhang” between bound and applied tariffs, and export taxes. The latter two — the binding overhang and export taxes — were considered not as sanctioned WTO contingency policies, but rather as comparable measures that might be deployed instead of the usual contingency measures.

We usually define the topic for the Report sometime in the first half of the previous year, and the choice for the 2009 Report was serendipitous. We had little idea then of what we would be confronting now and of the shared challenges we face in lifting the world economy out of its worst crisis in many decades — certainly the worst since the birth of today’s system of international global governance.

We know very well that today’s crisis — just like the last crisis of this magnitude back in the 1930s — was not caused by trade policy. But we also know that protectionist trade policy played a significant role in deepening and prolonging the economic downturn back then.

This time — so far — we have been more fortunate, thanks to improved macro-economic management, the solidity of WTO rules and disciplines built since the end of the 1940s and the self-restraint of governments.

But as you are no doubt aware from the WTO’s careful monitoring of trade policy developments, and from my public statements elsewhere, we have seen an increase in restrictive trade measures since the onset of the crisis. So there is no room for complacency. I do not think we are in a situation where we need to cry wolf, but we need to remain vigilant and open with one another.

The particular relevance of this year’s World Trade Report is, of course, that in times of crisis, governments are inclined to make greater use of contingency measures provided for under the WTO agreement.

We generally think of contingency trade policy as actions available to deal with unanticipated market situations. It is well understood such measures are fundamental to the effectiveness and stability of trade agreements. In their various guises, they can be thought of as safety valves, a form of insurance, an instrument of economic adjustment or as a deterrent against the trade-distorting policies of others. It would be nice to think that the existence of such measures did not just stabilize trade agreements, but also enticed a higher degree of openness than would otherwise be the case. The Report says there is scant evidence of this effect.

The core challenge in the design of these measures is to make them flexible enough to be useful, but not so flexible as to undermine the integrity of an agreement. The need for this balance has sometimes been a key issue in negotiations.

One of the motivations for launching the Uruguay Round in the mid-eighties was to bring voluntary export agreements under control. These were contingency measures that circumvented multilateral disciplines and in no way responded to an imperative for balance — they were simply destabilizing the GATT. And we hardly need reminding that anti-dumping provisions are an important component of the Doha Round, or that special safeguard arrangements are a delicate issue in the quest for agreement in agriculture.

The proposition that well-crafted contingency measures are an essential feature of viable trade agreements does not alter the fact that the use of such measures carries costs that may reduce economic welfare. This is why they need to be used with care. This is especially so in times of crisis because a widespread use of such measures may take on its own dynamic, such that governments resort to them not in response to a particular unforeseen difficulty, but just because other governments do so. We need to avoid such a self-fed upward spiral.

What I am saying here is that not only do we need the resolve to respect WTO obligations, but also restraint in exercising WTO rights. I also believe that if we are to exit the crisis successfully and at a minimum economic cost, it will be important that governments show willing to reverse actions they took to manage the crisis. It would be unfortunate if measures justified by particular circumstances were to linger once those circumstances had passed. To allow that to happen would be a negation of the very meaning of contingent action.

This is particularly important in this region. According to our estimates Asia is starting to see a rebound in trade from the very low figures in the first quarter of the year. These figures show that Asian economies may be leading the new expansion of world trade. Let us make sure domestic trade policy measures support this rebound.

My final point is that we need to be realistic about the challenges that await governments in the coming months. Pressure is likely to increase on policy-makers to resort to contingency measures and other actions that restrict trade, particularly if the upward trend in unemployment persists before things get better.

Political resolve will be needed to continue to show restraint. International cooperation and mutual support will help to resist the pressures and I can think of no more effective means of signalling a shared determination to weather the crisis at minimum cost than to bring the Doha Round to a speedy conclusion.

Today we had a fruitful discussion on the contribution that APEC members can make to translate the recent positive political signals in support for a rapid conclusion of the Doha Round into action. I leave Singapore with the message that APEC players are ready to work towards a conclusion of the Doha Round in 2010 and that they are all committed to make their contribution to get to the finish line. I am confident that this will send a positive signal to Geneva as we chart a programme of work for the autumn.

Thank you very much.

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