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Don’t wind down G20 trade support packages too rapidly – Lamy

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Don’t wind down G20 trade support packages too rapidly – Lamy

28th June 2010

By: Creamer Media Reporter

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There should be "no rush to exit" a G20 trade finance support package that was agreed in London last year, as it had helped to ease short-term trade financing shortages brought on by the credit squeeze, World Trade Organisation director general Pascal Lamy said at the weekend.


He also urged that more targeted trade finance was provided to address specific needs, explaining that the availability and affordability of trade finance remained a serious constraint for many businesses in low-income developing countries.

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Addressing G20 leaders gathered in Toronto on Saturday, he said that open trade and international investment were central to the exercise of fiscal consolidation and economic growth, which were much-needed at present.


He reiterated that trade should be an integral part of the framework for sustainable, balanced growth which the G20 has been putting together since the Pittsburgh summit, held in September 2009.

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Trade and international investment could help drive global growth and support macroeconomic adjustment to bring imbalances back to economically and politically sustainable levels, noted Lamy.


He also stated that trade was "a major casualty" the financial crisis, falling by an unprecedented 12% in 2009.


The collapse of demand caused the contraction in trade - given how highly leveraged consumption had become in North America and parts of Europe by 2008, and how quickly that was undermined by the choking off of bank credit.


The credit squeeze hit trade through shortages of short-term trade-financing as well, such as letters of credit which were vital for many developing countries as well as small and medium-scale businesses worldwide.


Lamy also highlighted that trade protectionism played a limited part in the contraction of trade in 2009.


"Protectionism is probably the only crisis dog that did not bark so far. Careful monitoring of trade restrictions by the WTO shows some slippage by G20 countries, but overall the impact of new restrictions has been limited - no more than 1% of world trade flows has been affected since 2008," he stated.


The traditional barometer of protectionist pressure was increased demand from the private sector for trade remedies, but these have not materialized because anti-dumping, countervailing and safeguard action remained within precrisis ranges.


But Lamy urged the leaders to remain vigilant against protectionism, particularly as unemployment levels remained unacceptably high.


"An important step that G20 governments can take now is to announce exit strategies to unwind the trade restrictions and subsidies that they introduced temporarily and to start implementing those strategies as soon as domestic economic recovery takes hold," he said.


Lamy urged for conclusion of the Doha Round of world trade negotiations, adding that they were currently at an impasse.


Although 80% of the job is done, negotiators are considering the remaining 20%, he said, adding that technically, finishing the Doha Round was possible, however the tactical and political impasse must be broken.


He urged business leaders to encourage their leaders to conclude the round.

 

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