Sunday, April 26, 2009

Myopia Still Hampers WTO

It is up to the United States “to make history” by leading the way to a revival of the stalled Doha Round of trade negotiations, says Pascal Lamy, director-general of the World Trade Organization.

In making that case in a Washington talk on April 24, Lamy emphasized that open trade needs to be “accompanied by the right domestic policies.” His list of those policies includes:

-- “better worker training, greater mobility in labor markets, more expansive social safety nets."
-- “investing in critical areas such as health care, education, and clean energy.”
-- “greater investment in physical, social, and government infrastructure, which helps increase the benefits of trade.”

“The presence of these domestic policies,” he explained, “provides a layer of comfort to workers who are then better prepared to face global competition since they know there are social safety nets that will catch them when they fall.”

In warning against protectionist measures, Lamy said: “It is not less trade that the United States needs, but more and better domestic policies,…policies which help translate trade into benefits for the people. This is where the task of reconciling the people with trade must start [emphasis added].”

While detailing the domestic policies that need to be changed for the sake of workers, he neglected to mention any WTO policies that might need change to take account the rights and interests of workers. These are controversial of course, but so are the domestic policies he advocates.

Ironically, at least in the United States, the business groups most eager to restart the Doha negotiations are also those most zealous in opposing the domestic policies that Lamy deems necessary to give “comfort” to working men and women.

In his talk, given at the Peterson Institute for International Economics, Lamy called upon U.S. business, academics, and political leaders to rally behind the WTO during what he called “the first global crisis in the history of mankind.” Yet, except for his ideas on needed domestic programs, he relied on the same free trade rationale that has been persuasive for 60 years but now is seriously questioned by influential economists and others in rich and poor countries alike.

Back in 1993, a Heritage Foundation memorandum analyzing the pre-WTO General Agreement on Tariffs and Trade (GATT) called it “the closest thing to a uniform commercial code for world trade.” The WTO is still devoted to devising and enforcing an improved global code for commerce, but the world needs more than that.

Lamy’s talk reflects some innovative WTO ideas on the internal policies of the United States and other countries. Especially in the present crisis, Pascal would be wise to start rethinking the WTO’s own policies.
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I have long criticized the WTO for its unbalanced agenda. See, for example, “The WTO's Lop-Sided Agenda for the World,” in December 2001. For a more recent analysis, see the blog posting of April 20, immediately below this.

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