G20 in a few weeks
G20 in a few weeks, the WTO, the global crisis and protectionism.
By Mike Moore, former Prime Minister of NZ
Former Director General of the World Trade Organisation.
The timing couldn’t be better for the release of a telling report from the World Trade Organisation about the explosion of protectionist measures implemented by its members since the beginning of the global economic crisis a year ago. On the 24th and 25th of September, the leaders of the G20 Nations meet in Pittsburgh in the USA. A recent informal meeting of trade Ministers in India, has given fresh impetus for Ambassadors to the WTO to resume negotiations in Geneva that had earlier collapsed in disappointment.
Ambassadors can’t successfully negotiate unless they have fresh and flexible mandates from capitals. It was smart to have the ministers meeting in India chaired by their new Minister of Trade. . India and China have been the beneficiaries of globalisation over the past few decades and have seen many hundreds of millions of their people lifted from extreme poverty. Other, less successful developing countries look to them for leadership.
The Doha Development round which was launched when I was Director General of the WTO has the capacity, if concluded with real substance will give the global economy a trillion dollar boost. All win. Especially the poor in rich countries and the poor in poor countries. As always agriculture is a major difficulty. Rich countries spend a billion dollars a day subsidising their farmers which makes food dearer for their families. However this is not just an agricultural round and it’s not just the rich countries that have to make compromises. Every leader has to face angry constituencies who feel the immediate pain of new competition and lukewarm supporters from those who will have new opportunities. Privileges are rarely surrendered without a fight anywhere at any time.
Some said you cannot make change when things are good. And things have been good, until the recent meltdown the world enjoyed the most sustained period of global growth in history. More wealth has been created in the past sixty years than all of history put together. When do you fix the roof? When the sun is shining or when it’s raining? It has not been raining over the past twelve months; it’s been a financial blizzard. Perhaps the economic crisis will focus Leader’s minds and the trade round will be concluded. There has been a great cost in standing still. The poor can’t afford the status quo. The status quo is just Latin for yesterday’s compromise.
Trade negotiations have not stood still. The slower things are at the WTO and if the multilateral system doesn’t move ahead the action moves to regional and bilateral deals. Poor small countries are rarely involved. Agriculture and other sensitive issues are seldom addressed. None of these deals have a binding disputes system. All create trade diversion and grant new privileges and history shows that when the powerful get levers to use, they will one day use them. There’s a cost to being left out, so we all do these deals, if we can.
Anti globalisation forces, the forces of reaction have been emboldened by the global melt down. It’s not globalisation that people need to fear but deglobalisation which is what a depression or recession means. Low and slow growth threatens people’s sense of security and they become vulnerable to evil forces of tribalism, racism, reaction and protectionism. Unpleasant political forces emerge with the seductive names such as Ukraine first, America First and NZ First.
Even the most amateur historian will concede that the last great depression was prolonged, made more lethal by competitive devaluations and protectionism which caused global trade to collapse. From this misery came the twin tyrannies of last century; Fascism and Marxism.
Most Leaders know what works and what doesn’t. Their real challenge is balancing their domestic interests. It’s called politics.
Who to blame? It doesn’t matter; there is enough blame for everyone to share. Congratulations to the WTO for being such a robust organisation that they can produce a report that criticises and exposes its most powerful twenty members.
At the G 20 meeting, hosted by President Obama there is an opportunity to move ahead. Leaders have been named and shamed for breaking the spirit of the consensus at the last G20. Just last week America put a new tariff on imports of tyres from China, China a few hours later put up measures against imports of American chickens and motor vehicle parts. The WTO report bravely exposes 130 new measures that restrict trade have been introduced over the past twelve months. Some of these decisions may even be legal in terms of the WTO agreements many will be the subject of the WTO’s binding disputes system.
This system is the jewel in the crown of international economic relations. No country has ever refused to act on a ruling. It works but can be improved yet even those technical improvements are locked inside the Doha trade negotiations. Overloading this system then blaming the WTO for its impartial legal rulings could threaten the whole system. The WTO risks becoming like a Mexican piñata that politicians can hit in the expectation of goodies and pump up populist domestic reaction if they are found guilty. This is dangerous.
The global recovery is at risk due to protectionism, international trade will drop 9% in 2009.Protectionism is the crack cocaine of economics; it’s a short term addictive stimulus .A successful conclusion of the trade round would lift all boats. No single decision would do more to advance worldwide growth.
It’s time for the adults to take charge. I feel like going to the G 20 with a placard that would read. "What would Roosevelt or Churchill do?"
