Pascal Lamy: free trade’s harassed champion still fighting to get the world to agree

Given the choice, Pascal Lamy would be in New York City this week, pounding the streets of Manhattan in his running shoes in preparation for his favourite marathon next weekend. Instead, the lean 64-year-old Frenchman will be on home turf, briefing the G20 at its Cannes summit on the state of the world trade negotiations over which he presides.

These negotiations have turned into a marathon of their own. Next week sees the 10th anniversary of the start of the round, launched at Doha in Qatar shortly after the terrorist attacks on 9/11, but still going nowhere fast. Lamy, director-general of the World Trade Organisation, runs every day but spends so much time shuttling between capitals in search of an elusive deal that marathons are out of the question, at least for now.

“Instead of doing 20-30 kilometres a week you need to do 60-70 kilometres a week,” he says. “I can run any time, any place, anywhere. You don’t need any special equipment. It is a form of meditation. But you can’t do marathons if you are jet-lagged once a week.”

Some might question whether the jet lag is worth it. Hopes of an ambitious, comprehensive deal that would see sweeping reductions to trade barriers in goods, services and agriculture, together with unlimited access to western markets for the world’s poorest countries, have been pared back.

Lamy’s aim now is to salvage what he can from a decade of trench warfare at the talks and to prevent WTO members worried about jobs and growth from putting up protectionist barriers as they did in the 1930s.

He is confident the deadlock can be broken but says that the WTO has to move away from the idea that nothing is agreed until everything is agreed. “You can [have an] early harvest. There is some low-hanging fruit.”

Asked if WTO members won’t simply pick the low-hanging fruit and leave the more difficult issues – such as industrial tariffs – rotting on the tree, Lamy says: “What’s the alternative? If the alternative is to do nothing, for how many years do you accept that?”

Away from the WTO, Lamy chairs the board of one of France’s leading orchestras, Les Musiciens du Louvre-Grenoble, and says he gets a thrill out of seeing how the conductor gets the musicians from “somewhere to elsewhere”. It is, he adds, like throwing a pot: “You start with the raw material, then you turn it, you cook it, you paint it, you re-cook it and something different comes out at the end.”

The orchestra he conducts at the WTO talks is made up of more than 150 states, and for the past 10 years some discordant music has been coming out of Geneva. Trade barriers were gradually dismantled in postwar rounds of negotiations, and Lamy identifies two key reasons why the so-called Doha round – the ninth – has been the longest and most difficult so far.

Firstly, the world is no longer divided into rich nations and poor nations; a third group of fast-growing and powerful developing countries – China, India and Brazil – has emerged, which has changed the dynamics of the negotiations. Secondly, governments are reluctant to make concessions now the economic skies have darkened.

“The current position of the US is that these countries [China, Brazil and India] have now emerged and we need a level playing field with them,” explains Lamy. He says Washington’s argument is that if the US is going to have to cut tariffs on imports of manufactured goods to zero, then the big emerging nations have to do the same. India and China counter this by saying that they still have big development challenges and cannot abide by the same trade terms as the rich nations of the west.

“There is a difference between trade policy and the politics of trade. An economist might say to the Chinese government that opening up to trade has been good for growth, so why not cut industrial tariffs to zero? But there is a political problem. Some constituencies in China won’t like it and if it looks like they are bowing to the US, it won’t get through the politburo. It is as simple as that.”

Nor is freer trade an easy sell in the US, he admits. “The US has a serious job problem. Ten per cent unemployment in the US has a political dimension no other country understands. It is a political catastrophe because there is not the same social safety net that there is in other countries. Ten per cent unemployment is a terrible social shock.

“The US vision of China is a strange mixture of how it viewed Russia in the 1960s and Japan in the 1970s. It is a geopolitical threat. It is a security problem. It is an economic problem.”

The poorer developing countries are frustrated, he admits, that they are not going to get all the concessions they thought they would get in 2001, but China, Brazil and India have agreed to be treated differently from nations in sub-Saharan Africa, offering the chance of concluding the round. “That was the landing zone. The financial crisis is probably why the expected landing did not take place and why the plane is still circling.”

The WTO talks have been in a holding pattern for the past three years, when talks broke down because of a disagreement between India and the US, so does Lamy ever despair? “I have a job that’s incredibly stimulating. I learn something every day. But with a temperament like mine, which is about getting things done, it’s frustrating. Trade negotiators are incredibly paranoid. They suspect others of cheating. The system is viscous and paranoid.”

Lamy is the classic poacher turned gamekeeper, having been Europe’s trade negotiator after working for European commission president Jacques Delors. Europe, he says, is limping along because it has one strong leg – monetary union – and one weak leg – economic union. The choice is, he says, to integrate further or watch Europe unravel. “It is not a question of one step forward or one step back; it is a question of one step forward or four steps back, because if the euro goes the next thing to go will be the single market, and after that the customs union. You go back to square one.”

Did the people who began the round bite off more than they could chew? “That’s probably the case. There are more topics, more players, more complexities.” Success now would be to show that the WTO is not just a body that polices world trade, imposing sanctions on those who break the rules, but that it also has the power to break down barriers.

If the WTO cannot achieve that, Lamy believes there will be a greater risk of protectionism – a risk so far remarkably avoided. “It’s the dog that didn’t bark,” he says. “Nobody was expecting the dog not to bark. But is there no danger at all? No, there is a risk – while there is unemployment, social distress, pain, and where people think protecting trade is a way to protect their job. It doesn’t work, but people think it does.

“Protectionist pressures are out there. We will publish something for the G20. It is like the check up from a doctor: the X-ray is roughly OK, but there are a few spots there.”

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By | 2016-03-29T11:15:13+01:00 October 31st, 2011|News|Comments Off on Pascal Lamy: free trade’s harassed champion still fighting to get the world to agree

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