WTO chief optimistic about global trade talks

Coming off a steep global recession, international trade is a hot issue. In the 1930s and late 1970s, many countries put up import barriers in order to save ailing domestic industries. However, these policies sapped global demand and arguably exacerbated the severity of the worldwide recession.

Recently, protectionism reared its head again in the form of currencies wars, which some fear would escalate into a full-blown trade war.

Bernard Hoekman, a director at the World Bank, said Doha can create greater security of market access through policy disciplines. In other words, Doha can put up concrete measures to make sure no global trade war breaks out.

In addition to preventing trade wars, Doha could reduce existing trade barriers. Economists estimate adopting current proposals can create hundreds of billions of dollars in new wealth per year. Lamy’s own estimate a few years ago puts global gains at $130 billion per year.

However, despite the obvious advantages of open trade, countries have incentives to be protectionist. For example, if a country enacts trade barriers when no one else does, it may be able to boost employment and (distorted) GDP growth. However, Lamy said the world is interdependent nowadays and such “beggar thy neighbor” policies won’t work.