SINGAPORE - Rising unemployment is the biggest threat to free trade and could spark greater protectionist policies around the globe, the head of the World Trade Organisation said on Thursday.
WTO Director General Pascal Lamy, who is attending a meeting of Asia-Pacific trade and finance ministers in Singapore, told broadcaster CNBC that he did not expect an improvement in the job situation in the next one or two years.
I think the biggest threat is in the deterioration of the jobs market where unemployment is rising hard, then inevitably protectionist functions appear, Lamy said when asked what was the biggest challenge to free trade.
Jobless queues have jumped across the industrialised world since the global economic crisis erupted a year ago and have been a prime reason nervous governments have resisted calls to start winding back stimulus measures.
The U.S. jobless rate hit a 26-½ year high of 10.2 percent in October and economists polled by Reuters expect it to rise to 10.5 percent by the middle of next year. [ID:nLAG005912]
In Japan, the world's second-largest economy, the jobless rate in September recovered from a record high, falling to 5.3 percent from 5.5 percent in August and 5.7 percent in July, but job availability remained near a record low.
Lamy said protectionist tendencies so far had remained very contained and measured.
The violence of the crisis has triggered protectionist reactions here and there. There has been slippage, countries with a bit of buy local, a bit of increasing the tariffs, a bit of anti-dumping, a bit of safeguards, he said.
Ministers at the meetings of the Asia Pacific Economic Cooperation (APEC) forum in Singapore have agreed that stimulus policies should remain in place for now.
They have to maintain it because there is not yet firm evidence of a sustained improvement in global private demand, Australian Treasurer Wayne Swan told reporters.
Lamy said the jury was still out on whether the Doha Round of trade liberalisation talks, stalled for eight years, could be concluded by the 2010 target date.
For the moment, that's the target and we are trying to accelerate, move it forward. What I got here was a certain sense of urgency, which of course has a lot to do with the necessity to keep trade open in order to exit the crisis, Lamy said.
WASHINGTON TOO SLOW
Lamy said in an interview with an Italian newspaper this week that the United States had been slow in reaching a negotiating position in the Doha talks.
He said that after a year spent putting in place the new U.S. administration, next year's U.S. mid-term elections could prove a further problem in finalising the Doha talks.
Trade ministers are due to meet in Geneva at the end of the month to assess progress.
Australian Foreign Minister Stephen Smith said he did not share the scepticism of some about the Doha round, adding APEC had a role to play in reinforcing its importance.
I am expecting a very strong communique from leaders so far as openness of markets and trade is concerned, underlining and reinforcing Australia's and APEC's strong view of the importance of successfully concluding that round, he said.
The WTO's 153 members must turn vague discussions on the Doha round into real negotiations with concrete proposals laid down on paper, Lamy said last month.
Broad agreement has been reached in many areas of the talks, launched in late 2001 to create new market opportunities and help developing countries prosper through trade.
But they are stalled over differences between exporters and importers, and rich and poor countries on how much to cut farm subsidies and industrial and agricultural tariffs.