The head of the World Trade Organization said in an interview Thursday that the biggest threat to trade worldwide was rapidly rising unemployment rates and the growing protectionist sentiments that oftentimes accompany very high levels of unemployment.
At meetings of the Asia Pacific Economic Cooperation (APEC) forum in Singapore, WTO Director General Pascal Lamy told CNBC that he was very concerned about the proliferation of protectionist policies he has seen implemented around the world since the start of the recession, although he acknowledged that it was likely the inevitable response.
"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.
In the U.S., as the unemployment rate has risen to a 26-year high of 10.2 percent, many Americans are beginning to get the sense that there is nothing “free” about free trade. The “buy American” clause in the $787 billion stimulus package was very popular with the public, and many citizens are now calling the president to follow through on his campaign promises and renegotiate the nation’s existing free trade agreements. Congress has stalled passing three already-negotiated agreements, because there doesn’t seem to be much support for them among the American public.
Support for free trade in the U.S. reached an all-time high in Gallup polling in May of 2000. In that poll, 56 percent of respondents said that they saw international trade as an opportunity for growth, while just 36 percent saw it as a threat.
The latest Gallup polling on the issue, conducted in February 2009, found that support for free trade had dwindled considerably. In the latest polling, just 44 percent of respondents saw international trade as an opportunity for growth, while 47 percent of respondents saw it as a threat to the economy from foreign imports.
Lamy is worried that those same feelings are sweeping the world-over as unemployment continues to rise.
"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.
In a separate interview, Lamy said that due to rising protectionist policies, he believed that world trade would contract by as much as 10 percent this year, although he would do everything in his power to stop that from happening. One of the ways in which he hopes to achieve that is by completing the contentious Doha round of global trade talks sometime this year, preferably December, he said.
Dustin Ensinger November 12, 2009