February 1, 2009 / 3:00 PM / 12 years ago

Trade ministers to strive for Doha deal this year

DAVOS, Switzerland (Reuters) - Key trade ministers agreed on Saturday to step up efforts to reach a new global trade deal and guard against protectionism to help pull the world out of economic crisis.

A security personnel watches near the venue of the World Economic Forum (WEF) in Davos January 31, 2009. REUTERS/Denis Balibouse

With the world economy in its worst state since World War Two, ministers met on the sidelines of the World Economic Forum in the Swiss ski resort of Davos and agreed keeping trade open was a central element in any solution to the crisis.

“It is very clear that we have to be better at communicating the message to all the people across the world that in order to come out of the economic downturn we need to keep trade open,” European Union Trade Commissioner Catherine Ashton said.

Ministers from 17 economies plus the 27-member EU said completing the World Trade Organization’s long-running Doha round to open up global trade was their top priority, and progress in 2008 meant remaining gaps could be closed this year.

But they did not agree on a date for ministers from the 153- member WTO to seek a breakthrough, not least because the new U.S. administration does not yet have a confirmed trade representative, which some felt weakened Saturday’s meeting.

Countries such as Egypt and Switzerland favor bringing ministers together before the next summit of G20 rich and emerging countries in London in April, which wants to settle on clear actions for tackling the economic and financial malaise.

But Brazil’s foreign minister, Celso Amorim, one of the strongest supporters of a deal, said it would not be useful to have a full meeting of ministers in the first half of the year.

BIGGEST STIMULUS

The Doha round was launched in late 2001 to open up trade in food, in goods from cars to chemicals, and in services like banking and telecoms, and help developing countries trade their way out of poverty. But agreement has proved elusive in the seven years since then as countries haggle over the details.

Economists disagree about how much a deal would boost the world economy by, but it would stimulate output by creating new trade opportunities.

“The Doha round will be the biggest stimulus package ever,” said Swiss Economy Minister Doris Leuthard.

A deal would also prevent countries raising new barriers against imports — even measures allowed under current WTO rules — which could deepen the crisis, as happened in the 1930s.

Already trade has slowed sharply, with the United States, China and Germany all reporting steep falls in exports and air cargo volumes dropping by nearly one fifth in December.

“The only antidote against this disease of protectionism ... is to conclude the round quickly,” said Brazil’s Amorim.

Business leaders at the Davos forum agreed.

“We cheer ‘em on. We believe in free trade. So anything that’s going to move that forward, that’s a good thing for business,” said William Amelio, CEO of Chinese computer maker Lenovo.

Fears that protectionism could worsen the crisis have prompted the WTO to monitor trade measures by its members and report them regularly, a move applauded by the ministers.

In recent months several countries have raised tariffs and subsidies, while a spate of multi-billion dollar stimulus packages and bailouts are also under scrutiny to see whether they discriminate against foreign businesses.

EU, U.S. FACE QUESTIONS

The EU’s decision to resume export subsidies of dairy produce, something that would be banned in a Doha deal but is allowed under present rules, has been denounced by food exporters like Australia and New Zealand.

Ashton said the permitted subsidies were a temporary measure to help an industry through troubled times. But WTO Director-General Pascal Lamy said that whatever the technicalities, the political signal was not right.

Acting U.S. Trade Representative Peter Allgeier said Washington was working to ensure that any stimulus package for its economy was in line with international trade rules.

Ministers had expressed concern that “Buy America” provisions in the $825 billion stimulus bill passed by the House of Representatives could shut imports of other countries out of the U.S. market and fuel protectionism.

Many fear the rules would prompt a wave of tit-for-tat measures, exactly as happened in the 1930s.

“We are certainly working with the Congress, with the White House, to make sure whatever we do in response to the economic crisis is consistent with our obligations,” Allgeier told Reuters.

A voluntary agreement at the WTO regulates rules for government procurement. Ashton said the EU and others would be satisfied as long as the new package complied with that.

Slideshow (5 Images)

Allgeier said the U.S. administration hoped the Senate would hold confirmation hearings for President Barack Obama’s nominee as trade representative, Ron Kirk, in the next couple of weeks.

(For statements issued after the meeting, click on: here 25136 )

Additional reporting by Barbara Lewis, Ben Hirschler, Emma Thomasson, Jason Subler and Lisa Jucca editing by Mike Peacock and Simon Jessop

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