Global trade and the impact of the economic crisis

13 November 2009

David O’Sullivan, Director-General for Trade, European Commission, said the financial crisis could be seen as the real beginning of the 21st century, as it heralded a global economic shift from the EU and the US to Asia.

Although this crisis is not a trade crisis per se for many larger countries, it has resulted in dramatic falls in trade flows, and affected global supply chains. While there was global agreement to avoid protectionism, developing countries have criticised industrialised countries’ ‘low-intensity protectionism’ of large public bail-outs of their banking systems.

The World Trade Organization (WTO) has shown that a rules-based trading system can help avoid a protectionist backlash, so this process must continue by concluding the WTO Doha (Development) Round. This round will form the framework for the global economic architecture of the 21st century, and as it will benefit developing countries most, shows that the WTO has changed from a “rich man’s club into a global organisation”. It is the only organisation that represents the 21st century world order and a new way of working.

Meanwhile, the EU is continuing with bilateral trade relations with Korea, India, ASEAN, Canada, the US, Central America and the Andean countries.

“We have survived the worst of this crisis”, he said, but because of the time lag unemployment will peak in the middle of 2010 and is likely to lead to pressure for protectionism to safeguard jobs.

Turning to the forthcoming climate change negotiations in Copenhagen, Mr O’Sullivan hoped there would be a sufficient breakthrough to keep the process moving. His DG’s contribution is to keep trade open and help countries resist the temptation of ‘climate protectionism’, by imposing import levies, as “trade is part of the solution, not part of the problem”.