Geneva: Leaders from the Group of Twenty (G-20) have kickstarted stalling world trade with a substantial infusion of funds to finance export credits, but promises to agree to a new Doha trade deal and battle protectionism remain vague.
A $1.1 trillion (around Rs55 trillion) deal to combat the economic downturn agreed at Thursday’s G-20 summit in London includes a trade finance package to fund $250 billion of trade over the next two years.
Rising world trade since World War II has lifted millions out of poverty and supply chains in the globalized world economy mean exporters rely on imports from maybe dozens of countries.
But trade has slumped in recent months. The World Trade Organization (WTO) predicts a 9% drop globally this year, the first contraction in 25 years, reflecting both dwindling demand and the lack of credit to finance shipments.
“The new resources made available for trade finance are clearly going to have an effect. It’s an important step. This is something quite significant,” said Fredrik Erixon, director of the European Centre for International Political Economy, a Brussels think tank.
But the promise to agree to a deal in WTO’s long-running Doha deal—a fixed feature in the communiques of all international gatherings—was short on details.
The communique said a deal in the Doha talks, launched in late 2001 to help developing countries prosper through trade, could add at least $150 billion a year to the world economy. But it did not set a deadline for the urgently needed agreement.
Ministers from trading powers came close to a deal last July, but the talks eventually foundered on differences between the US and major emerging countries.
The US wanted countries such as China, India and Brazil to open their markets up more to American businesses, while India wanted to protect its poor farmers from a surge in imports and China was suspicious of calls to create duty-free zones in specific industrial sectors like chemicals.
Despite a G-20 call last November to reach an outline Doha deal by the end of 2008, WTO director-general Pascal Lamy felt the gaps were still too wide to call in ministers in December.
On Friday, Lamy told Reuters an outline deal on the core areas of agriculture and industrial goods could be done by the end of this year, and he could call in ministers for talks before or after the European summer break.
Such talks could take place at a summit of the Group of Eight rich countries, to which emerging powers like Brazil, China and India have been invited, to be held in Italy in July, an EU diplomat said on Thursday. Chinese commerce minister Chen Deming said on Friday the Doha talks would resume in July.
Many developing countries fear the original purpose of the Doha Round—to remove distortions from the international trade system that hurt poor nations—are being forgotten in the push to secure the greater market access for American businesses that will be needed to get a deal through the US Congress.
“What is important, however, is not the conclusion of just any Doha Round, but rather a round that...explicitly prioritizes the needs of developing countries and addresses the imbalances already present in the rules of the global trading regime,” Carolyn Deere, director of the trade project at Oxford University’s global economic governance programme, wrote in a blog.
The lack of high-profile action on the Doha talks may belie the reality, however. Negotiators are meeting quietly to ascertain each other’s limits on areas such as the sector proposals, which could prepare the way for a final push.
The G-20 communique repeated a call from last November to its members not to raise trade barriers, extended this to the end of 2010 and called on WTO, among others, to monitor compliance.