Beijing: Countries are coming round to the need for a global system of financial rules because the credit crisis has shown that purely national solutions are not enough, World Trade Organisation chief Pascal Lamy said on Monday.
Speaking in Beijing, Lamy said the crisis may already have created a political will for greater global financial regulation that has hitherto been stifled by divisions between proponents of traditional regulation and advocates of self-regulation.
“My sense is that nations are starting to converge around the idea of the need for greater global regulation in this area, and it is now time to think about building a consensus on a possible regulatory agenda,” Lamy, the WTO’s director-general, told a conference a Peking University.
US President George Bush said on Saturday he would host the first of a series of crisis summits soon after the 4 November presidential election to focus on the “principles of reform” needed to fix the global financial system.
Lamy said he would welcome the construction of what some are calling a new Bretton Woods consensus.
Over 700 delegates from 44 allied nations met in Bretton Woods, New Hampshire, in July 1944 to design the post-war economic order. The meeting gave birth to the International Monetary Fund and World Bank and led to the creation of the WTO’s predecessor.
It also put in place a system of fixed but adjustable exchange rates that underpinned a generation of fast growth and low inflation.
Designing a new regime would be a slow and painful process, Lamy said. “The most urgent element is to restore confidence in the financial system. The signal that nations are ready to engage in an honest process of global rule-making would contribute to this,” the head of the Geneva-based trade watchdog added.
The participation of developing countries was critical to forging a global consensus on regulation, which should be aimed at controlling risks not stifling financial innovation, he said.
Lamy drew an analogy with train engineers: the trains they design have to be faster, lighter and smarter, but they must also meet safety standards.
“What we need is a set of safety rules against world financial crashes,” he said.