Pascal Lamy, World Trade Organization director general, speaks at the launch of the WTO World Trade Report at the APEC Ministers Responsible for Trade meeting in Singapore

The global economic outlook remains uncertain as growing protectionist sentiment threatens the world’s recovery from its deepest slump since the Great Depression, the Asia-Pacific Economic Cooperation said yesterday.

The global slump has prompted policy makers to cut lending rates, boost spending and cut taxes to sustain growth. The International Monetary Fund and the World Bank lowered their forecasts for 2009 global growth in recent weeks, while leaders from advanced nations say the recovery is too fragile to consider reversing more than US$2 trillion in stimulus efforts.

Policy responses to the economic crisis should minimize distortions to trade and investment flows, which are critical to ensure growth, the APEC ministers said, adding that the world economy appears to be bottoming out. They pledged to resist growing protectionism and renew efforts to conclude the Doha trade talks in 2010.

“It’s doable, which experience has shown doesn’t automatically mean it’s going to be done,” World Trade Organization Director-General Pascal Lamy said in an interview with Bloomberg Television yesterday. “But we have good political energy and this huge economic crisis is focusing minds on the dangers of protectionism.”

Trade barriers

APEC members extended their commitment to refrain from raising new barriers to trade and investment by another year until the end of 2010, the ministers said yesterday.

“We will persist with efforts to support growth and facilitate trade and investment flows, keep our markets open and give a new push to concluding the Doha Round,” the trade ministers said. Uncontrolled protectionism could hurt growth severely, they said.

The Geneva-based WTO expects trade in goods to drop 10 percent this year, the most in more than six decades, after forecasting a 9 percent contraction in March. Trade grew 6 percent in 2007.

The collapse in global trade deepened in the first quarter, with exports and imports slumping by more than 10 percent in the Group of Seven nations, the Organization for Economic Cooperation and Development said last week.

Contraction slowing

“We see some slowing down of this deep contraction, especially in Asia, which unsurprisingly will probably be the place in the world economy that will bottom out first and probably more vigorously than average,” Lamy said. “But I remain very cautious as we’re still not out of the woods.”

APEC members, including the US, China, Russia and Japan, account for about 44 percent of world trade and 54 percent of global gross domestic product, according to the organization’s website.

Ministers agreed that “while populist measures for protectionism were greater during these difficult times, the political resolve to resist them must be even stronger,” according to the statement. “Although the Asia-Pacific region was still relatively open, some trade-restrictive measures had emerged since the beginning of the economic crisis.”

Buy American

The European Union and Canada have led international efforts to get the US Congress to scale back a provision in its $787 billion stimulus bill that said all the steel and manufactured goods bought with that money had to be made in America. Congress later agreed to soften that provision, saying it would be applied in a way that complies with US international obligations.

“We do not believe that the ‘Buy American’ provision as included in our stimulus bill violates that pledge,” US Trade Representative Ron Kirk said in Singapore yesterday. “It expressly states that the ‘Buy American’ provision will be implemented in a manner wholly consistent not only under our obligations to the WTO but our obligations under any of our existing” free trade agreements, he said.

The Doha Round began in 2001 with a focus on dismantling obstacles to trade for poor nations by striking an accord that will cut agriculture subsidies and tariffs on industrial goods. Discussions have been dogged by disagreements over issues including how much the US and the European Union should reduce aid to their farmers and advanced developing countries such as India, China and South Africa should lower tariffs.

Source: Bloomberg