[Outlook]Closing the Doha dealWith the global economic crisis showing little sign of abating, problems are rapidly spreading into the real economy. The growth rates of advanced economies such as the United States, Japan and the European Union have recently sunk into the negative range and emerging markets such as China are also slowing significantly.
In Korea, import and export growth were down by two digits in November from the same period last year.
These figures indicate that the speed with which the financial crisis has begun to affect the real economy is at a much faster pace than originally anticipated.
International institutions such as the International Monetary Fund and the Organization for Economic Cooperation and Development have lowered their economic growth rate forecasts for next year. Many countries have cut interest rates and drawn up measures to stimulate their economies, even though such measures will cause huge financial deficits.
With the world economy having slipped into a downward momentum, revisions on details of the Doha Development Agenda that would govern trade in agriculture and industrial goods were released early Sunday morning, Korea time.
The DDA is a series of trade negotiations among multiple partners, which began in 2001. It is aimed at boosting economic growth in WTO member countries by easing trade restrictions.
However, as the differences in the stances of advanced and developing nations have not yet narrowed, nothing has yet been finalized in the talks. A fourth draft was drawn up recently in an attempt to finally induce an agreement in a mid-December ministerial meeting. The conference will focus on details concerned with opening the markets for agricultural and industrial goods.
A draft reached after a smaller meeting in July could not garner consensus as it was viewed as primarily reflecting the position of leading members. As such, the December round is drawing attention to see if a deal can be reached this time. If a positive outcome is achieved, it will form an important basis for overcoming the economic crisis.
Recently, leaders of the world’s 20 leading economies, including Korea, met in Washington and agreed to cooperate in battling the economic crisis.
But we can’t rule out the possibility of protectionist policies emerging. In the 1930s during the Great Depression, the Smoot-Hawley Tariff Act prompted countries to erect trade barriers, putting the world economy into deeper trouble.
U.S. President-elect Barack Obama has said that he supports free trade in principle, but the U.S. Congress is reportedly wary about agreeing to the DDA anytime soon, concerned as it is with protecting American industries. If the U.S. makes even the slightest move toward trade protectionism, other advanced economies will likely follow suit.
Our economy is heavily dependent on exports and is therefore more vulnerable to changes in the global economic climate. If a trend of protectionism emerges, our exports will fall. Exports have led our economic growth since the Asian financial crisis; reduced exports will damage the domestic economy as a whole. So for us, the newly distributed Doha draft is good news.
WTO Director-General Pascal Lamy has constantly argued that settling the Doha negotiations as soon as possible is the right way to respond to the global economic crisis. Through the new draft, Lamy has sent a stark warning against the emergence of trade protectionism, and is urging member countries to cooperate on closing the Doha negotiations. Our government must also actively participate in these efforts.
*The writer is chief of the WTO team at the Korea Institute for International Economic Policy. Translation by the JoongAng Daily staff.
by Jung Chul