Former trade rules chief bashes Trump’s tariffs, calls for multilateral rules-based order
The World Trade Organization could continue even if the United States decides to leave it, according to a former trade rules chief.
Pascal Lamy, former director-general of the World Trade Organization, said whether the US stays in depends on the world’s largest economy’s commitment to a multilateral rules-based order.
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Pascal Lamy says US tariffs do nothing to reduce its overall trade deficit. Provided by CEIBS To China Daily |
“For the moment it is the big economy in the system, but it depends on whether you believe at the end of the day that having a collective system – a multilateral cooperation system – is the right way to go. I think the EU, Japan, India, China and Africa believe this is so,” he said.
Lamy, who was speaking at the China Europe International Business School in Shanghai, where he is a distinguished professor, said the US was breaking WTO rules by imposing tariffs on China and other countries.
“We all know that his tariffs are not WTO compliant,” he said, speaking of US President Donald Trump. “There is uncertainty on whether Trump is after improving the trade regime or whether he is about getting rid of the trade regime.”
Lamy, who was involved in the negotiations for China to join the WTO, said the tariffs would do nothing to reduce the overall US trade deficit. While it might reduce that with China, it would only serve to increase its deficits with other countries.
The decision to impose tariffs “is not a question of a US-China trade deficit”, he said. “Assuming Trump decreases the US-China trade deficit but increases the US-Vietnam or the US-Thailand deficit, that will not change anything seriously.”
Lamy added that having a trade deficit should not be a problem for a country like the US, whose currency is the global reserve.
“The US has had a trade deficit for a very long time, and I think most economies on this planet would agree that this has nothing to do with trade,” he said.
“The US has a trade deficit because US consumers consume more and save less than the rest of the planet. And as long as the US benefits from this formidable privilege of having the dollar, they don’t have a problem financing the deficit. If they had a problem financing the deficit it might be an issue. It is not an issue.”
Lamy also said Trump is wrong to argue that tariffs are a way of bringing back jobs to the US.
“If it is a question of bringing back jobs to the US, it is already near full employment so it must not be that relevant. It doesn’t make sense,” he said.
Lamy, however, said he supported calls from the G20 summit in Buenos Aires earlier this month for WTO reform.
“Agreeing on WTO reform is one thing, but agreeing on what you should put in that box called reform is another,” he said. “China has to compromise in some areas; the US will have to compromise in others. What the EU and to some extent Japan are trying to do for the moment is talk to the US, talk to China, so at the end of the day everybody is around the same table.”
Despite current trade issues Lamy does not believe the world will descend into 1930s-style protectionism.
“We have reached a stage of globalization that makes deglobalization extremely unlikely. Globalization exists because it is efficient,” he said. “Deglobalization would be inefficient.”
(China Daily European Weekly 12/21/2018 page3)