World leaders spoke out against protectionism
in their speeches at Davos, warning that putting restraints on trade would only
worsen and prolong the global economic crisis, dpa
reported.
But there were few signs that a sideline meeting Saturday of trade ministers
from about 20 countries had managed to push ahead the long-stalled Doha Round
of trade talks, meant to create freer markets.
"Throwing out the baby with the bathwater is not right," said World
Trade Organization Director General Pascal Lamy. "Trade is not the cause
of crisis."
The concerns over protectionism - measures such as tariffs which would place
restrains on trade - were sparked by the harsh reminders that isolationist
policies in response to the market crash of 1929 wreaked havoc and in part
created the harshness of the Great Depression.
Nations could take steps to protect their industries, but protectionism
distorts markets, said Lamy, adding that he would monitor legislation in various
countries which might violate WTO rules.
He urged the US Senate to be careful when it voted on a stimulus bill, already
passed in the House of Representatives, which did contain some "buy
American" elements.
With the International Monetary Fund predicting the weakest year of growth
since the Second World War, there was real concern over measures which might
impede commerce needed to get the world economy out of the downturn.
France's Finance Minister Christine Lagarde said the two greatest concerns were
social unrest and protectionism.
The trick would be finding a way to stimulate national economies without
overstepping trade rules, while also, as Lagarde said, making sure planned
actions were properly articulated to domestic constituents.
Several politicians openly stated they were under pressure from businesses at
home to take big steps towards protecting local enterprises.
At the World Economic Forum, the common mantra was that while there was an
understanding that something needed to be done, and fast, it was still unclear
exactly what that something might be.
Some ideas were floated to get lending back on track, including pumping
liquidity into banks and markets and putting so-called "toxic assets"
into bad banks in order to free up the balance books of financial institutions.
One agreed-upon point was the need for increased international cooperation.
Many hopes were pinned on the upcoming meeting of the Group of 20
industrialized economies (G20) in April in London, with expectations that the
major emerging economies will have to be part of a solution in such a global
crisis.
There were repeated calls, from Indian to British officials, to take steps to
boost the IMF and other international institutions. Japan said it was ready to
give 100 billion dollars to the fund, which itself has asked for 250 billion.
However, it was clear most leaders did not feel there was a one-size-fits-all
approach to fixing the problems and each state would have to take right steps
for its economy.
No one was willing to predict when the crisis would end, or even bottom out.
The optimists would only say that eventually things would work out, though
changes would be made.
"People will still make money but not like in past decade, and that's a
good thing," said former US president Bill Clinton.
Regulation would likely get tougher both on existing banks and all financial
institutions.
"If it walks as a bank and quacks like a bank it needs to be regulated
like a bank," said Peter Sands of Britain's Standard Chartered Bank.
Several business leaders said they were simply waiting for the proverbial other
shoe to fall, such as when it became clear how badly hedge funds were affected.
The financial world was entering, in the words of a private investor, "a new
era of humility."
But for the already humbled, the world's poorest or "bottom billion"
people, times might get tougher as they will lack both the capital and the
credit to stimulate their economies, while the industries they depend on are
likely to be hard hit.
World Bank President Robert Zoellick suggested that the industrialized world
should put aside 0.7 per cent of their stimulus packages for a
"vulnerability fund" for developing countries suffering in the global
downturn.
He urged against leaving the weakest "out in the cold."
Similarly, Ban Ki-moon, the UN's secretary general, called for maintaining aid
to the developing world, even in times of crisis.
Like others, he also said an eye should be kept on the ball in regards to
climate change, particularly with countries set to gather at the end of the
year in an attempt to pass an aggressive environmental accord.
If the economy were to "go green," jobs could be created, spurring
some recovery, many leaders including Ban noted.
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