Peter Gallagher

This weekend’s WTO Min­is­te­r­ial meet­ing in Geneva was unable to agree on how to keep goods and ser­vices mar­kets open to trade and com­pe­ti­tion. That’s no sur­prise, after ten years of repeated fail­ure to agree. Nor is it a cat­a­stro­phe given that for­mal bar­ri­ers are being held in check (more or less), for now, despite the global reces­sion. But in a world tee­ter­ing on the brink of a sec­ond reces­sion, the stale­mate in WTO gives plenty of rea­son for concern.

The nearly-twenty-year-old treaties that cur­rently gov­ern world trade allow a lot of room for gov­ern­ments to hike trade bar­ri­ers by a long way (50 — 80 per­cent in many goods and ser­vices sec­tors) any time they want. The legal lim­its — the trade “bind­ings” — in the treaties on trade in agri­cul­ture, some indus­trial prod­ucts and ser­vices, were cut only half way in 1994.

Now, the longer the mis­er­able state of non-collaboration on trade extends, the big­ger the risk that some gov­ern­ment will take advan­tage of the “manoeu­vre room” to kick off a round of retal­ia­tory, but per­fectly legal, trade restric­tions, freez­ing global eco­nomic recovery.

An out­break of “legal” pro­tec­tion­ism is far from fan­ci­ful. All it would take would be, for exam­ple, elec­toral vic­tory in Europe or the Amer­i­cas for a polit­i­cal party that draws its sup­port from the mil­lions of dis­af­fected and unem­ployed who are suf­fer­ing most from global reces­sion. A defi­ant act, securely within the lim­its of WTO treaty “bind­ings,” that hiked bor­der bar­rier to iso­late and pro­tect domes­tic mar­kets; a plau­si­ble spark for a trade conflagration.

You can find a brief account of the Chairman’s sum­mary of the Min­is­te­r­ial meet­ing here.