Negotiators at the Geneva-based WTO aim to wind up an agreement this year that would boost trade flows with lower customs tariffs and reduce market-distorting subsidies. The only international rules governing trade among the WTOs 149 members also include a dispute settlement system that can authorize retaliation for illegal trade measures.
The U.S. trade deficit widened to a record $726 billion last year and that, together with an all-time high current- account deficit, make the U.S. more reliant on foreign investment. Meanwhile, Chinas trade surplus tripled to a record $102 billion last year, prompting increased calls in the U.S. and Europe for China to let its currency strengthen. This level of imbalance in the global economy, which is historically unknown, probably contains the germs of danger, Lamy told reporters in Brussels today. The WTO is needed as an insurance policy to guard against protectionism, he said, citing the trading systems role in limiting the effect of the Asian crisis at the end of the last decade. Federal Reserve Chairman Ben S. Bernanke said March 21 that the possibility of a future disruptive correction of the U.S. trade deficit cannot be ruled out.
With an April 30 deadline for the WTOs governments to agree on formulas that would cut duties on farm and industrial goods, Lamy also said the U.S., European Union and a group of 20 nations led by India, Brazil and China hold the key to completing a global accord. Each must make further concessions for the WTO as a whole to reach agreement, Lamy said.
The EU must pare tariffs on sensitive products such as sugar and dairy goods and the U.S. must impose limits on payments to farmers for products including cotton, he said. Brazil and India have to go further on promises to cut their import duties on industrial goods, Lamy added.