Bailouts can hit developing countries, WTO chief warns

January 28th, 2009 - 6:36 pm ICT by IANS  

London, Jan 28 (IANS) The head of the World Trade Organisation (WTO) has said multi-billion dollar financial packages aimed at bailing out failing banks and industries in rich countries may end up harming developing countries. “There are planes that won’t fly, ships that won’t sail, cars that won’t be sold. Does this mean that open trade is wrong? No. It means that there is an adjustment problem between supply and demand,” Pascal Lamy told Britain’s Channel 4 television news Tuesday on the eve of the World Economic Forum in Davos, Switzerland.

“And if you look at that from the side of developing countries who, by definition, cannot afford big bailout packages simply because they don’t have the money - let’s not make a system … more development-averse.”

Lamy said protectionism as a “go-it-alone solution … does not work” but added he had not seen any dramatic signs of protectionism so far.

Separately, in a report to the WTO’s 153 member-states, Lamy said bailout packages need to be designed in a such a way that they do not violate global trade rules or discriminate against foreign companies.

“It must be recognised that some of the measures at least, which in most cases constitute some form of state aid or subsidy, may eventually have negative spill-over effects on other markets or introduce distortions to competition between financial institutions,” he said.

The report names several examples of trade restrictions imposed since September 2008, including: India, which raised tariffs on some imported steel products; Ecuador; Indonesia; Argentina; and the European Commission, which says it will re-introduce export subsidies for butter, cheese, and whole and skimmed milk powder.

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