Protectionism can 'spin out of control'

World Bank chief Robert Zoellick yesterday warned the two-day WTO conference that trade-distorting measures used by governments to stimulate their economies could "spin out of control" as unemployment rises.

"High-income countries have used subsidies for troubled industries, while low-income countries are using selective increases in border barriers," he said. "These trends can easily spin out of control in coming months as unemployment rises," he said. Pointing to signs of protectionism, Mr Zoellick cited examples such as the US Buy American provisions in its stimulus package and Washington's move to re-introduce dairy export subsidies.

He also pointed to China's Buy Chinese provisions.

"Government leaders need to recognise that they are playing with fire," said Mr Zoellick.

Meanwhile, International Monetary chief Dominique Strauss-Kahn yesterday said that banks still had work to do to clean up their balance sheets, adding that economic recovery would not come until this process was over.