Combating the global recession through trade

There seems to be a general feeling that by early next year the world economy will stop going downwards and stabilise, but it will be some while before we witness true economic growth, European Trade Commissioner Catherine Ashton told The Times Business.

"We are in the beginning phase of the upturn," she said.

Interviewed by this newspaper on the global economic situation, Ms Ashton expressed cautious optimism about the crisis and said: "I think the position we are now in is probably a stronger position than I would have dared to hope a few months ago. We have had a very severe financial and economic crisis and we are at the point where our financial institutions are stable, though there are still serious problems for many of them."

Visiting Malta for talks with government officials last Friday, the Commissioner said that she was beginning to hear reports that the initial signs of recovery are there "but we have some way off that because in the real economy we are still going to see job losses and businesses not managing to survive." She added: "We are in the beginning phase of the upturn."

Acknowledging that this year the world will experience the first decline in global trade since 1982, Baroness Ashton said that the 27 EU member states have done very well in trying to support their industries.

"There are still important industries facing difficulties and it is important for me to be able to open up trade opportunities for them," she said.

The European Trade Commissioner said she came on her first visit to Malta, where she held discussions with Finance Minister Tonio Fenech, to look at what she called "the three legs of the economic downturn", namely the fiscal stimulus, regulation and trade as a mechanism and means out of this recession as well as issues specifically for Malta.

She said the negotiations on the Euro-Med free trade zone was also discussed, pointing out that this was of deep significance for Malta, as was a free trade agreement with Libya, which was also being discussed.

"It's good for me to hear from a member state how important such agreements are. I get from them the sense of wanting to complete these agreements as quickly as we can," she said.

Asked to elaborate on a recent speech she gave in Washington DC in which she said that maintaining and extending open trade was as vital as the fiscal stimulus and financial regulation in addressing the current economic crisis, she said:

"If you look at how we get beyond the problems, first of all we had to provide the money, the fiscal stimulus, into Europe and the world to enable us to carry on, to get moving, to prevent anyone toppling over or the banks collapsing and so on. We are beyond that stage now, we've done our bit. We wobbled but did not fall over. Then you've got to look at how to get smarter regulation for the future and how to do that in a way that doesn't damage the ability of the financial markets to function.

"For me the biggest element is, having done all that, what is going to help us drive our economies in the future and help us get beyond this recession? And it is trade - the ability to produce goods, sell them on the market, to use the productivity for our country and invest in education and technology. All of those things will be how we all, as a world, get out of this recession and into the uplands, as it were, of economic growth again."

Turning to a possible shift in public opinion in both Europe and the US towards protectionism and isolationism, Baroness Ashton said: "People say they are worried about jobs, local industries, the economy, and whatever action is taken should not damage their jobs and industry. The quickest way to damage jobs is to put up barriers to trade and to invite others to do the same".

It is crucial, she said, to get the message across very clearly that the best way to support industry - besides giving them financial support through this recession - is to give them the resources to invest in the future, in order to help them trade and sell their goods successfully.

"So what people want is actually what we believe trade will offer them. We have got to get that message across very clearly."

She said she got the impression that the new US Administration was really committed to free trade.

"There were some concerns about what was said on the campaign trail. I have read most of what President Obama has said, and I have had the privilege of meeting Ron Kirk, the new US Trade Representative, a number of times. I have no doubt at all he is committed, so is the White House, to open and free trade. Within Congress, however, there is a strong feeling that this is not trade at any price, but trade in the best interests of America. I'm hopeful that what we will see in the future is an America, for example, really pushing forward on the Doha Round and helping us to finish that process".

Asked about the importance of an agreement on the Doha Round being reached and whether she was confident about this, she said this was very important.

"If you look at trade as an important solution to this problem, one arrives at the conclusion that a multilateral solution is better than a bilateral solution. You also get to the point of saying their economies have had a battering, how do we help them? You end up at Doha, wherever you begin. We need a multilateral agreement, and we need one as soon as possible. And here we have one which is 80 per cent done.

"I'm hopeful we'll get there. I'm not confident yet because America has to decide how to go forward - but I'm confident that they are serious about trying to do that. We now have a new Indian trade minister appointed. I'm very interested to hear his views on Doha, and I hope to meet him very soon."

The Commissioner said the 27 EU member states have a united position on Doha, pointing out that the way the EU works "is one of its great strengths".

"Before we get to the position we have a discussion and debate. Quite rightly member states approach trade with their own domestic interests as well as the overall interests of the EU. For example, at Doha agriculture is a very big part of the economy of a number of member states. That means that the way we've negotiated at Doha takes that into account.

"So I think we are in a good position that member states recognise that there is a deal on the table, and it is a good deal. Would some like more? Probably.

"Could we get more? No. Are we in a good position? Yes. The great joy of the 27 coming together is a degree of compromise in that. I'm comfortable we have got a good deal," she said.