Pascal Lamy, France’s former head of the World Trade Organisation (WTO), believes the world trade will adjust without upheaval or catastrophe to the new tariffs being imposed by the United States.
Lamy told a conference in Geneva that the US represented 13% of world trade, and the system would adjust.
“If the United States surrounds itself with a 20% tariff fence, the international trade system will adapt, just as it adapts to changes in the minimum wage in China or to fluctuations in the price of oil.
“Global market capitalism is extremely effective at absorbing such relative price changes. This adjustment will happen without major global consequences, provided two conditions are met.
“First, that we avoid contamination, because there is no reason to replicate the US protectionist model elsewhere. Second, that we continue our trade diversification.
“We will lose markets in the United States, and we will have to gain markets elsewhere. There will be efficiency losses — mostly for the US and also for its partners — but we can regain efficiencies in other regions.”
Lamy said there was little the WTO could do about the new US tariffs.
“The United States has de facto left the WTO, though not de jure. They will not formally withdraw because it would have severe consequences, for instance for agreements like TRIPS. They will not take that step, but we must get accustomed to operating in a WTO minus the US,” he commented.
