Trade, not talk

G8: The cynical view is tempting: world leaders have made yet another feel-good, empty pledge they will forget as soon as they return to their domestic concerns. But the G8’s commitment at the L’Aquila summit to concluding the drawn-out Doha trade talks next year may be more than that.

All the leaders seem to agree that giving in to protectionist pressures in fighting the recession would send the world economy into a tailspin. Protectionism doesn’t protect anyone. Fortunately, its increase has so far been a threat more than a fact. The renewed pledge should keep it that way.

Another reason for guarded optimism is the shift in the political climate since the Doha talks foundered a year ago. A severe rift between India and the US over sugar and cotton prevented progress on lowering tariffs and removing other obstacles to free trade in negotiations that have dragged on since 2001. But elections in both countries have since brought in leaders more inclined to compromise.

Both European and emerging countries still worry that President Barack Obama thinks he faces more pressing matters than trade. But they can look forward to the next meeting of the Group of Twenty countries — the de facto forum for international crisis fighting — taking place in the US next September. The hope is that Obama, who has a vested interest in the summit’s success, will put trade high on its agenda.

There’s a strong case for him doing so. World trade will drop 10 per cent by volume this year, according to the World Trade Organisation. Trade financing is drying up. Western bank bailout plans aggravate the problem by forcing banks to retreat to domestic markets. Furthermore, G20 countries have been slow to disburse the $250 billion they pledged last April to finance world trade. By September it should be clear to all that switching from pledges to deeds has become a matter of urgency.