Last year, a quarter of a century has passed since the founding of the WTO. You were its co-founder and longest-serving CEO. When you look at this organization today, does it meet the goals set in 1995?
Overall, yes. The WTO is fulfilling its most important goal, which is to reduce trade barriers. This may be evidenced by the fact that the volume of international trade has increased over the last 26 years. Of course, the WTO is not the only reason why barriers are disappearing, but it is certainly one of the main forces contributing to this. However, this does not mean that her work is done, because trade barriers are constantly changing and new ones are emerging. For example, what I call “prevention”. The WTO needs to adapt to these changes, and that is perhaps too slow at the moment.
What can we actually imagine under the term prevention? How is it different from protectionism?
When the state applies protectionism, it protects domestic producers and the economy from foreign competition. By contrast, prevention means that the government protects its citizens or consumers from some external risk. So these are two different things with different policy intentions, but they can have the same consequences in some cases. Because each country sets a different type of prevention, exporters have to adapt to it, and that is costly. And extra costs are an obstacle to international trade.
Is it possible to combat these new obstacles?
The only way to stop this trend is to harmonize the different levels of prevention. This can only be done from above and not from below. Because for legitimate reasons, opening up business through lowering levels of prevention will not work. The key is therefore to harmonize and create international fora where these measures can be discussed. One such issue that is currently being addressed at European level is CBAM (introduction of carbon duty at EU borders – note red.), just proposed by the European Commission. This is a good example of prevention, not protectionism.
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How can the European economy recover from the current corona crisis as quickly as possible?
The first thing that needs to be done is to stop the current “vaccine apartheid”. The European economy will not fully heal as long as much of the world remains unvaccinated against coronavirus. Currently, about a quarter of the global population has received the first dose of the vaccine, and only half of that amount has received both doses. That’s very little. Until developing countries in particular vaccinate their populations, their economies will be weak. And the European Union’s economy, which is partly dependent on exports to world markets, will also be weaker.
Thus, tackling vaccine apartheid is not only a matter of health or morality, but also a major economic problem. At the moment, this is really urgent, because if the vaccination of the developing world takes another three or four years, it will have a severe impact on global economic growth.
Is there anything else that can be done here in Europe?
As a next step, we should use the European Union’s € 750 billion support package as soon as possible to revitalize and transform the European economy. It is a great deal of money, and if invested effectively, it can prepare EU countries for a global strategy, which is greening, decarbonising and digitizing the economy. Greening and digitization should be our two central priorities for the coming decade.
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During the ongoing pandemic, the world also has to deal with unprecedented problems, such as the global shortage of chips. How is it possible that the European Union was not prepared for this threat? And did she learn from her?
Whenever there is a deep economic downturn followed by a sharp recovery, markets will face shortcomings. Whether they are raw materials, skilled labor, energy resources or, as in this case, chips. The lack of chips was caused by two factors.
The first is that the coronary crisis has greatly accelerated the digitization process, leading to a huge demand for electronic equipment. Component manufacturers, of course, prefer customers who can charge higher margins. That’s why they prefer to sell their goods to Apple or Microsoft rather than Mercedes or Renault. If we talk directly about European carmakers, they made the mistake of not counting on the speed of economic recovery when planning their production.
The second factor is that we have a very limited capacity for chip production in the European Union. However, Europe has already recognized this problem and wants to be less dependent on external resources in the future. Brussels is currently negotiating with major component manufacturers to build new chip factories on European soil.
You are a strong supporter of globalization. Aren’t you afraid that the corona crisis has slowed the convergence of the world? Will entrepreneurs have to refocus on shorter supply chains in the future?
I reject deglobalization. It wouldn’t be a good thing, and I don’t believe it will ever happen. What is happening now, and this is not the first time, is that the process of globalization is changing. Yes, in some cases traders are reorienting themselves to shorter supply chains, especially where a pandemic has exposed their fragility. However, in some other sectors it will be extended. For example in telemedicine. If, in twenty years, we visit a doctor on the monitor screen, which is actually located two thousand kilometers from us, instead of going to the doctor who has the clinic around the corner, it is a longer supply chain.
Overall, I think that globalization may be slower in the coming years than in the past decade, but it will certainly continue.
You recently said in an interview that the post-pandemic world will be worse than the one before the pandemic. Are you behind it?
Unfortunately, I still believe that. International social, political and economic relations have been damaged by the coronation crisis. The post-pandemic world will be far more fragmented. Countries will be more divided as well as communities within states. By the way, we are still not in the post-pandemic world at the moment, the coronavirus is still among us.
Is it possible to prevent this?
International dialogue. The first opportunity will be at the Paris Peace Forum in November. This year’s edition is called Mind Mind the gaps ’(“Beware of differences” – note. red.). At this meeting, we will address, among other things, the huge inequality in the distribution of vaccines that I mentioned earlier. We need to keep in mind that problems will get worse if we do not solve them in time.
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Speaking of intensified international relations, what is your opinion on the Brexit trade agreement? Was it advantageous for Britain to leave the European Union on agreed terms?
Brexit is a tragedy that will end in negative consequences for both Britain and the European Union. However, the European Union is a ‘huge animal’, so the damage to it will be limited because it will be distributed among the 500 million inhabitants. While on the British side, only 65 million people will suffer the consequences. Overall, it is a lost operation that is bad for everyone. I simply see absolutely nothing positive about Brexit.
But the European Union is also not without flaws. Some critics of Brussels say that it would be better for relations if the 27 tried to be only a trade union and not a political one.
I fundamentally disagree with that. Economic integration, including the opening up of cross-border trade, is not possible if states are also not converging politically. Especially at a time when the economy is diversifying. I’ll give you an example. In the past, people only traded in goods such as socks, bicycles or cars. That is, with things that are ideologically neutral. But today, most stores are digitized and converted into data. And issues like data protection, data storage, data sharing, and so on are more complicated. Part of society believes that data should be publicly available. Others disagree and demand even stricter protection. It depends on aspects such as culture, religion or history. All Europeans have similar collective preferences, which they value. And that’s politics.
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China and the United States are currently the world’s largest political and economic powers. Europe seems to be playing an increasingly marginal role in the world. Do you think this trend will continue?
Partly yes. Indeed, the populations and economies of some Asian countries in particular have grown rapidly over the past decades. The American-Chinese rivalry will remain with us for the next fifty years. So the relative importance of Europe on this planet will decline. This is due to our demographic prospects. On the other hand, what role Europe will play depends above all on the Europeans themselves. Whether they can be sufficiently unified in the coming years, especially in trade matters. By the way, international trade continues to be the area where Europe’s influence on the world is still most pronounced. Lessons at the end? If we want to stay strong, we need to connect more and more.
Pascal Lamy (74)
- French politician and businessman.
- He studied economics at the prestigious Sciences Po in Paris.
- He has been a member of the Socialist Party since 1969.
- In the 1980s, he was an economic adviser to French Prime Minister Pierre Mauroy.
- He later worked for the European Commission and from 1999 to 2004 he was EU Commissioner for Trade.
- He was at the birth of the World Trade Organization (WTO) and led it as Executive Director between 2005 and 2013. He has held this position the longest of all current WTO chiefs.
- He is currently President of the Paris Peace Forum and Honorary President of the French think tank Notre Europe.
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