A new narrative for world trade

©AFP/Eric Piermont

World trade is changing, and so too must the way policymakers approach it, says Pascal Lamy. We asked him to explain. 

OECD Observer: The financial and economic crisis of the last few years has led to calls from world leaders, the OECD and other international organisations for new growth models, and to avoid returning to business-as-usual. You have also urged change, and just recently stated that “yesterday’s solutions simply cannot be applied to the problems we face today.” In the context of world trade, what you think can no longer be applied?

We can no longer think about world trade in the same terms as 20 years ago. International trade has profoundly changed over the past decades. Production chains have become global, with production stages located in various countries. World trade is no longer exclusively about trading final products, as per David Ricardo’s theory. It is increasingly about trading intermediary goods. The import content of exports has roughly doubled in 20 years (from 20% to 40% on average). This means that protectionism in the classical sense of the term, i.e. customs tariff increases or quantitative restrictions on imports, does not protect anymore: in today’s world, taxing your imports means taxing your exports, and hence damaging your competitiveness. In other words, applying the classical recipes of protectionism doesn’t do the trick anymore. It won’t pull us out of the current crisis, to the contrary.

Real protection lies in my view in the quality of economic policies and social safety nets. Look at Europe: it has a common trade policy but social policies differ from one country to another. The difference in competitiveness between France and Germany, for example, stems largely from differences in the way economic and social policies are designed and implemented. In today’s globalised world and in the current context of financial and economic crisis, social policies are more important than ever. They are the key to competitiveness and sustained growth.

The WTO traditionally favours trade opening and is against trade protectionism. Have these definitions evolved in any way in light of the crisis or shifts in globalisation?

Yes, they have evolved dramatically. I just referred to the profound changes that have affected world trade in recent decades and what this means for protectionism. Raising tariffs does not protect anymore; real protectionism is about putting in place the right economic and social policies to accompany those impacted by globalisation.

As for trade opening, for decades it took the form of tariff reductions. In 1947, before the GATT began operations, average tariffs in the industrial world were comprised between 20 and 30%. Eight successive rounds of trade negotiations under the GATT succeeded in reducing average MFN tariffs* on imports of manufactures to 4% in industrial countries. With the lowering of tariffs, the nature of obstacles to trade has evolved.

In many regards, today non-tariff barriers matter more than tariffs. This is what we now have to focus on, and this is what this year’s WTO World Trade Report will be about. This evolution has an impact on the way trade opening can be achieved.

By trade opening, I do not mean deregulation; I mean opening trade within a framework of global rules. What the current crisis has demonstrated is that regulation is essential to harness globalisation. How can this be best achieved? Regional and bilateral trade agreements have a positive impact on trade opening as far as tariffs are concerned. But regulatory issues may not be necessarily best addressed through these agreements. The multiplication of regulatory frameworks that stems from regional and bilateral agreements may indeed create divergences with costly impact on business. Today, given the changing nature of obstacles to trade and global production chains, greater trade opening is best achieved through multilateral agreements.

You have recently named a panel to identify 21st century trade challenges. Why have you taken this initiative and what would you like to see come from it?

I have noted above, the nature of trade and of obstacles to trade has changed dramatically over the past decades. We need a new trade narrative. We need to analyse these changes to identify what are the real obstacles to trade in today’s globalised world and how best to respond to them. I have decided to appoint this panel to shed light on the new challenges facing world trade and the WTO, to assess the medium-to long-term trends in multilateral trade relations, and to reflect on the future direction of the WTO. The panel–with strong presence of business, civil society and prominent stakeholders of global trade–has been tasked with identifying what are today’s and tomorrow’s obstacles to trade, as well as the potential opportunities for the Multilateral Trading System; and explore how trade is contributing to development and what actions can be taken to ensure that the trading system continues to support growth, job creation, poverty alleviation and improved standards of living.

*MFN: “Most-favoured nation” status.




©OECD Observer No 290-291, Q1-Q2 2012

Economic data


Stay up-to-date with the latest news from the OECD by signing up for our e-newsletter :

Twitter feed

Suscribe now

<b>Subscribe now!</b>

To receive your exclusive print editions delivered to you directly

Online edition
Previous editions

Don't miss

  • Africa's cities at the forefront of progress: Africa is urbanising at a historically rapid pace coupled with an unprecedented demographic boom. By 2050, about 56% of Africans are expected to live in cities. This poses major policy challenges, but make no mistake: Africa’s cities and towns are engines of progress that, if harnessed correctly, can fuel the entire continent’s sustainable development.
  • “Nizip” refugee camp visit
    July 2016: OECD Secretary-General Angel Gurría visits the “Nizip” refugee camp, situated between Gaziantep and the Turkish-Syrian border, accompanied by Turkey’s Deputy Prime Minister Mehmet Şimşek. The camp accommodates a small number of the 2.75 million Syrians currently registered in Turkey, mostly outside the camps. In his tour of the camp, Mr Gurría visits a school, speaks with refugees and gives a short interview.
  • OECD Observer i-Sheet Series: OECD Observer i-Sheets are smart contents pages on major issues and events. Use them to find current or recent articles, video, books and working papers. To browse on paper and read on line, or simply download.
  • Queen Maxima of the Netherlands gives a speech next to Mexico's President Enrique Pena Nieto (not pictured) during the International Forum of Financial Inclusion at the National Palace in Mexico City, Mexico June 21, 2016.
  • How sustainable is the ocean as a source of economic development? The Ocean Economy in 2030 examines the risks and uncertainties surrounding the future development of ocean industries, the innovations required in science and technology to support their progress, their potential contribution to green growth and some of the implications for ocean management.
  • OECD Environment Director Simon Upton presented a talk at Imperial College London on 21 April 2016. With the world awash in surplus oil and prices languishing around US$40 per barrel, how can governments step up efforts to transform the world’s energy systems in line with the Paris Agreement?
  • Happy 10th birthday to Twitter. This 2008 OECD Observer interview with Henry Copeland said you’d do well.
  • The OECD Gender Initiative examines existing barriers to gender equality in education, employment, and entrepreneurship. The gender portal monitors the progress made by governments to promote gender equality in both OECD and non-OECD countries and provides good practices based on analytical tools and reliable data.
  • Once migrants reach Europe, countries face integration challenge: OECD's Thomas Liebig speaks to NPR's Audie Cornish.

  • Message from the International Space Station to COP21

  • The carbon clock is ticking: OECD’s Gurría on CNBC

  • If we want to reach zero net emissions by the end of the century, we must align our policies for a low-carbon economy, put a price on carbon everywhere, spend less subsidising fossil fuels and invest more in clean energy. OECD at #COP21 – OECD statement for #COP21
  • They are green and local --It’s a new generation of entrepreneurs in Kenya with big dreams of sustainable energy and the drive to see their innovative technologies throughout Africa. blogs.worldbank.org
  • Pole to Paris Project
  • In order to face global warming, Asia needs at least $40 billion per year, derived from both the public and private sector. Read how to bridge the climate financing gap on the Asian Bank of Development's website.
  • How can cities fight climate change?
    Discover projects in Denmark, Canada, Australia, Japan and Mexico.
  • Climate: What's changed, what hasn't, what we can do about it.
    Lecture by OECD Secretary-General Angel Gurría, hosted by the London School of Economics and Aviva Investors in association with ClimateWise, London, UK, 3 July 2015.
  • Is technological progress slowing down? Is it speeding up? At the OECD, we believe the research from our Future of ‪Productivity‬ project helps to resolve this paradox.
  • Is inequality bad for growth? That redistribution boosts economies is not established by the evidence says FT economics editor Chris Giles. Read more on www.ft.com.
  • Interested in a career in Paris at the OECD? The OECD is a major international organisation, with a mission to build better policies for better lives. With our hub based in one of the world's global cities and offices across continents, find out more at www.oecd.org/careers .

Most Popular Articles


What issue are you most concerned about in 2016?

Euro crisis
International conflict
Global warming

OECD Insights Blog

NOTE: All signed articles in the OECD Observer express the opinions of the authors
and do not necessarily represent the official views of OECD member countries.

All rights reserved. OECD 2016