Pascal Lamy on Trade Agreement “Generations”

Pascal Lamy (former Director-General at WTO) spoke on the three generations of trade agreements (“jurassic”, “modern” and “futuristic”) at the GED sponsored “Multilateral Regionalism and Emerging Markets – Opportunities and Risks in Global Trade” panel at the Global Economic Symposium in Kiel.

Pascal Lamy started by pointing out that opening trade leads to welfare  improvements, assuming the fullfilment of a number of conditions. Thus, the important question is – according to him – how to remove obstacles to trade?

He defended that obstacles to trade exist in order to protect both:

• Domestic producers from foreign competitors,
• Consumers from risks (environmental, safety rules, etc).

These obstacles to trade depend on both governance and distance.

He highlighted that most preferential agreements are not being used by businesses but, indeed, they only cover in practice 15% of trade.

Pascal Lamy claimed that there are three generation of trade agreements:

• Jurassic trade agreements; Examples of Jurassic trade agreements are GATT, NAFTA and WTO. They are 80% aimed at removing protection to domestic producers and 20% about other issues related to trade regulations, anti-dumping, anti-subsidies etc. Pascal Lamy stressed that they are “Jurassic” since they make less sense in a globalised world. As production processes become more and more vertically integrated along global value chains, trying to prevent imports makes less sense and might even hamper a country’s export sector.

• Modern trade agreements; These agreements are only 20% targeted to remove protection to producers. An example is TPP. According to him, the strict classical trade opening through product protection reduction is very modest in TPP. However, he praised the great step in linking trade openness with labour, environment and anti-corruption provisions.

• Futuristic trade agreements; TTIP is an example of this new generation. Pascal Lamy defended that they will mainly target precaution provision (80%) and at a smaller extent, protection (20%). According to him, the breakthrough in TTP is of no use for TTIP, since environmental, labour and anti-corruption provisions are the same level. Therefore the focus relies on precaution.

See his full remarks in this video below:

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