Trade is the pulse of the world economy, and it is slowing dangerously. The World Bank predicts that in 2009 world trade will decline for the first time since 1982. Europe is feeling the pinch – even global export champion Germany saw the biggest fall in exports for 15 years at the end of 2008. Our external trade partners are also hurting: on the back of slumping exports, Japanese industrial production has fallen by 30 per cent in six months. The same decline took five years in the US during the depression of the 1930s.

While the attention of governments is now focused on bolstering domestic economies to create jobs and growth, politicians must realise that trade is part of the solution. World trade has grown continuously since the Second World War. Trade has buoyed business, increased choice for consumers, and most importantly lifted maybe a billion people out of poverty.

The worst thing that could happen now is that “de-globalisation” takes hold and undoes much of this good work. With this in mind, five key steps can help us fight the trend. They aren’t easy and they aren’t quick fixes, but they are vital to our economic revival.

First, we must combat protectionist tendencies at home and abroad. The temptation is great to raise tariffs or even ban imports in a bid to protect our industries. Nobody is immune from such misguided beliefs, not even the European Union. Completing the current Doha Round of world trade talks will provide an insurance policy against rising protectionism, and strengthen the world trading system. Until we conclude that deal we must act in the spirit of what the WTO stands for – free and fair trade.

Second, we should continue to dismantle barriers to trade in order to create new opportunities for our businesses. Nothing will do this better than completing the Doha Round, but we in the EU also have the chance to close other ambitious deals. The free trade agreement we are close to sealing with Korea will provide substantial market access opportunities for a wide range of European industries such as machinery, chemicals, pharmaceuticals, textiles and footwear, and will deliver a major liberalisation of services trade.

Third, we need to get trade finance flowing again. Finance is the lifeblood of international trade: 90 per cent of world trade needs some form of credit or other financial support, and the WTO sees a shortfall of at least $25bn. EU Member States are taking action, but they cannot take over the role of the banking sector. In the absence of sufficient funds we should look closely at a coordinated European response to keep trade moving. Fourth, we can foster greater international cooperation on trade. The G20 meeting in London in April needs to amplify the message that protectionism is not the answer. It must also produce some concrete action points on keeping markets open and finding new opportunities for trade. Particularly important will be that US President, Barack Obama, sends a strong signal that the US is committed to working with international partners.

Finally, we must communicate the benefits of trade better. In this economic downturn, globalisation has become a negative word. We must remember that real trade and investment are indispensable if we are to survive this crisis and move forward. A Doha deal alone is worth hundreds of billions of euro to the global economy. A free trade deal with Korea would mean around EUR20bn in additional exports for the EU economy. Globalisation undoubtedly brings its challenges and problems, but the alternative – De-globalisation – would leave us all worse off.



Ms Ashton is EU Commissioner for Trade