The head of the World Trade Organization praised Brazil for its open-minded trade decisions and cautiously welcomed the US stimulus package, saying countries battling the global economic crisis must resist the pressure of protectionism. Director-General Pascal Lamy said protectionist instincts are completely understandable in the current economic climate but that such regulations would be equivalent to "shooting their own foot." "People want to protect their jobs, they want to protect their pensions, or their money in the markets," Lamy said in a speech at the Lowy Institute for International Policy in Sydney. "But smart protectionism is a total oxymoron. It doesn't work." The only answer to the economic crisis, Lamy said, is to stimulate trade and spending.
He said Asian governments, particularly Japan and Korea, were coping well with the crisis, as were Australia and New Zealand. But Brazil was the standout.
"If there was to be a prize for this period, I think President (Luiz Inacio Lula) da Silva would take it," Lamy said. In late January, Brazil announced new restrictions on 60 per cent of imported products, apparently in reaction to perceived protectionism in the proposed American stimulus package. But Silva reversed the decision almost immediately, his government explaining that they did not want Brazil to be identified with protectionism. The runner-up prize, Lamy said, would go to President Barack Obama for his $787 billion economic stimulus package that honors international trade commitments, softening a restrictive "Buy American" policy that was written into the initial package. The plan still favors US steel, iron and manufactured goods for government projects funded by the package but would require Washington not to violate trade agreements when implementing the law.
But Lamy was guarded in his endorsement of the American package. "We all know the devil isn't in the details, its in the implementation," Lamy said. "Let's be cautious." The WTO last month announced it would step up its monitoring of protectionist commercial policies amid rising fears that nations will exacerbate the economic crisis by retreating from open markets as they did during the Great Depression.