Pascal Lamy: The Role of Trade Negotiators

What does the EU trade commissioner think of the state of world trade?

July 22, 2002

What does the EU trade commissioner think of the state of world trade?

Steel, agricultural subsidies, tax issues. The list of contentious trade issues across the Atlantic is long. Pascal Lamy, Europe's chief trade negotiator, plays a key role in all of these disputes. But, as he explains in this Globalist Interview, his thinking is focused well beyond the crucial spat of headline-grabbing, tit-for-tat retaliation moves. Instead, he views his job as making everybody around the world adhere to the same trading rules.

Are Europe and the United States fighting a trade war?

As far as I recall, the last true trade war occurred all the way back in 1812.

That was the time when both the United States and Britain mobilized their armies and navies to fight over their respective roles in governing the international trading system.

Nobody today is talking about truly vicious things like blockades and denying our ports to the other side — despite the occasional sensationalist reporting in the press.

As Europe's chief trade negotiator, what is the essence of your job?

I spend much of my time explaining that, regardless of all the media reports on this particular topic, retaliation is not the name of the game. To me, the name of the trade game at its core is rather to ensure dependable long-term structures. And this requires compliance with the WTO rules and disciplines.

But when the United States put tariffs on imported steel, didn't you recommend sanctions — a form of retaliation?

It was not retaliation. The big issue at present involves the U.S. "safeguard" action. The WTO allows countries to take unilateral steps — without waiting for WTO approval — to prevent injury to their industries.

But the WTO also requires that the country imposing safeguards offer its trading partners compensation for such actions.

If the country in question does not offer appropriate compensation, the trading partners can take their own action to ensure that they receive compensation.

The point of this rather complicated system is to keep such contentious actions within the bounds of a set of agreed-upon rules.

Most people, however, do not realize that there are any rules at all.

I realize that the popular interpretation is that everything should be tit for tat — that we should be throwing stones at each other. But that simply ignores the whole point of the WTO. In fact, we are working within a carefully defined system in order to prevent precisely this type of stone-throwing. Rather than unilateral retaliation, WTO rules create a system in which we can agree on what is allowed — and what is out of bounds.

And if the United States fails to comply with the WTO rules?

Then we will use the methods allowed in the WTO rules — such as retaliation — as a tool to foster compliance. So it is not a question of "big politics" and whether or not the EU has the guts to retaliate. We would prefer to avoid taking such measures — if we can ensure U.S. compliance with the WTO rules.

Are you concerned about the weakening U.S. dollar?

Frankly, we trade people are too humble to discuss such important matters. We know that talking about these matters is very dangerous.

So we leave public comments on these tricky issues to more qualified people, such as central bankers or treasury officials.

That being said, I am not running the euro-dollar exchange rate on my PC screen. I have to watch many issues carefully to keep this aircraft in flight, at the right speed and landing where I want it to land. Factoring in exchange rates is simply too complicated.

You sound more like a diplomat than like a trade warrior.

I have always said from the very beginning of my job that I am not in the megaphone diplomacy business. Rather, I see myself in the telephone diplomacy business. We want to be judged on the results. I want to bring back results that are good for Europe — and good for industry in general. And that, in turn strengthens the disciplines of the WTO — and of the organization itself.