SFC Markets and Finance | Former WTO Director-General: Trade Openness is Key to Global Prosperity

南方财经全媒体记者李依农 上海报道

As the pace of globalization slows, the question arises: are we witnessing the end of globalization, or merely its transformation? According to former WTO Director-General Pascal Lamy, we’re not facing de-globalization but a period of adjustment in global trade dynamics. "We still need substantial trade to drive economic growth, especially for the world’s least developed economies that are eager for faster progress," he told SFC in an exclusive interview.

In recent years, escalating geopolitical tensions and mounting economic uncertainties have severely impacted global economic integration. WTO reports indicate that global merchandise trade is projected to grow by 2.7% in 2024, a slight upward revision, though the outlook for 2025 has been adjusted downward, now expected to increase by only 3%. The rise of protectionist policies, particularly in the U.S., and increasing focus on national security across multiple countries further complicate the global landscape.

As the WTO marks the 30th anniversary of the Marrakesh Agreement, Lamy emphasizes the urgent need to adapt trade rules to today’s complex environment. For instance, clearer definitions of national security are needed to prevent its misuse as a pretext for restrictive trade practices. 

In this conversation, he also reflects on whether the WTO can mediate emerging trade disputes, such as the recent anti-subsidy duties on Chinese electric vehicles by the EU, and how it might uphold a fair, open, and rules-based trade system amid challenging global dynamics.

SFC Markets and Finance: With Trump just announcing his election victory, what impact will this have on the outlook for global trade?

Pascal Lamy: Well, we know Mr. Trump's views on trade. He believes that trade is a win-lose game. This is wrong. Trade is not a zero-sum game. Trade is a win-win game, provided the proper conditions are met.

The reason the U.S. has a large trade deficit is not because other countries are cheating the U.S.; they should correct this narrative. The reason for the large U.S. trade deficit is that Americans overconsume and undersave. This is a macroeconomic issue.

The U.S. economy is performing well. It is competitive. However, there are issues with the distribution of growth in the U.S. The rich are getting too much, the poor are not getting enough, and the middle class feels threatened. This is likely, very likely, the reason why Mr. Trump became the next President of the United States—not because of the U.S. trade deficit.

SFC Markets and Finance: How can organizations like the WTO and the global community work more effectively together to counter protectionism and address these challenges?

Pascal Lamy: This trend towards protectionism is primarily a U.S. trend. Most other countries are not leaning towards protectionism. It’s true that there are new concerns in many countries—for instance, about national security. This is understandable, given the rising geopolitical tensions, power struggles, and rivalries，or the major conflicts in the Middle East. These developments contribute to a more conflicted, fragmented world, and some countries are concerned about their national security and believe they should be less dependent on trade than in the past. This perspective is understandable.

However, the only place where protectionism has become a dominant feature is the U.S. I hope that others, like my European compatriots or the Chinese people, maintain the view that trade openness is the way forward, and that we pursue this under a system that properly administers trade rules, so that the win-win aspects of trade prevail.

SFC Markets and Finance: How will the outcome of the U.S. election impact EU-China and France-China relations, and in what specific ways?

Pascal Lamy: I believe that the EU and China share a common belief that opening trade is the way to go. China may have valid reasons to focus on national security, and in Europe, we also have good reason to be concerned about European security, given the situation in Ukraine. However, this should not lead to an overhaul of our view that trade openness is the right path forward.

We may need to take some precautions here and there to ensure that we are not overly vulnerable if conflict arises. But overall, I do not think that either the EU or China should change their view that the international division of labor is beneficial for growth, especially for many other developing countries that still hope to boost their growth through exports.

SFC Markets and Finance: While foreign investment in China has dropped recently, French investment has grown dramatically. What’s driving this? 

Pascal Lamy: These numbers are averages, but if you look at the French, German, or Italian engagement with the Chinese market, they are not average. The French, for instance, have a comparative advantage in the luxury industry; the Germans may have a comparative advantage in the car industry; and the Italians may have a comparative advantage in the wine industry. That’s all well and good.

The key issue for China is whether its economic growth will resume to levels we’ve seen in recent decades. There is some uncertainty about this, given the tendency of Chinese households to oversave and underconsume. Additionally, there is the question of whether China will remain open to the rest of the world.

SFC Markets and Finance: The EU recently imposed a five-year anti-subsidy tax on Chinese EV imports over “overcapacity” concerns.What’s your take on that? Do you see real overcapacity in China’s new energy sector?

Pascal Lamy: I think this is a good example of the benefits of the World Trade Organization. We have rules in the WTO that address the issue of trade-distorting subsidies. We Europeans believe that the level of subsidies for electric vehicle production in China creates an unfair comparative advantage in the European market compared to European EVs. WTO rules allow us to offset this unfair advantage with duties—provided, of course, that these duties are properly calculated.

Now, China, on its side, disagrees. They argue that the EU’s assessment is incorrect, that they are not over-subsidizing, and that our calculations and duties do not align with WTO rules. So, what happens? The EU can take action, and China can go to the WTO, saying, “I want to dispute the EU’s interpretation of WTO rules.” A judge will then make an adjudication on whether or not the EU is justified in offsetting what they believe to be excessive subsidies with duties. This is a dispute, not a war. It’s similar to a disagreement you and I might have, where we differ on something without trying to harm each other.

So, this is where we stand now. The main question here is whether the EU and China should properly strategize to grow the electric vehicle sector, given our environmental ambitions. I believe the answer is yes. We should, for instance, encourage Chinese investment in Europe, just as China previously welcomed European investment. The roles are now reversed. We held an advantage at the time, and China wanted to benefit from it. Now it’s time for China to do the same in Europe, and for Europeans to say, “Welcome.”

SFC Markets and Finance: With 30 years of WTO history, do you think its role has changed over time? In today’s rapidly changing world, do we need to take on new responsibilities?

Pascal Lamy: The WTO has undergone significant changes recently. One major shift is that the U.S. no longer prioritizes the WTO or adheres to the disciplines it once subscribed to, which poses a real problem. Essentially, there’s now a “big elephant” in international trade that disputes the established rules of the game and is unilaterally leaning toward protectionism. This marks the first major change.

The second change is that the world itself has evolved. Today, we are collectively striving to address global challenges like climate change and biodiversity loss, making environmental issues far more pressing than in the past. At the same time, trade and economic activities are becoming increasingly digital. We need to adjust WTO rules to align with these new global realities. For instance, it may be necessary to clarify what constitutes “national security,” as not every trade restriction can be justified on national security grounds.

These are areas where updating the WTO rulebook is crucial. The question now is, can we achieve this without the U.S.? Perhaps we can—and I think it’s an option worth seriously considering. When I say “we,” I’m referring to those of us who still believe in staying united within a rules-based, open trade system.

SFC Markets and Finance: When globalization is developing rapidly, some have said "the world is flat." Do you think this still holds true?

Pascal Lamy: The world was never truly “flat”—that notion was always an oversimplification. While globalization has indeed opened up opportunities, it hasn't been accessible in the same way for everyone. Why is that? Primarily because poorer countries may lack the capacity to compete effectively, whereas industrialized nations, like China, now have this capability. So, while the world was more open, it was never “flat.”

What we experienced was rapid globalization, but what we’re seeing now is not de-globalization. Trade in goods and services continues to grow globally, albeit at a slower pace than in the past. Trade flows may differ from 20 or 30 years ago, yet they’re still expanding. This growth highlights the ongoing need for trade to fuel economic development, particularly for economies that require accelerated growth—namely, the world’s poorest countries.

SFC Markets and Finance: What does the future picture look like for the global economy?

Pascal Lamy: I would say, first of all, I've never been either optimistic or pessimistic; rather, I'm an activist. I focus on moving things in the direction I believe is right. 

Secondly, it’s clear to me that a world with more conflict and fragmentation will be less economically efficient. This likely means slower growth, reduced wealth, and a decline in quality of life, which could lead to heightened social and political tensions, and an increased risk of conflicts. This chain reaction is concerning, and I don't believe a more fragmented world will make people happier.

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责任编辑：和佳

记者：李依农

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出品：南方财经全媒体集团