WTO chief warns against currency wars

November 21, 2010 | 14:33

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The head of the World Trade Organization on Friday warned countries against keeping their currencies undervalued to generate jobs, saying such policies could trigger protectionism.

Pascal Lamy, WTO director general, said the fight over currency values -- in a clear reference to the United States and China -- has emerged as a barrier to global financial stability.

"It is generating employment which is at the heart of the strategy of some countries to keep their currencies undervalued," he said. "Just as it is also at the heart of other countries' loose monetary policies."

Competitive devaluations, which have raised fears of a global currency war, would trigger "tit-for-tat protectionism", he said.

"Such uncoordinated 'beggar thy neighbour' policies will not result in increased employment," he said.

Washington has urged Beijing to allow its yuan to rise, saying the currency is being undervalued to create an unfair trade advantage.

The United States has been accused of doing the same with a $600-billion cash injection announced earlier this month.

Lamy also said he was aiming for a preliminary deal in the stalled Doha round of WTO trade talks by mid-2011.

The WTO director general said leaders at the Group of 20 meeting in Seoul last week had "called for negotiations across the board to conclude the end game" of the global trade liberalisation talks in 2011.

The Doha round of global trade talks began in 2001 with a focus on dismantling obstacles to trade for poor nations. But the negotiations have been dogged by disagreements.

They include how much the United States and the European Union should reduce farm aid and the extent to which developing countries such as India and China should lower tariffs on industrial products.

Successive deadlines to conclude the talks have been missed.

AFP

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