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Government assistance a threat to free trade

Government assistance a threat to free trade article image

World Trade Organisation (WTO) director-general Pascal Lamy has warned that government interference in the private sector, particularly with regard to the bail-out of banks, will put the finance industry "on the side of the forces of deglobalisation". Bail-outs curbed risk-taking, which in turn decreases foreign direct investment and trade. Added to current protectionist measures, this could spell trouble for the global economy. "The real stress test is for the future when the shrinking of economies translates into unemployment and social hardship and that translates into a political reaction that could influence trade policy. The toolbox for protection is a wide one," said Lamy in an interview with the Financial Times newspaper published yesterday. Lamy said he would use this week's G8 summit to encourage governments to resist protectionism and commit to the Doha Round of trade talks.

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