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Call to world to continue trading and resist limits

GLOBAL leaders had a simple message for the world: Keep trading.

If nations instead choose to barricade their economies behind new commercial barriers, they risk making the global economic crisis even worse, leaders said on Saturday.

"Trade is the best economic stimulus," said Doris Leuthard, the Swiss economics minister who hosted trade chiefs from the world's most powerful countries on the sidelines of the World Economic Forum in Davos.

Their talks, however, offered no renewed hopes for a long-awaited deal in the Doha round of trade talks that many see as a necessary bulwark against the threat of economic protectionism, which devastated the world during the Great Depression.

Under threat

The meeting did not produce a timeframe for action in the Doha talks, now in their eighth year with no completion in sight.

CEOs, company chairmen and politicians turned their attention to the future of free trade, which many said was under threat as countries deal with rising unemployment, financial instability and recessions - real or anticipated.

British Prime Minister Gordon Brown said these pressures were no reason to recoil from free trade and called cooperation the only path forward.

"This is not like the 1930s. The world can come together," he said. "This is a global banking crisis, and you've got to deal with it for what it is, a global banking crisis."

Japanese Prime Minister Taro Aso said his country would do its part: "We will resolutely fight protectionism."

But even as the "P" word was repeated countless times, discussions were thin on specifics beyond some restrained criticism of the US$800 billion stimulus package passed by the United States House of Representatives. The bill includes "buy American" clauses that appear to unfairly favor US steel producers.

"I hope the senators will be wise enough ... to make sure the US complies with its international obligations," said Pascal Lamy, the head of the World Trade Organization.

On the same panel, Brazil's foreign minister said subsidies are the "most scandalous way of damaging developing countries."

The fear of policy makers and businessmen in the US and abroad is that Washington may revert to the strategy it employed at the beginning of the Great Depression, when it hiked tariffs on thousands of foreign goods to protect American business.

In the end, the US Smoot-Hawley Act of 1930 led to worldwide retaliation and the devastation of global commerce.

World powers after World War II tried to guard against a repeat of the experience by setting up the Bretton Woods global financial institutions.

President Barack Obama now faces a dilemma as the world enters its most significant economic crisis since then: Backing the "buy American" provisions could set off a trade war, while opposing them could trigger a backlash from his supporters.

Lamy said the trade chiefs he met were saying they were under intense domestic pressure to protect home industries against foreign competition. "But trade openings were not a cause of this crisis," Lamy said.

France's finance minister stressed the challenges of helping atrophying industries without damaging free trade.


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