Financial crisis boosts trade reform calls

By Jonathan Lynn

GENEVA (Reuters) - The hurricane tearing through financial markets has had a muted impact so far on trade flows.

But with inadequate regulation widely blamed for the biggest financial disaster since the 1929 Wall Street Crash, the debacle is reinforcing calls to strengthen the rules of commerce by agreeing a new trade deal.

"If we can conclude the negotiation we can send a positive signal to the world economy, to business people, because the Doha round is a round of liberalisation of trade and investment," said China's deputy World Trade Organisation WTO.L ambassador, Xiang Zhang.

Conversely, failure to agree a deal now after seven years could lead to a new crisis of confidence in business, said Zhang, who was instrumental in steering China into the WTO.

WTO Director-General Pascal Lamy still hopes to reach an outline deal on agriculture and industrial goods by the end of the year in the WTO's Doha round, launched in 2001, even though ministers failed to secure a breakthrough in July.

Both Lamy and EU trade chief Peter Mandelson warned last week the financial crisis could fan protectionism, which would hurt economic growth, making a new trade deal to secure the benefits of globalisation all the more urgent.

The crisis could also monopolise the attention of countries' leaders, distracting them from trade issues and getting a deal.

Agreement on a proposed $700 billion bailout for the U.S. financial industry, which could be announced on Sunday, would go some way to easing that concern.