Banks must cleanse balance sheets and regulators shore up international rules for confidence to be restored amid the global financial crisis, the head of the World Trade Organization said Monday. Pascal Lamy, director general of the Geneva-based WTO, told a forum in Seoul that cleaning up balance sheets is “a matter of urgency” even if bank shareholders resist. “Until and unless this happens, there is in my view, no turning point in sight.” Lamy also said that restoring confidence requires a “serious attempt” be made at “filling the hole” of international financial regulations to “avoid future accidents of this size.” The global credit crunch is having a serious impact on trade, which is decreasing not only because of falling demand, but “because of lack of trade finance,” Lamy said. Some 90 percent of global trade happens with such financing, which is drying up, he told a press conference earlier. Lamy also told the forum that countries must avoid protectionism and quickly reach agreement on the stalled Doha round of WTO trade talks, calling it the “best insurance policy available” against trade barriers. “Beggar-thy-neighbor policies bear the risk of prompting retaliation by other countries and driving down the overall level of trade, thus destroying even more output and jobs around the world,” he said. WTO talks aimed at a new global commerce pact - the so-called Doha round named after Qatar's capital where the negotiations were launched in 2001 - have been unable to secure a final deal amid disagreement between the United States and emerging economies over trade rules applying to agricultural and industrial goods. Lamy said the world was experiencing its “worst economic recession” since World War II. “No country on this planet is now immune from this crisis,” he said. “Trade is shrinking, growth is declining and unemployment is on the rise.” He also said that countries must coordinate individual stimulus packages and steps must be taken to care for the “weakest and poorest” in society.Lamy said that the upcoming April summit of the Group of 20 in London will be a “test of the capacity of major economies to work together in searching for solutions to pull the world economy out of this recession.”
