Patricia Hewitt also expressed her concerns on Tuesday that there is little time left to agree to a new framework to relaunch the Doha trade round after talks collapsed in Cancun, Mexico, last year.
Writing to her fellow ministers in the World Trade Organisation, Hewitt warned them they must get some sort of new deal stitched together by July or else suffer the costs of protectionism.
“We have a very short window of opportunity to get a WTO framework in place … too close to the US elections and before the scheduled change in EU commissioners,” a government source added.
A British study finds that the net loss to global income as a result of protectionism is $500 billion a year.
Hewitt is also hoping the election of the new government in India will provide an urgently needed boost to restarting the WTO talks, which broke down as developing countries objected to agricultural subsidies paid out by rich nations.
British Chancellor of the Exchequer Gordon Brown will also make the case for restarting the trade talks at this weekend’s Group of Seven finance ministers’ meeting in New York.
“Mercantilism is dead”
G7 ministers already warned last month that failure to restart the Doha round posed a risk to the otherwise rosy economic outlook.
Like Hewitt, Brown will turn to the study being published jointly by the Department of Trade and Industry and the Treasury examining the case for free and fairer trade, showing that protectionism is a bad thing that ultimately hurts economic growth.
“Mercantilism is dead,” Hewitt will tell her WTO colleagues, adding that it is no longer the case that countries should believe that exporting is good while importing is bad.
“That’s just a wrong theory,” said a government source. “The benefits come from both sides. Besides bringing down prices and giving us more choice, imports give our manufacturers access to intermediate components.”