The Wall Street Journal-20080128-Politics - Economics- Blair Tells Candidates To Be Flexible on Trade

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Politics & Economics: Blair Tells Candidates To Be Flexible on Trade

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DAVOS, Switzerland -- Tony Blair cautioned U.S. presidential candidates not to lock themselves into damaging protectionist or isolationist policies they could have a tough time walking away from once in office.

In an interview with The Wall Street Journal yesterday at the World Economic Forum here, the former British prime minister expressed concern that a suddenly more gloomy outlook for the global economy could lead the U.S. and other nations to close themselvesoff.

"I understand all the protectionist pressures in the U.S.," Mr. Blair said. "On the other hand, I think it would be extremely unfortunate if people bolt themselves in positions that become difficult to extract themselves from, because the reality in the world is that we're going to have to open up world trade, not close it down."

Mr. Blair neither singled out candidates nor said whom he favors. However, Democratic candidates in particular have championed "fair" over free trade. Sen. Hillary Clinton has called for a "timeout" on multilateral trade deals.

Mr. Blair also said there is a risk that U.S. presidential candidates will lock themselves into isolationist policies during the campaign, given the price to the military of staying in Iraq, Afghanistan and other hot spots. "There's a ready political advantage to saying: 'Enough is enough, we don't want any more. Why should we have to sort out the problems of the rest of the world?' But on the other hand, for the rest of the world, that engagement is vital."

Mr. Blair, who is Middle East envoy for the U.S., the European Union and Russia and who recently joined J.P. Morgan Chase & Co. as an adviser, said that instead of turning inward, it is "urgent" that countries reach deals to increase trade and strengthen outdated international institutions -- from the International Monetary Fund to the United Nations -- as the global economy comes under strain.

That was a common refrain at this year's annual meeting of global business and political leaders in Davos, which was otherwise dominated by concerns over how to resolve a liquidity crisis in the global financial system.

"It isn't clear to me yet which way [the political tide] will go," said former U.S. Secretary of State Henry Kissinger, also speaking in Davos. What happens next, he added, depends largely on how deep the current economic downturn gets and how desperate governments become to find quick and popular short-term fixes.

Problems in the global economy have only added to existing challenges, such as international terrorism, climate change and the dramatic shift in relative wealth and power from the U.S. and other Western countries to China, India and the Middle East, according to Mr. Blair and others.

"These problems are coming at us from different parts of the world so quickly that our international institutions are almost paralyzed," said Gen. George Jones, who until 2006 was supreme commander of the North Atlantic Treaty Organization. There, he struggled with sometimes reluctant governments to secure a new security doctrine, extend NATO's responsibility to protect global energy infrastructure, and to get the soldiers and helicopters to fight in Afghanistan.

Pascal Lamy, director general of the World Trade Organization, has been wrestling since 2001 to change the rules of global trade through the stalled Doha round of global trade negotiations. "Behind this technical side of the negotiations, there is a power game going on" between developed countries who set the old trade rules and poorer and emerging countries that want to change them, Mr. Lamy said in an interview.

Many of the changes sought by Mr. Blair and others at the U.N. Security Council, the IMF, the World Bank and the International Atomic Energy Agency aim to give emerging economies such as China, India and Brazil a bigger stake, often at the expense of overrepresented European countries.

According to Mr. Kissinger, the most important change may be to the current nuclear-nonproliferation regime, where failure to act could bring "catastrophe." Mohamed ElBaradei, director general of the IAEA, the U.N.'s nuclear watchdog, has been pushing for a new arrangement to plug the loophole in the Nuclear Nonproliferation Treaty that gives any state the right to enrich uranium for civilian use. The same technology, however, can be used to make weapons-grade fuel, by far the most difficult part of building a nuclear bomb.

He also is trying to boost funding for the IAEA, which has to rely on ad hoc funding from individual countries to pay for 90% of its security work, inspecting facilities in countries such as Iran and North Korea. As nuclear power enjoys a renaissance, a slew of new countries across the Middle East, Asia and elsewhere are planning to build power plants. That means more security and safety work for the IAEA.

IMF head Dominique Strauss-Kahn was also in Davos to push his efforts to change that organization's focus to include surveillance of global markets, adding to its dwindling business of lending to and stabilizing troubled national economies. But he said that in order to work, the U.S. and other developed economies need to let the IMF set up surveillance authorities on their territories too -- something that isn't happening yet.

"I don't want to use apocalyptic language, it isn't helpful, but it is now urgent to do these things," said Mr. Blair. "At some point, the reality is so sharp that it is going cut through the bureaucratic lethargy that has left the situation as it is."