Pascal Lamy: 'A global trade deal? It's not mission impossible'

The Monday Interview: Head of the World Trade Organisation

The unmistakable smell of stale cigar smoke wafts from the far end of the director general's corridor at the World Trade Organisation in Geneva. Tobacco is the only known vice of Pascal Lamy, the cerebral, marathon-running, head of the WTO and, since his arrival in the job in September, no one has dared tell him this is a no-smoking zone.

One indulgence could be forgiven at a taxing time for European supporters of free global commerce. Ministers from around the world were so far apart last week on plans to liberalise trade that they abandoned hope of striking an agreement at a summit in Hong Kong next month. Though only a tactical retreat, it underlined the risk that the Doha round will collapse.

Meanwhile, the social consequences of globalisation were to be seen in France, where rioters in the suburbs have torched hundreds of cars a night. France is one of the fiercest opponents of liberal economics in the EU and the most determined to prevent further erosion of farm subsidies. So it is more than a little ironic that a French socialist such as M. Lamy should have responsibility for freeing global trade.

In his spacious but Spartan office overlooking Lake Geneva, M. Lamy is serious and businesslike. Asked about the link between globalisation and the unrest in the suburbs of France, he avoids mentioning any country, though the message is clear: France cannot roll back the tide of global forces; what it can do is manage their consequences.

"All countries have to cope with globalisation," he says. Freeing world trade "has good sides and bad sides. It is a question of how you cope with that. We in the WTO firmly believe that trade opening is good. It creates more winners than losers, but we have to acknowledge that the reshuffling it creates in the social fabric has to be coped with."

A graduate of France's Ecole Nationale d'Administration, M. Lamy speaks precisely in deep, sometimes gruff, tones. Born in 1947, he made his name for ruthless efficiency as the head of the private office of Jacques Delors, the former European Commission president. He hates small talk and one ally describes his favoured form of relaxation as reading "unintelligible French philosophical tracts".

M. Lamy's reputation for intelligence, mastery of detail and determination grew when he returned to Brussels as EU trade commissioner in 1999. By backing reform of the Common Agricultural Policy and global trade, he clashed with the government in Paris and was barely on speaking terms with President Chirac.

The reason for the riots across France, he says, "like all these surges of discontent, is a mix. It is clearly a signal that the integration policy vis-à-vis the second or third generation of immigrants has problems.

"It is a bit more dramatic for the French, who have advertised more strongly their assimilation integration policy. But countries that have chosen another model of integration also have problems. Societies and cultures have to cope with immigration."

As the director general of an international institution, M. Lamy is trying hard not to criticise France, though one can read between the lines, particularly when economic policy is raised.

"I see within the developed world countries that are good at coping with [globalisation] and countries that are less good," he says, and, across the globe, the need is "to help the weakest and the poorest". He supports the idea of an EU fund to deal with the social consequences of globalisation, arguing that the US has similar policies.

France's resistance to opening markets is a result of "gut reaction" and tradition, he says. "Look at what happened in the 19th century when we had steam engines crossing the Atlantic. Because of technological innovation, the price of grain dropped suddenly. There was a debate in the UK whether this should be accepted or whether tariffs should be put in place. People working for the poor warned that adding tariffs to food would make life more difficult for them, which was a convincing argument. In France, it went the other way. France raised the tariffs on grain. That's a fundamental stance."

Outside M. Lamy's office hang photographs illustrating the high and low points of WTO history - including the protests in Seattle in 1999. By lowering expectations for Hong Kong, M. Lamy hopes to avoid a spectacular failure, but the danger of a collapse is clear. The deadline is the end of 2006 because, shortly after that, the US administration's "fast-track" powers to sign a deal without Congress will expire. The idea was to get two-thirds of an agreement in Hong Kong. That has now been abandoned.

Agriculture remains the crux, and M. Lamy's successor as EU trade commissioner, Peter Mandelson, has made two offers to cut subsidies and boost access to European markets. Over both, he has been hounded by the French. M. Lamy says he cannot comment on Mr Mandelson's poisonous relations with Paris "given the problems I had with the French when I was a commissioner".

But before the last reform of the CAP in 2003, M. Lamy co-wrote a pamphlet describing Europe's subsidy regime as "a policy of the past", and calling for France to reorder its priorities. So has the CAP been reformed enough? "I can't speak about that in my present position," he says.

He offers a clear analysis of the impasse in the WTO talks. When trade opening deals are struck, "winners are usually not conscious that they are winners and are politically silent, and losers are a few but they know why and they are politically open. If you pay for your T-shirt 30 per cent less than last year the notion that it is thanks to trade opening is not there. If the factory next door has to close because of trade opening there is no doubt why."

The success or failure of the round - and the credibility of the WTO - hangs on the willingness of its most important members to move. As M. Lamy puts it: "The WTO is a big truck, not a Formula One car".

The roadblock is the EU's offer to reduce farm tariffs by 46 per cent on average, which has been rejected by developing nations as insufficient. Mr Mandelson will not go further unless emerging nations make an offer to reduce their tariffs on industrial goods and liberalise services.

Thus, the "positions are too different". M. Lamy's conclusion is that "it was better to stage Hong Kong as a step forward rather than [with] a big, make-or-break, brinkmanship aim. After Seattle it took nearly two years to produce proposals, after Cancun it was nearly one year."

A breakdown next year would mean that a "great opportunity for more growth, more jobs and less poverty will disappear", he says, and getting a deal means flexibility from all parties. "Everybody will have to move. They will have to move on market access, as they will have to move on services. The areas that are most visible, agriculture, industrial tariffs and services, are only the most important part of that. Many issues remain: anti-dumping, regional trade, and trade and the environment." But he insists: "It's not mission impossible."

The CV

* Born: 8 April 1947, Paris

* Education: Institut d'Etudes Politiques, Paris; Ecole Nationale d'Administration, Paris

* Career

1975: Inspection Générale des Finances

1979: French Treasury

1981: Technical adviser, then deputy director, Office of the Ministers for Economic and Financial Affairs

1983: Deputy Director, Office of the Prime Minister

1985: Chef de cabinet to the president of the Commission of the European Communities

1994: Member of the executive committee then director general of Crédit Lyonnais

1999: European commissioner for trade

2004: President of the Association "Notre Europe"

2005: Director general of the World Trade Organisation