It is not easy to round up 20 leaders, have them more or less sing from the same hymn sheet and finally agree to a communiqué that was long on bold headlines but fell short in the way concrete measures.

That was the outcome of round two of the G-20 meeting in London. This, indeed, is the worst downturn witnessed in seven decades, so it may be worth viewing the road to recovery as a 15 round boxing championship.

Behind the scenes, we at CNN had a healthy debate on what the actual package was worth -- was it $750 billion or $0.5 trillion for the International Monetary Fund. Wait a second, how do we get to $1.1 trillion? In actual fact, $250 billion of that total is being set aside for trade credits, with another $100 billion for developing countries. However, the devil is in the detail. Who will have access to those funds? Moreover, who will be putting up the fresh capital to make that happen?

These are key questions that were not addressed in London, but they are waiting for round three in Washington, at the spring meetings of the IMF and World Bank to go to the next level.

Since the financial community in general (including financial journalists) is so conditioned by the former G7 process, very few tuned into the emerging voices of the 21st Century economy, notably China, Saudi Arabia and Russia –- the new surplus countries. Not one of them offered fresh funds on the new equation of $1.1 trillion.

During the deliberations, I was on the phone with a Saudi banker who was waiting for a call from the London delegation to see what may be put on the table. I was told the Kingdom was not asked to offer more funds to the big number.

Now, there are many interpretations along that front. First and foremost, China and Saudi Arabia probably feel they have offered more than their fair share; after all they are major buyers and holders of U.S. Treasury bonds. Like the Japanese, who put up $100 billion in loans to the IMF, Beijing and Riyadh could have done the same, but it seems quite clear after the dust has settled that they were not convinced to do so.

Which leaves us where in the process? Just prior to the G-20 meeting, I interviewed the First Deputy Managing Director of the IMF, John Lipsky, in Vienna. While addressing the OPEC seminar and acknowledging the vast stimulus provided by $45 dollar oil, he expressed concern that there may be stimulus fatigue in 2010. Collectively, G-20 countries have spent about 1.8 percent of their GDP to free up capital in an attempt to put air back into the economic balloon. That is a record according to Lipsky.

What is not clear from the vague language of the final communiqué in London is what happens next year. German Chancellor Angela Merkel and French President Nicolas Sarkozy made it clear they were not offering more money just yet and they wanted to move to towards a policy agreement for global financial regulation. All agreed that better regulation is needed; how to get there was not defined. So, that is big issue number two for third round of talks in Washington.

If there is a key issue number three for round three, it has to be the fate of the Doha Development Round. While in Brussels to drum up support for his efforts, WTO Director General Pascal Lamy talked of the need to ward off protectionist measures within the current rules of the Geneva-based organization and offer a bit of "blue sky" to developing countries that cannot simply open their financial taps and spend a record amount of money.

In the communiqué there was language to cover off the financial markets (investors get extremely nervous at the thought of trade barriers), but leaders were short of concrete answers or a firm timeline to get the Doha Round done and dusted. What was agreed to, cleverly inserted by Lamy and British Prime Minister Gordon Brown, was a "name and shame" game. The WTO will identify those who are erecting barriers to free trade and they will be asked politely to watch their step. Lamy will have a great deal of work to do since the World Bank identified 17 of the G-20 as being overly aggressive with their trade claims within the current WTO framework.

There are, of course, some very worrying hurdles to cross. The Paris-based OECD is projecting that the industrialized countries will decline by a record 4.3 percent. The WTO says trade is already collapsing with a record decline of nine percent projected.

These are the numbers that make up the real story that could be outshone by the glare of photo-ops, a new U.S. president and one huge headline number of $1 trillion, but this fight against a global recession will only get more challenging in the later rounds.

Labels: barack obama, Doha, G-20, Gordon Brown, lamy, OECD

He walked into the Brussels hotel suite looking energetic, despite the many obstacles he is facing as World Trade Organization director general.

Fresh off a trip from Washington, where he met key players of the Obama administration, Pascal Lamy knows that finalizing the so-called Doha Trade Round, which was launched in the Qatari capital eight years ago, is not the world's number one priority these days.

Well ahead in this race to mend the global economy are: Cleaning the system of toxic assets, re-regulating the global financial system to avoid a repeat performance of the 2008 meltdown, and even trying to close down or limit the use of tax havens.

Those other issues however do not prevent the former French politician and European Trade Commissioner from performing his “Tour de Trade.”

Mr. Lamy aptly said that trade negotiations are like riding a bicycle: “either they move or they fall.” The key now, he says, is not to let them move backwards: “First thing we have to do is push back on protectionist measures which understandably appear here and there."

Having covered the final Uruguay Trade Round in Geneva where there were far fewer countries, and talks were dominated by the U.S., Europe and Japan, I know that this Doha Round is much more complex.

The key difference is that what was not covered the last time around has been swept into this attempt. More importantly, China, India and all the other developing country players are feeling emboldened by their new roles in the global economy -- they do not want to be bullied into a deal they don’t see as favourable to them.

In the G20 process, all the major players are sitting around the same table. That, in theory, should help this effort but, so far that has not been the case.

At the European Business Summit in Brussels, the largest business trade group in the European Union, Business Europe, said that 17 of the G20 have participated in some form of protectionist practices.

Director General Lamy admitted they are not breaching the rules of the WTO, but they are stretching the limits these days in various ways, like by filing more anti-dumping cases, or by nudging tariffs to protect industries such as auto-makers and textile manufacturers.

So "the DG," as his staffers refer to him, has adopted a new line that appeals in particular to developing giants like China: Don’t see the Doha Round as a process of giving up something, but as an insurance policy to protect the now vulnerable G7 countries from backing out of their commitment to free trade.

“Keeping the insurance policy which the WTO offers for the world against protectionism; that is very important at this stage, to make sure it does not move back,” said Lamy.

This is where we should watch closely. Mr. Lamy was encouraged by President Obama’s action to draw a line in the sand in terms of policy when he stood against the “Buy American” clause being put forward by the U.S. Congress.

Pushing that through would have rolled back the clock to the 1930s, when the Smoot Hawley trade act exacerbated the Great Depression. Since many compare this global depression to that one, there have been great fears that policymakers would follow the same tack, ignoring historical evidence against such a move.

But, when asked directly if Washington is committed to passage of the Doha Round, Mr. Lamy replied, “That is the general line they are taking.”

Until the President of the United States and his counterparts in the G20 jump right into the global trade "pool," don’t expect rapid movement. That was the case in the previous round, and the only real difference here is that a global recession does not lend itself to signing onto measures that may be seen to jeopardize jobs for textile workers, farmers or auto-makers.

The DG makes another valid point: While G7 countries, especially the U.S., can open up the taps to jumpstart their economies by spending a collective $2 trillion, many developing countries in Africa and Latin America cannot. Trade to them offers what Mr. Lamy calls “a bit of blue sky” -- a hope to grow their way to prosperity.

Against this backdrop, regional trade blocks should not place all their bets on the Doha Round.

The Greater Arab Free Trade Agreement has 18 countries of the region loosely agreeing, at this stage, to create their own market of nearly 350 million people. It looks promising on paper.

As Saad Hariri, leader of the Future Movement in Lebanon noted during an interview, this downturn should prompt leaders to move this process forward to create inter-Arab trade and ultimately jobs. Lebanon is applying to the WTO to join the other 11 regional states who have become members of that organization since 1995.

“Regional integration and opening trade globally are two things that have to go together,” notes Mr. Lamy. There is not the threat that regions will live in isolation as the world trade talks stall.

But how about getting past the final two or three hurdles to get a deal done in 2009?

Calmly the DG states, “We are 80 percent of the way, but we have a couple of tough nuts to crack.”

Labels: lamy, saad hariri, world trade organization