The possible failure of the Doha round of trade talks has the potential to undermine the credibility of the World Trade Organisation (WTO) and its rules-based system of globalisation, the businessman Peter Sutherland said yesterday.
The former WTO director general who is now chairman of investment bank Goldman Sachs and oil group BP, said the Doha talks were in "deep trouble" and that failure to conclude a deal would result in a proliferation of bilateral treaties between trading states.
He was speaking at an Institute of European Affairs conference in Dublin on "the Rise of China", at which he said fears in Europe about China and globalisation were misplaced. China did not create Europe's problems, but offered a solution to them.
"Our underlying challenges are the demographic shift; a seemingly diminished capacity to innovate; and an economic structure which we find it difficult to adapt to changing times.
"The first two have reduced our potential growth rate. The last means we aren't able to compensate by improving our productivity trend, in contrast to the US. Our trade and investment relationship with China offers us a way out."
However, its commitment to the WTO trading system was crucial. "In the next two to three weeks we could see the failure of the Doha round, bringing with it challenges to the rules-based system of globalisation." In addition, Mr Sutherland acknowledged China's environmental problems and its energy supply difficulties and said it was "not at all clear" that it could combine freer economic choices with a restrictive political system.
He also pointed to the fragility of China's banking system and social tensions between people in its cities and countryside.
"Massive adjustments will be needed, and quickly, in China's regulatory machines, property laws, welfare systems and infrastructure."
Later, the British writer Will Hutton said China's rate of economic expansion - with 25 per cent export growth per annum - was not sustainable.
In a wide-ranging address, he said that a revaluation of the Renminbi was urgently required but that such a move could lead to a collapse of the state-owned banking system.
He said China was held back by capital-destroying state enterprise, endemic corruption and environmental disaster. Tension between China and Japan and China and Taiwan meant there was a 1 to 10 per cent possibility of "regional war" in Asia, he said.
