Hanoi (dpa) - The United States' massive current account deficit could lead to a "deep-seated and prolonged" recession if Asia and Europe don't work to reverse the trend, the former head of the World Trade Organization (WTO) warned on Friday.
"If the deficit of the US is reduced drastically, it will mean there will be a long effect on the global economy," said Supachai Panichpakdi, the former head of the WTO and current director general of UNCTAD. "That is something we don't want to see happen."
Supachai, addressing the Apec CEO Summit in Hanoi, warned that the US's current account deficit of an estimated 840 billion dollars this year posed a threat to the world economy, which has enjoyed unprecedented growth for the past five years, especially in the dynamic Asia-Pacific region which now accounts for half the world's trade and nearly half the world's foreign direct investments.
"I don't think the world should be relying only on the health of the US economy, which is spending more than it saves, to drive forward the global economy," warned Supachai, who added that Asia and Europe would need to do more to sustain growth in the future.
"In Asia, for example, we may need to support domestic consumption, whereas in the developed economies they may need to save more," said the former WTO chief.
"Otherwise, left alone, there will come a day when deflation will hit the world economy and the recession will be quite deep-seated and prolonged," he warned.
Economists worry that a slowdown in consumption in the developed economies such as the US's, combined with excessive production at low costs in Asia, could lead to a downward cycle of deflation that would slow world growth.
Supachai made his comments at the Apec CEO meeting, an annual forum held on the sidelines of the Apec leaders summits that will be hosted this year by Hanoi on Saturday and Sunday.
The summit will draw 21 Asia and American leaders to Hanoi, including US President George W Bush, who arrived on Friday.
This year's summit is expected to focus on garnering support for efforts to restart the stalled Doha Round of trade talks and winning regional backing for efforts to bolster alternative energy initiatives.
Current WTO chief Pascal Lamy attended Apec's ministerial meetings on Wednesday and Thursday.
"Despite the fact that Doha is under threat of failing, I don't think the global community, or the Apec community which is so pro-trade, can afford to stand by and let the round go down the drain," said Supachai.
"If the deficit of the US is reduced drastically, it will mean there will be a long effect on the global economy," said Supachai Panichpakdi, the former head of the WTO and current director general of UNCTAD. "That is something we don't want to see happen."
Supachai, addressing the Apec CEO Summit in Hanoi, warned that the US's current account deficit of an estimated 840 billion dollars this year posed a threat to the world economy, which has enjoyed unprecedented growth for the past five years, especially in the dynamic Asia-Pacific region which now accounts for half the world's trade and nearly half the world's foreign direct investments.
"I don't think the world should be relying only on the health of the US economy, which is spending more than it saves, to drive forward the global economy," warned Supachai, who added that Asia and Europe would need to do more to sustain growth in the future.
"In Asia, for example, we may need to support domestic consumption, whereas in the developed economies they may need to save more," said the former WTO chief.
"Otherwise, left alone, there will come a day when deflation will hit the world economy and the recession will be quite deep-seated and prolonged," he warned.
Economists worry that a slowdown in consumption in the developed economies such as the US's, combined with excessive production at low costs in Asia, could lead to a downward cycle of deflation that would slow world growth.
Supachai made his comments at the Apec CEO meeting, an annual forum held on the sidelines of the Apec leaders summits that will be hosted this year by Hanoi on Saturday and Sunday.
The summit will draw 21 Asia and American leaders to Hanoi, including US President George W Bush, who arrived on Friday.
This year's summit is expected to focus on garnering support for efforts to restart the stalled Doha Round of trade talks and winning regional backing for efforts to bolster alternative energy initiatives.
Current WTO chief Pascal Lamy attended Apec's ministerial meetings on Wednesday and Thursday.
"Despite the fact that Doha is under threat of failing, I don't think the global community, or the Apec community which is so pro-trade, can afford to stand by and let the round go down the drain," said Supachai.
