The economic crisis confronting our world today is the gravest in generations.

The economic situation will get worse before it gets better.

As the global economy deteriorates, policymakers are reaching for every tool at their disposal to combat the contracting output, rising unemployment and sluggish demand.

The search for solutions to the serious crisis we face has led some to reassess the common wisdom that growth and development must be underpinned by the so-called Washington Consensus, which prescribes free markets, minimal government intervention, privatisa-tions and open trade as the tonic for economic ills.

Much of the circumspection directed at the Washington Consensus is understandable.

There is no doubt in my mind, for instance, that absence of prudent regulation and supervision in financial markets lies at the very heart of the crisis we encounter today.

Where I would differ with the sceptics is on the question of open trade.

Trade inside a system of globally agreed rules has been a multiplier of growth for more than half a century.

Effective insurance policy

Moreover, the international trading system which the World Trade Organisation (WTO) oversees, has been an effective insurance policy against protectionism. Open trade has done much to lift hundreds of millions of people out of abject poverty and has done much to foster better relations between countries.

But as the long-set economic paradigm begins to shift, there are reasons to worry that belief in open trade is eroding.

The International Monetary Fund has forecast that trade will contract by 2.8 per cent this year and given that this forecast represents a sharp downward revision from the World Bank estimate only weeks earlier, we cannot be sure that trade volumes will not shrink further still.

The decline in trade volumes is no mystery. Collapsing global consumer demand and the drying up of trade finance has resulted in empty vessels and blank order books.

If demand is to be lifted, governments need to stimulate their economies and given that interest rates have been slashed to historically lower levels, this means that fiscal measures must be employed.

Such fiscal-stimulus programmes require a degree of coordination to ensure that some economies do not resume growth far earlier and become the favourite destination for exports.

Moreover, international and regional financial institutions need to work with private lenders to provide assurances that trade credits are a relatively low-risk form of banking.

Adequate volumes

About 90 per cent of world trade operates with some form of trade finance, and if we are to see trade growing again, these funds must start to flow at adequate volumes.

But there is another spectre lurking in the mist which could threaten to make this already bad situation worse: the threat of a return to the isolationist policies of the 1930s.

One thing we do know for sure: putting obstacles in the path of trade does not promote growth and it does not save jobs.

To the contrary, history is replete with examples of protectionist and isolationist measures making a bad economic situation worse.

The notorious Smoot and Hawley Act in 1930 sharply raised US tariffs on more than 20,000 products.

Predictably, other countries retaliated, raising their tariffs on US goods.

The Great Depression followed.

The establishment of the General Agreement on Tariffs and Trade after World War II and the GATT's evolution into the World Trade Organisation has provided a degree of assurance that governments cannot revert to the disastrous beggar-thy-neighbour policies of the 1930s.

But WTO rules are far from airtight and even within the scope of these rules, governments can employ measures which effectively restrain trade, be they anti-dumping. policies, licensing requirements, subsidies or procurement rules.

The picture is evolving quickly and to date, most WTO members seem to have kept domestic protectionist pressures at bay.

This is not to say that governments must remain inert, as job losses mount and social unrest grows, but job protection does not mean protectionism.

Social protection means improved training, better health care, more flexibility in pension plans and a social safety net which means that workers displaced by foreign competition are not consigned to society's sidelines.

Such measures are needed in rich and poor countries alike if we are to rebuild public support for trade.

Strong foundation

This is also the time to shore up global trade rules, making them more equitable, transparent and relevant. For more than 60 years, these rules, which the WTO oversees, have provided a strong foundation for economic growth and development.

A conclusion of the Doha Development Round of global negotiations would strengthen these rules and help ensure that trade is part of the solution to the economic downturn.

A Doha Round on its own would not lift us out of this deepening recession, but more open trade would provide an important economic stimulus in its own right. It would also send the political signal that in harsh and difficult times, governments are capable of working together to provide the kind of global answer which is so desperately needed.

A twin aspect of the Doha Development Round is the Aid for Trade initiative that we are going to discuss this week in Jamaica.

Aside from building roads, ports and telecommunications that link regional and global markets, Aid for Trade aims at helping developing countries develop trade capacity.

For some, it means developing capacities to negotiate trade agreements more effectively.

For others, it means to produce goods and services which can meet international health and safety standards. For others, it means translating opportunities into realities.

The Aid for Trade initiative is the necessary complement to the Doha Development Round. Keeping Aid for Trade promises and concluding the Doha Round would send a strong signal of the collective readiness to address the challenges of the current crisis that is hitting us all.

Pascal Lamy is director-general of the World Trade Organisation.