Rising jobless casts shadow over world trade - Lamy

By Dean Yates

SINGAPORE (Reuters) - Rising unemployment is the biggest threat to free trade and could spark greater protectionist policies around the globe, the head of the World Trade Organisation said on Thursday.

WTO Director General Pascal Lamy, who is attending a meeting of Asia-Pacific trade and finance ministers in Singapore, told broadcaster CNBC that he did not expect an improvement in the job situation in the next one or two years.

"I think the biggest threat is in the deterioration of the jobs market where unemployment is rising hard, then inevitably protectionist functions appear," Lamy said when asked what was the biggest challenge to free trade.

Jobless queues have jumped across the industrialised world since the global economic crisis erupted a year ago and have been a prime reason nervous governments have resisted calls to start winding back stimulus measures.

The U.S. jobless rate hit a 26-½ year high of 10.2 percent in October and economists polled by Reuters expect it to rise to 10.5 percent by the middle of next year.

In Japan, the world's second-largest economy, the jobless rate in September recovered from a record high, falling to 5.3 percent from 5.5 percent in August and 5.7 percent in July, but job availability remained near a record low.

Lamy said protectionist tendencies so far had remained "very contained and measured".

"The violence of the crisis has triggered protectionist reactions here and there. There has been slippage, countries with a bit of buy local, a bit of increasing the tariffs, a bit of anti-dumping, a bit of safeguards," he said.