WTO news: what’s been happening in the WTO

WTO NEWS: SPEECHES - DG MIKE MOORE

New York, May 22nd 2000
The WTO and the new economy

National Foreign Trade Council

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Ladies and Gentlemen,

 It is a great pleasure and honour to give this keynote speech at the National Foreign Trade Council's World Trade Dinner here in New York City. I welcome this opportunity to report to you on the considerable work the WTO has done, including on issues related to the new knowledge-based economy, and the important results we have achieved over the last few months.

I am pleased to report that the WTO has not stood idle since Seattle. Standing still is going backwards. Accepting the status quo means accepting yesterday's compromise, and that's not good enough.

First, we have launched sectoral negotiations on agriculture and services. Together, these sectors account for over two-thirds of world output. The potential gains from further liberalisation in these areas are huge.

Second, we have worked through an important package to help the world's poorest countries reap greater benefits from the world trading system. This package includes better access to rich-country markets (on that note, I must congratulate the Clinton administration and Congress for pushing through the bill to boost trade with Africa and Caribbean), increased technical assistance, and closer co-operation between the WTO and other global institutions that promote development, notably the World Bank.

Third, we have established a mechanism for dealing with the problems that some developing countries have with implementing some of their commitments from the Uruguay Round. This was a major area of difference at Seattle.

Fourth, we are looking at ways to improve how the WTO works, and in particular how to adjust to having 136 members, all of whom demand respect and their rightful seat at our table.

Last but certainly not least, thirty candidates, more than 1.5 billion people, are lining up to join the WTO. This is a clear vote of confidence in the WTO system and we are doing everything we can to facilitate their entry under the appropriate conditions. Next month Georgia will become our 137th member and the fourth former Soviet republic to join. Russia itself is actively pursuing accession and I am meeting their experts again next week.

The country that is getting most attention right now, of course, is China (particularly in light of the agreement just concluded with the European Union). China's decision to join the WTO is momentous. One Chinese leader has said that this is the most important decision China has made since 1949. China has chosen openness rather than isolation. It has opted for reform rather than reaction.

The benefits for China are clear. Opening its markets to foreign trade and investment will make it richer. Committing itself to WTO rules will entrench market-based reform and strengthen the rule of law. It will also give Beijing a seat at the WTO table and a stake in the world trading system, bolstering progressive forces in China.

A more open China brings benefits for everybody. For example, the WTO accession deal that the United States struck with China last November will give American business better access to an economy of 1.3 billion consumers that is growing at 8% a year. China's opaque and arbitrary trade and investment rules will become transparent, stable and more predictable. And a stable and peaceful China will make investments elsewhere in Asia more secure too.

The United States loses nothing from this deal. But it stands to gain enormously.

These benefits are real. China knows it has to stick to its WTO commitments. If it doesn't, the US or any other WTO member government can use the organisation's dispute-settlement procedures to ensure it does.

Of course, American business and workers will only get these benefits if Congress votes for permanent trade relations with China. In this, I agree with President Clinton: if Congress votes for permanent trade relations, 10 years from now everyone will wonder why it was a hard fight. And if Congress votes against it, they'll be kicking themselves 10 years from now.

History demands we welcome China into the world trading order. But don't just take my word for it. Ask Dai Qing, one of China's most prominent environmentalists and independent political thinkers, who served time because she opposed the Tienanmen crackdown. She says: "All of the fights—for a better environment, labour rights and human rights—these fights we will fight in China tomorrow. But first we must break the monopoly of the state. To do that, we need a freer market and the competition mandated by the WTO."

The WTO has an ambitious agenda. And rightly so. It is a powerful force for good in the world. Consider what the WTO, and its predecessor, the GATT, have done for America. Over the past 50 years, America's average import duties have fallen from over 40% to a mere 2.8%. Thanks to these falling trade barriers, the two-way flow of trade now amounts to more than a quarter of America's national income, a record high for this century. That in turn has helped raise living standards, as exporters sell more abroad, new technologies spread faster, foreign competition keeps domestic firms on their toes, and consumers enjoy an ever wider choice of cheap imports.

The gains to the United States from the Uruguay Round alone come to over $40 billion a year. That's a pretty good return on the $12 million that America contributes annually to the WTO's budget. And that $40 billion a year is actually an underestimate of the true benefits to America.

The WTO also provides a stable and predictable framework for business. It does this firstly by locking in governments' commitments to liberalise. In this regard, WTO rules helped discourage protectionist pressures in the wake of the Asian crisis. And the WTO also promotes stability through its dispute-settlement system, which acts like a world commercial court. I should mention here that the US has won 23 of the 25 cases it has brought to the WTO.

Critics of free trade often say that imports costs jobs. That is an odd claim when imports are at a record high and unemployment is at a 30-year low. Indeed, a new study by the Cato Institute points out that since 1973 there has not been a single year when falling imports have been associated with a falling unemployment rate. What's more, America's openness to foreign investment is also creating jobs. One in eight manufacturing workers now works for a foreign-owned company.

Another myth is that free trade is destroying well-paid manufacturing jobs and replacing them with low-paid service-sector jobs. In fact, since 1993 America's share of world manufacturing exports has remained steady, the number of manufacturing jobs has risen, and manufacturing output has leapt by 42%. As for the service sector, yes, some jobs there are poorly paid, but most pay above-average wages. The lion's share of the new service jobs is in communications, computing and finance: the heart of America's dynamic new economy.

Few can fail to be impressed by this new economy. As John Micklethwait and Adrian Wooldridge say in their new book, "A Future Perfect": "Technology gives entrepreneurs the freedom to challenge giant companies and to break up concentrations of power. Technology gives people the power to weave connections all over the world. Technology allows people to escape from the tyranny of place." All of that is true.

But we should not fall into the trap of thinking that new-economy firms cannot fall victim to trade barriers and protectionist regulations. Yes of course the Internet makes it easier to bypass trade barriers and government regulations. Certainly, an Internet start-up can more easily reach a global market than a new steel mill. But even the new economy needs global free-trade rules to prevent governments throwing spanners in the works. Government regulations can easily hinder the global development of e-commerce. So can trade barriers. We need to be vigilant. Open up an American PC and you will probably see memory chips from Japan and Korea, a disk drive from a US company in Singapore, and a motherboard from Taiwan. Those components can be imported duty-free thanks to the WTO's information-technology agreement. The competitiveness of American computer makers depends on free-trade rules.

The WTO provides certainty in an uncertain world. The WTO's services agreement locks in governments' liberalisation of a wide range of sectors. Additional agreements signed since 1997 have lowered barriers to trade in information technology, financial services, and telecoms. The WTO's intellectual-property agreement protects businesses' investments in areas such as pharmaceuticals, media, and computer software. And WTO members agreed in May 1998 not to impose customs duties on electronic transmissions.

Of course, there is much more the WTO could do, and will. The services negotiations that started this year aim to expand the service agreement's country and sectoral coverage and remove restrictions on market access and national treatment. A second information-technology agreement could enable a wider range of computer hardware to be traded duty-free. A more ambitious telecoms agreement would strengthen the backbone of the new economy and help the poorest nations to share the benefits of the knowledge economy.

All these aims are achievable. Some may even be possible without a new round of WTO talks. But it will be tough to clinch a far-reaching deal without a round. And a broader round would also spread the benefits of liberalisation to other sectors where America is competitive, such as agriculture. American farmers exported $54 billion last year. Think how much more they could sell if farm trade was freed.

I hope we can get a new round started soon. But it will not happen without your active support. Businesspeople are not doing enough to promote freer trade. There is no shame in trumpeting your role in making America, or Mexico, or China, or South Africa, or anywhere else a better place with more jobs. There is no shame in pushing hard for a new round of trade liberalisation.

Our critics say we don't have public opinion on our side. But the facts tell a different story. 58% of Americans think the WTO has a positive impact on the world, compared with only 27% who think it has a negative impact, according to a recent poll by the Angus Reid group. And 60% of American union members think the US should stay in the WTO, according to a poll by the Association of Women in International Trade.

Of course, we face a big challenge ahead. The WTO is too often misunderstood, sometimes genuinely, often wilfully. We need to put our case better. We need to explain that we are not a world government of any shape or form. People do not want a world government, and we do not aspire to be one. But people do want global rules. If the WTO did not exist, people would be crying out for a forum where governments could negotiate rules, ratified by national parliaments, that promote freer trade and provide a transparent and predictable framework for business. And they would be crying out for a mechanism that helps governments avoid coming to blows over trade disputes. That is what the WTO is. We do not lay down the law, we uphold the rule of law. We do not tell governments what to do, they tell us. That is how it should be.

Free trade is not an ugly concept. On the contrary, free trade helps pay for the things we value most: jobs, health, education, a cleaner environment. More trade, not less trade, is the surest way to improve people's lives and working conditions. More trade, not less trade, is the surest way to promote freedom, security and peace.

Free trade needs more champions. So does the WTO. I hope you will join us in fighting for a better world by taking the case for free trade to a wider public. We will do our share. But we need your help so that in these days of great change the voices of reason and progress prevail over those of fear and doom.