Having
discussed together the political, public and economic environment in
which the multilateral trading system is currently functioning we wish
to make a number of observations, to express certain concerns and to
present several suggestions.
We
see danger in the present situation. We consider it is time for
political and business leaders to pay attention to that danger and
make the development of an adequate response a priority. Lack of
attention will mean continued drift and, ultimately, increased
difficulty in reinvigorating an effective rules-based system.
- We
believe that the multilateral trading system, in the form of the
World Trade Organization, is one of the most precious tools of
global economic management at the disposal of governments. In its
five years of existence, it has shown itself to be an effective
framework in which nations can pursue their economic and
development goals, especially so where they are making the
transition from centrally-planned to market-oriented systems and
for developing countries integrating into the global economy.
The
WTO, with the impending accession of China and the likely admission
of Russia, Saudi Arabia and Vietnam and other applicants in the
foreseeable future, will become a truly global institution. Its
continued ability to produce results in the field of trade for all
its members is, and will remain, a formidable challenge.
We
are in no doubt that the WTO can fulfil its role. We say that
because of our conviction that the fundamental concepts that
underlie the institution are as valid and crucial today as they were
when written into the General Agreement on Tariffs and Trade over 50
years ago. There is no doubting the huge contribution made by the
GATT to global growth and development. Trade liberalisation based on
non-discrimination, national treatment and transparency have been,
and will continue to be, the best hope to increase global income
through trade and, as important, the only basis on which poorer and
smaller nations can secure a fair share of international commerce.
- Our
concerns focus on the need to ensure that the multilateral trading
system can, indeed, continue to produce results in the short and
medium term as well as meeting the challenges of the technological
and communications revolutions. There are a number of doubts that
have been expressed during the past year or so, particularly since
the Seattle Ministerial meeting. Those which seem to us to be
particularly worthy of attention are the following:
- There
is public and political disenchantment with international
institutions. This is tied, in part, to the discomfort and
suspicion attached to transfers of national governance in a
globalizing economy and to a lack of coherence in policy-making
at the inter-governmental level. It is tied also to a view that
powerful international bodies are less accountable to the
ordinary citizen than should be the case. It is a view we cannot
share. It is governments which negotiate in institutions like
the WTO, and governments are accountable to their citizens.
- In
the area of trade, there is a view that nothing further should
be negotiated at the global level unless the particular concerns
of those developing countries which have yet to succeed in the
international market place are first dealt with. We do not
accept that this failure to achieve co-called
"equitable" results demonstrates a shortcoming of the
multilateral trading system. We do, however, believe that much
greater effort can and must be made to ensure that the poorer
nations are able to draw maximum benefit both through the
efforts of the private sector and government and through the
properly coordinated delivery of assistance from all the
international agencies involved.
- At
present, there is a clear drift by governments from reliance on
securing objectives through the multilateral framework to
initiatives at the bilateral and regional level. Individually,
many of these initiatives make sense. In the absence of
significant movement in the WTO, they are understandable. If
they are consistent with WTO rules we would not condemn them.
Nevertheless, we are concerned by their collective effect. In
particular, closed, discriminatory trade agreements fragment the
trading system and close down options for those outside. While
poor developing countries can pursue their own regional
integration initiatives, these can never be a substitute for
their global economic integration.
- We
are struck by the very high level of trade dispute settlement
cases being handled in the WTO. In one sense, this is a sign of
the success and effectiveness of the new system which emerged
from the Uruguay Round. It is notable that developing countries
are making increased use of the system as complainants. Our
concern is that the dispute settlement system is being used as a
means of filling out gaps in the WTO system; first, where rules
and disciplines have not been put in place by its member
governments or, second, are the subject of differences of
interpretation. In other words, there is an excessive resort to
litigation as a substitute for negotiation. This trend is
dangerous in itself. The obligations which WTO members assume
are properly for the member governments themselves to negotiate.
The issue is still more concerning given certain public
perceptions that the process of dispute settlement in the WTO is
over-secret and over-powerful.
- Generally,
there is widespread misunderstanding of the multilateral trading
system. This has led to public and political distrust in some,
largely industrial, countries. In part, misunderstanding is the
result of deliberate misrepresentation. In part it reflects the
limited attention by the WTO's member governments to explaining
and making available tools for adequate public information.
There is a pressing need to demonstrate the system's role and
importance in the process of globalization as well as to
emphasize its limitations in achieving progress in fields which
are not tied closely to trade. All of us need to keep in mind
that there is no other rules-based system available to pursue
the goals of economic development: the only other systems are
power-based.
- All
these concerns combine with doubts being expressed about the
economic environment in which trade policy issues and negotiations
will be considered in the coming period. Trade growth worldwide in
2000, at around 12% by volume, was one of the highest rates in
decades. However, there are sufficient signs of a significant
slowdown in the United States for economists to expect a less
impressive performance this year. Furthermore, we are concerned
that protectionist tendencies could re-emerge as some major
markets turn back. A moribund WTO in such circumstances would hit
the interests of the weakest players most. Indeed, we believe the
circumstances are such that the multilateral trading system must
now be seen not merely to be effective as it is, but to be moving
forward.
- With
all these elements in mind, we draw the following conclusions and
make several suggestions.
Business
support for the trading system
We
believe the public undermining of the WTO and the notion of a
rules-based trading system has gone too far. The system will not
sustain itself. The business community – and by that we mean
principally the many hundreds of millions of jobs that depend on trade
- has the most to gain and the most to lose if the system fails; it
must therefore speak out at the national and international levels.
Here we are not simply referring to the large multinational companies
which are already solidly established across the globe. We stress the
interests of smaller businesses and entrepreneurs in the developing
and transition economies who should be reaping more benefits from the
effective integration of their countries into the global economy.
Listening
to the critics but upholding the principles
Even
more so, must the governments speak up for the WTO. Political leaders
have a responsibility to respond fully and frequently to the
criticisms and concerns expressed by interest groups. We do not
suggest that any of the international economic institutions is
perfect. We ourselves believe the WTO could be improved. However, the
principles which underlie the system are not in serious dispute. They
underlie the achievement of economic success across much of the world
today. Those principles – open markets, non-discrimination; the rule
of law, not power, transparency - must be reconfirmed and reinforced.
The
cost of leaving the debate to the system's critics could be very high.
We fear that an attempt to launch new negotiations, however successful
the negotiators may be in defining an agreed agenda, could be
seriously compromised if the effort is not made soon to improve public
and political perceptions.
Recognizing
the WTO system has limits
Part
of the perception problem relates to two contrasting views: first,
that the system is powerful and should be harnessed to achieve many
objectives outside the trade area and, second, that it is too powerful
and already imposing itself in policy areas where other objectives
than trade are in play.
The
first view leads to proposals that trade concessions should be linked
in the WTO to the enforcement of minimum labour standards,
environmental objectives and even human rights in general. We believe
the risk in going far down this road would be precisely to undermine
the fundamental principles which drive the trading system.
The
second approach is seen in the concerns that WTO disciplines and
dispute settlement judgements have, on occasions, appeared to
undermine worthy environmental goals and might, in the future, be used
to attack other public policy areas.
We
believe both views are wrong but reflect a widespread uncertainty
about the limits within which global trade rules should operate. We
are not sure that WTO member governments themselves are clear on the
limits. That being so, the issue is one which deserves to be addressed
and explored. The WTO cannot be used as a Christmas tree on which to
hang any and every good cause that might be secured by exercising
trade power. Nor can its branches be lopped off because it might
sometimes tackle trade issues which have other public policy
components.
In
short, the perceived over-extension of the WTO system is a significant
cause of disquiet in “civil society” and needs to be recognized.
Creating
an environment of public confidence
We
have already dealt with some questions which relate to public
perceptions of the global trade rules and the institution of the WTO.
The most dangerous misconception - at least to the extent that it is
taken seriously - is that the system amounts to a conspiracy between
large multinational firms and certain governments. Each of us, having
had responsibility for leading the institution, finds this a notion
unworthy of detailed rebuttal. It is simply not true. The WTO is an
intergovernmental institution and democratic governments in
determining negotiating positions must take account of interests in a
multiplicity of constituencies – business, consumer, environmental,
social and so on. It is for the governments to decide their national
priorities.
There
are, however, public concerns being voiced that deserve more serious
consideration. Above all, comes the relative lack of transparency in
the institution. Since Seattle, the focus within the WTO has been on
improving the participation of some of the poorer developing countries
which consider they have been excluded from decision-making processes.
While many developing countries have long played a substantial and
often decisive role in Geneva, it is clearly important that all WTO
members feel they have an adequate chance to be involved in all
decisions which affect their national interests.
There
is also, a question of external transparency. First, where they have
not already done so, we would encourage all governments to open up
trade policy debate at the national level. However, the WTO itself has
a job to do. We welcome the efforts made to date to ensure the public
availability of documents. At the same time, it is difficult to accept
that there are compelling reasons why at least some of the WTO's
activities and councils could not be opened up to public scrutiny. We
are concerned that charges of secrecy could again mar efforts to move
the system forward. We would encourage WTO governments to think
carefully about this issue.
Cooling
the dispute settlement climate
Dispute
settlement is one of the great successes of the WTO. Yet the current
burden of cases is probably too heavy. Again, it is a matter of
perception. But the WTO cannot be known solely for its judicial
prowess, still less for the number of times its members are given
clearance to retaliate where dispute findings are not implemented
satisfactorily.
It
is unfortunate if the first option for governments seeking to put
right trade grievances is resort to the WTO dispute settlement
process. The better route - and it should be the first option - must
always be good faith consultation and direct bilateral negotiation.
Above
all, the spate of disputes and the large overhang of retaliatory
actions - actual or threatened - between the United States and the
European Union is one of the most troublesome barriers to securing
leadership from the WTO's two biggest beneficiaries. The new US
Administration should make it a priority to work with the EU to
resolve the outstanding transatlantic differences.
We
believe that all WTO members - but the EU and US in particular - must
exercise the utmost restraint in their recourse to the dispute
settlement system. Litigation in trade matters is not, and must not
become, an automatic alternative to negotiation.
Meeting
developing country aspiration and concerns
Over
the past year, considerable efforts have been made in Geneva to push
forward an agenda of issues related to developing country concerns
about the “implementation” of the Uruguay Round agreements. It was
a disappointing process with few results. We can understand the
disenchantment of some poorer nations and their reluctance to move
forward with any new negotiation that might involve further
commitments on their part. Nevertheless, it seems more than doubtful
that many gains will be made outside the context of a wider
negotiation.
We
recognise that this may be a difficult situation for some governments
to accept. Industrial countries must recognize that difficulty in a
tangible manner. What further market access commitments for
least-developed countries which can be made now, should be made. But
the most significant contribution that advanced countries can make to
the export potential of poorer nations must be in capacity building.
We strongly suggest that a further major financial commitment be made
directly and through the multilateral agencies to assist the
government and private sectors in developing and transition economies
in creating the institutions, qualified personnel, skills and support
technology that will eventually make the market access commitments of
their potential trading partners, solid opportunities.
In
the context of the poorest developing countries, the trading system
cannot be seen or treated as more than a component in tackling their
problems. Market access alone will not secure higher export levels.
Many other elements must be in place - some of which require concerted
efforts by other international institutions - if export capacity is to
be generated. We believe that the major multilateral economic
institutions should place themselves to deliver the necessary support
in the most effective, efficient and coherent manner possible.
Dealing
with other human development challenges
Labour
rights and environment are often linked as issues to be dealt with by
the WTO. They should not be linked. The GATT and, especially, the WTO
have been able to consider, if not always resolve, questions related
to the intersection between environmental and trade policies; no doubt
that will continue. It is not the case for labour rights.
We
accept that many of those who call for recognition of a link between
international labour standards and trade do so out of genuine concern
for the welfare of foreign workers. It is clear, however, that there
is no basis for agreement on such a link being examined and acted upon
within any delegate body of the WTO. That is the case for certain
other areas where social development or human rights objectives are
said to intersect with trade policy.
The
real problem is much wider. We accept that there is some genuine
public disquiet, sometimes a sense of insecurity, about the nature and
speed of globalization. There is some truth in the view that there is
a lack of balance in the management by the international community of
the social and developmental elements of global change.
Indeed,
there are many issues for which a complete and valid understanding
requires the co-ordinated and focused attention of a number of
international agencies. We therefore propose that a new commission be
established, which brings together the heads of all relevant trade,
financial and development institutions, to assist governments in
understanding and managing the balance between the social and
developmental aspects of global economic change.
The
commission would decide priorities and delegate expert staff from its
constituent agencies to work together on the clarification and
analysis of specific issues and to report back. Once adopted by the
commission, such reports would be sent to the executive councils and
boards of the agencies concerned as an intellectual input to their
substantive work.
This,
of course, is just one of a number of possible approaches to dealing
with the overlap between social, economic and development issues. In
particular, we welcome the initiative of the Secretary General of the
UN in launching the Global Compact initiative.
It
seems to us the proposed commission provides an efficient approach to
achieve the ends required and involves no expensive international
bureaucracy. Nor would it detract from the rights and obligations of
the member states of intergovernmental organisations. It is certainly
the case that a better means of ensuring the adequate consideration of
the interlinkages between the many policy areas related to global
human development is needed. We urge governments, at the highest
levels, to give urgent and serious consideration to this proposal.
Launching
a new trade round
The
various observations and suggestions put forward above are designed to
help create the environment for a decision to move ahead with a broad
trade negotiation within the WTO. We do not believe there is an
alternative to such a course. On the contrary, progress already made
in the services and agriculture sectors suggest there is much to be
gained by all WTO members if those processes can be brought to a
conclusion as part of a wider, but balanced, package. We therefore
urge strongly that governments now focus on the conditions for the
launch of a new trade round at the Ministerial meeting of the WTO to
be held later this year.
The
essential elements for building the agenda of a new trade round are
well known and, in any event, are for good-faith negotiations in
Geneva and between capitals. We would only note two institutional
proposals which need to be considered if the management of the WTO is
to be as effective as possible in the future. The following would
ideally be settled prior to the launch of a trade round. However, we
recognize that agreement may only be possible within the wider context
of a broad negotiation. WTO members should look seriously at the case
for and potential terms of:
- A
management board which could take routine decisions not affecting
members' rights.
- A
wider, senior level policy consultancy group to ensure current
trade issues are debated in the widest policy context.
We
believe that additional institutional arrangements of this kind would
go some way to achieving efficiency in the operation of the WTO and
more favourable public and political perceptions of the institution.
Conclusion
Our
principal purpose in releasing this statement is to draw the attention
of political and business leaders to the importance of maintaining and
driving forward an effective multilateral trading system at a time
when there appears to be a growing lack of understanding of the
extraordinary benefits that the GATT and the WTO have brought to
global growth and development. By expressing these views, we want to
emphasise our full confidence in the WTO trading system and in the
technical work under way in Geneva and capitals. We have no doubt that
the system can and will continue to deliver benefits to all its
participants in the future.
ARTHUR DUNKEL — Director-General, GATT, 1980 – 1993
PETER
SUTHERLAND — Director-General, GATT/WTO, 1993 – 1995
RENATO
RUGGIERO — Director-General, WTO, 1995 - 1999 |
