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WTO NEWS: 2001 NEWS ITEMS

1 February 2001
Joint statement on the multilateral trading system

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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.

  1. 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.
  2. 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.

  3. 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.
  1. 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.
  2. 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