Secretary-General Ban Ki-moon,
Under-Secretary-General Sha Zukang,
Ambassador Miloš Koterec, President of ECOSOC,
Excellencies, Ladies and Gentlemen,

 

The global economic situation

We are meeting in difficult economic times.

The world economy has clearly not recovered from the global economic crisis of 2008. Global growth remains tepid, well below its potential in most regions, with severe downside risks emanating from the euro-zone. According to the UN’s recent “World Economic Situation and Prospects”, the global economic situation is still challenging, and there are heightened risks of a severe downturn.  It warns that global economic growth will likely remain tepid for the rest of the year, with most regions expanding at a below-potential pace.  Hard-won developmental achievements of the past decade are in danger of unravelling.

National economic concerns inevitably gain visibility during times of recession and economic uncertainty, and the political will to open markets to foreign goods and services wanes with the escalation of fears regarding job losses and the livelihood of domestic industries.  In such times, the temptation to resort to protectionist measures becomes stronger.

The rules and norms of the WTO are the strongest insurance policy we have against protectionist pressures.  In the past few years, the WTO has been monitoring the measures that its members have introduced in response to the crisis.  Through its biennial report, the WTO has helped to deter the sort of destructive economic nationalism that deepened the Depression of the 1930s.  Nevertheless, in view of recent developments, it is of primary importance not only to safeguard the multilateral rules that nations have agreed upon but also to redouble efforts in trade-opening measures.

Consider that 3% of world merchandise trade has been lost to trade-restricting measures introduced since 2008.  This is equivalent to the trade of the entire African continent.  It means that despite their repeated pledges to hold back from protectionism, some G-20 nations have continued to introduce new trade-restricting measures and have been slow to remove measures introduced earlier, even though past experience has shown that protectionist measures only make us all worse off by deepening the economic downturn.

For the first time, we believe there is serious cause for alarm. As WTO Director-General Pascal Lamy recently said, protectionism is like bad cholesterol: it builds up slowly, but one day you discover that your arteries are clogged. I need scarcely point out that the yawning gap between word and deed hurts the G-20’s credibility at a moment when it is particularly important that leading governments appear credible.

 

The role of the WTO — the “can-do” approach

In some ways, this concern was foreshadowed by WTO Ministers when they met in Geneva last December. They had underscored the WTO’s critical role in keeping markets open in the current global economic environment. They had also emphasized the WTO’s vital role in fighting protectionism and affirmed their commitment to resist protectionism in all its forms. That being said, it is no secret that the Doha Round of negotiations, which promises to further open markets worldwide, is at an impasse. It is clear that nations are hesitant to commit to undertake the package of reforms negotiated in various areas in such uncertain economic times.

Given the serious economic situation and one in which trade is often one of the first targets for abuse, there is an imperative need to strengthen multilateral co-operation and find global solutions. The Doha Round is not part of the problem; in fact, by stimulating trade flows and encouraging global economic growth, the early conclusion of the negotiations can very much be part of the solution to the crisis.

We must be realistic: these unpropitious conditions are not going to change very soon.  So what can we do?  In order to stimulate growth, we should continue to open trade through small steps where possible.  In that regard, a multilateral agreement on trade facilitation is a possible deliverable of the Doha negotiations.  A global deal to cut red tape in customs procedures and smooth the flow of goods across borders would unlock considerable economic gains for producers and consumers alike.

Reduced transit and transaction costs would be especially beneficial to small and medium-size enterprises operating in landlocked countries.  Africa being home to the majority of landlocked countries, it is not surprising that the African Union’s ’Action Plan for Boosting Intra-African Trade’, which was adopted by the Heads of State at their last summit in January, puts a strong emphasis on trade facilitation.  The Action Plan notes that trade facilitation will not only assist in the deepening of Africa’s market integration but will also enhance the performance of African countries in global trade.

The WTO’s trade facilitation negotiations take on particular significance given that the way that global trade is carried out has changed significantly during the last two decades. In particular, with the prevalence of global value chains, it is not only the efficiency in a particular country’s customs procedures and infrastructure that will determine the competitiveness of the firms within that country.  Given that 60 per cent of global trade is in intermediate goods, trade facilitation procedures are an essential part of the competitiveness of all small, medium and large companies trading across borders.  For this reason, expediting a multilateral deal on trade facilitation becomes even more important.

Other important deliverables will be to support LDCs’ integration into the global economy by providing them with duty-free, quota-free market access and by facilitating their accession to the World Trade Organization.  The good news is that many countries, developed and developing, have done away with tariffs applied on most imports from LDCs and, just last Friday, WTO members made significant progress in their negotiations on specific modalities to streamline and facilitate LDCs’ accession to the WTO.

 

Rio+20 and trade

Let me now comment on the recent Rio+20 Earth Summit.

The Rio+20 summit further underscored the contribution of international trade to sustainable development.  The outcome document builds on Rio 1992 and Johannesburg 2002 by highlighting the critical role that trade openness can play “in stimulating economic growth and development worldwide, thereby benefiting all countries at all stages of development, as they advance towards sustainable development”.

The decision by member states to consider trade as a “means of implementation” — alongside finance, technology, and capacity building — further highlights trade’s instrumental role in promoting sustainable development.  Sustainable development is firmly embedded in the WTO, whose founding charter recognizes that more open trade is not and should not be an end in itself;  rather, it is tied to crucially important human values and welfare goals such as raising living standards, ensuring full employment, using the world’s resources sustainably, and protecting the environment.

Rio+20 makes clear that a universal, rules-based, open, non-discriminatory and equitable multilateral trading system is an indispensable component of the requisite framework for sustainable development.  The outcome document highlights that a multilateral trading system based on those same principles is an instrument to promote agricultural and rural development in developing countries and to contribute to food security.  Non-discrimination and transparency rules underpin all WTO agreements and offer a framework for ensuring predictability and fair implementation of measures to tackle the vast array of social, environmental, and economic challenges that we face.

This brings me to the very real concern, expressed by many countries and stakeholders during the Rio+20 preparatory process, that green economy may be used to justify trade protectionism and undermine the competitiveness of exports from developing countries, or otherwise impede their development process.  The Rio+20 outcome document rejects green protectionism by affirming that “green economy policies should not constitute a means of arbitrary or unjustifiable discrimination or a disguised restriction on international trade, avoid unilateral actions to deal with environmental challenges outside the jurisdiction of the importing country, and ensure that environmental measures addressing trans-boundary or global environmental problems, as far as possible, are based on an international consensus”.

In recent years, we have seen a wide range of measures adopted under the green economy banner by both developing and developed countries.  These measures may in some instances impact international trade.  Through its system of rules and transparency mechanisms, the multilateral trading system of the WTO is a uniquely powerful instrument to help minimize the risks of protectionism and trade tensions.

WTO rules seek to achieve a crucial balance:  on the one hand, they support the right of members to take measures to advance legitimate goals such as protection of the environment;  on the other hand, they ensure that such measures are not applied arbitrarily and are not disguised protectionism.

WTO monitoring and transparency mechanisms provide its members with a unique platform to monitor, explore, discuss, influence, and challenge green economy measures with trade impacts.  The special monitoring reports that the WTO Director-General launched in the wake of the outbreak of the financial and economic crisis are now joint reports by OECD, UNCTAD and the WTO for G20 meetings.  They have proven to be a highly useful transparency tool that has bolstered political resolve to resist protectionism.

From the perspective of the WTO, Rio+20 has made a significant contribution to on-going efforts to facilitate progress along the path of sustainable development through more open trade.  Rio+20 identifies two specific areas where progress by the international community would be particularly important, namely, trade distorting subsidies and trade in environmental goods and services.

Both issues have been part of the WTO’s Doha Development Agenda since its launch in 2001.  The elimination of tariff and non-tariff barriers to trade in environmental goods and services can facilitate access to products and services that help countries tackle air, water and soil pollution, and enhance the conservation of natural resources.  In addition, it can facilitate the dissemination and deployment of environmental technologies that are vital to a green economy.  Curbing trade distorting subsidies in agriculture that are environmentally harmful can result in a double win for trade and sustainable development.

Besides trade distorting subsidies and trade in environmental goods and services, Rio+20 emphasizes fisheries subsidies, another key element of the trade and environment negotiations under the Doha Round.  The fisheries chapter of the Doha Round demonstrates how the trade and environmental agendas can meet, because eliminating trade distortions can help conserve fish stocks.  In Rio+20, countries reiterated their commitment to strengthen multilateral disciplines on fisheries subsidies that contribute to overcapacity and over-fishing, recognizing that special and differential treatment for developing and least-developed countries should be an integral part of these negotiations.

As we have seen, even in these difficult times, we can produce substantive development results by taking feasible and realistic steps but for this to happen, we need two things: (i) the ECOSOC to use its mandate and legitimacy to make sure that G20 members respect their pledge to resist protectionism.  This is in the best interests of the ECOSOC as the cost of protectionism is borne by all its members; and (ii) we need ECOSOC members to galvanise their energy and pragmatism necessary to keep opening trade. This will speed the economic recovery and prepare the ground for a successful conclusion of the DDA.

In sum, small steps have been taken, more can be done and more needs to be done.