Ladies and gentlemen,

Thank you for inviting me to deliver the opening address at this first G-20 Trade and Investment Promotion Summit. I know this event is very dear to the Mexican G-20 Presidency and I want you to know that we at the WTO also strongly support bringing together the trade and investment policy makers — those who make trade possible — with the trade promotion agencies, i.e. those who make trade happen.

In my remarks this morning I intend to briefly focus on the transformations in the global economic and trade landscape and the challenges and opportunities that this brings to policy makers and traders. In particular, I will address the growing role of global value chains and provide some ideas on how trade promotion agencies can better support businesses, especially small and medium enterprises (SMEs), to benefit from these new trade patterns.

The topography of trade has changed dramatically in the past ten years — markedly so in the post-economic and financial crisis period of 2008. That crisis challenged the traditional view of geo-politics as many developed countries struggled to maintain growth levels and economic activity while many developing economies sailed better through the crisis. Mexico, Brazil, India, China, Indonesia, Turkey and many other emerging economies provided a new narrative on trade.

Four years later we are still working our way out of the crisis. The Eurozone issues remain challenging — although there have been some positive signals of late — and the threat of a US fiscal cliff remains. Although emerging economies have weathered the storm, there are signs that even their growth is slowing down as we move forward.

In effect, as we near the end of 2012, the signs are not positive. The WTO recently revised its forecast for trade volume growth in 2012 to 2.5 per cent, down from 3.7 per cent in the spring. This is no surprise as the International Monetary Fund revised its forecast for global growth to 3.3 per cent this year and on the employment front, the ILO has forecast that in 2013 an additional 7 million people will join the 200-million-strong ranks of the unemployed.

We do expect that exports and imports will pick up in 2013 but these figures reveal some interesting patterns. The global network of imports and exports is no longer just the North-South paradigm of the past century. Increasingly we are seeing South-South, South-East and South-Other! Developing countries as producers and as markets for each other is one of the growing patterns of the new landscape of trade.

Accompanying these transformations in the direction of trade, we are also increasingly seeing a change in the very nature of that trade. No longer are economies trading in just final products. No longer can we really say with any degree of precision that any product is ‘Made in country X’. We are witnessing the growth of trade in intermediates or trade in tasks — where components of goods and services are produced and assembled in different countries and where the import content of that final good fails to truly and accurately capture any label but one termed ‘Made in the World’.

The old ‘imports bad and exports good’ cannot possibly hold true when today almost 60 per cent of trade in goods is in intermediates or trade in tasks and the average import content of exports is around 40 per cent. For the same reasons, trade protectionism is unlikely to protect. Protection will rather depend on smart domestic policies in social safety nets, in education, in innovation. This transforms the policy debate on trade and broadens the impact that trade can actually have on growth, employment and innovation.

The WTO is working closely with other agencies, such as the OECD, UNCTAD and many others on this “Made in the World” architecture. By the end of the year, we will be issuing the first ever figures on trade flows in value added. We hope this will help better understand trade flows, bilateral trade balances, competitiveness and jobs related to trade.

Intimately linked to trade in tasks is the emergence of value chains. Value chains are not new. But what is new is their reach, depth and potential. They were first local and regional, now they are more and more global. What is new is also their breadth, spanning industrial products, agriculture and agro-foods as well as services. What is new is the interdependency between trade, investment and capacity. What is also new is the opportunities that value chains offer to smaller and poorer countries to link up with the global economy.

I have just returned from Costa Rica which I believe is a good example of how joining regional and value chains can help a relatively small economy diversify, innovate, grow and create higher value added jobs. We have seen the same thing in many parts of Asia where the notion of ‘Factory Asia’ was very much built on the idea of a series of regional value chains. Or in Africa, which is working on a set of measures to grow intra-African trade.

One of the arguments we often hear from companies operating in value chains is the importance that effective and transparent trade facilitation procedures can have in reducing the cost of doing business. Companies require transparency and predictability to produce, to distribute and trade - both importing and exporting. Investors require a stable and well-regulated business environment to invest in a company or in a country.

Trade facilitation and other customs and border procedures is the connective tissue that allows economies to run efficiently and effectively. The 2013 World Bank Doing Business Report shows that those countries which move up the listing are those which have invested in effective trade facilitation procedures.

There is simply no downside to an economy investing in trade facilitating procedures. In the future, the economies that benefit from the opportunities presented by value chains and trade in tasks will likely be those who have developed their customs and border procedures to a competitive level based on transparency and predictability. The discussion at the WTO on a multilateral Agreement on Trade Facilitation is one critical element. These negotiations aim to create a form of international insurance policy on the application of a set of coherent trade facilitating measures accompanied by capacity building for developing countries, especially the least-developed countries, who may require assistance to implement the agreement.

A second important component, critical for well functioning regional and global value chains, is addressing the growing number of non-tariff measures. Tariff reduction has been the traditional work of the WTO. But as tariffs continue to decrease both in reach and in importance, non-tariff measures such as technical standards, health and safety requirements or services regulation now have a greater potential to become obstacles to trade. This year’s edition of the WTO World Trade Report focused on this issue. We found that the nature of non-tariff measures had transformed from a more traditional protection-motivated construct to an increasingly precaution-oriented emphasis on health, safety, environmental quality and other social considerations. Unlike tariff negotiations that aim to negotiate to a zero level of tariffs, discussions on non-tariff measures must instead focus on coherence and capacity. Coherence to ensure that companies do not have to face a series of competing standards and requirements and capacity to help companies, in particular SMEs, better understand and adapt to these measures. The issue of private standards is particularly important in this regard.

A third related element that I would briefly touch on is Aid for Trade. For some countries and companies, the cost and capacity deficit of implementing customs and border procedures and identifying and adhering to non-tariff measures can be a barrier to benefiting from value chains. Even though the entry cost for a developing country into these chains can be comparatively small vis-à-vis the benefits, some developing countries and SMEs may require specific technical assistance and capacity building.
     
Since 2005, the WTO has spearheaded the work on Aid for Trade, the part of development aid focused on helping developing countries build trade capacity. In 2010, over USD 45 billion in Aid for Trade was committed to developing countries. With the existing budget tightening related to the crisis, we must use the available resources better and smarter and focus on showing results. A third important component of the work on Aid for Trade has been bringing the private sector more on board - both as a provider of trade-related assistance and investment and as a demandeur for assistance.

At the Fourth WTO Global Review of Aid for Trade in July 2013, we will focus on “Connecting to Value Chains” with a particular emphasis on the private sector. Our collective aim should be to continue to ensure that Aid for Trade is well targeted to assist developing countries and SMEs to seize the opportunities that the new trade landscape provides. This may range from infrastructure development to understanding and meeting private standards to increasing productive capacity and market knowledge.

The International Trade Centre (ITC), present at this Conference, is a key partner in this endeavor, in particular regarding SMEs. Its work on increasing market knowledge, identifying barriers and opportunities and translating these into workable and fundable projects and programmes is a major input into helping translate trade opportunities into realities.  ITC’s work with the trade promotion agencies here present is of critical importance. But these agencies also have a growing responsibility to adapt to the trading realities. Businesses need modern trade promotion agencies which offer ‘just in time’ knowledge, data and intelligence. Trade promotion agencies who can connect trade with investment.

I would like to offer three suggestions in this regard.

First, SMEs need accurate and quick information — this is the minimum platform they need to expand and grow their businesses. Trade promotion agencies can work with the ITC to help feed that information and build up that expertise. Use the wide network offered by the ITC to build relationships and share information with other trade promotion agencies.

Second, better identify the needs of your customers. This could be in the areas of trade finance, market knowledge, or investment in procedures. With the growing web of non-tariff measures and other regulatory frameworks, it is likely that demand to help SMEs identify and address these measures will be a growing priority. This will be essential to help SMEs reach new markets and expand within existing ones.

The WTO can also support you in this regard by improving transparency about existing non-tariff measures. We have created the Integrated Trade Intelligence Portal (I-TIP), which is a one-stop shop for accessing all information notified to the WTO by members, including non-tariff measures, tariffs, trade remedies and trade statistics. In December, we will be unveiling the first results of I-TIP which will need to be regularly updated.

Third, I urge you to see improved trade facilitation processes as an investment tool. Committing to transparency, predictability and cooperation at the border can bring substantial dividends in positioning your countries and your businesses as players in the new economic landscape.
   
These are challenging times for the global economy and indeed for multilateralism. We have seen this in the WTO with the stalled Doha Development Agenda negotiations and also in other fields such as in climate change. However, within these challenges also lay opportunities. In the WTO for example, members are continuing to move forward cautiously on some fronts. And in the changing geo-politics of today with the rise of South-South trade and cooperation and the reach of value chains, there are intrinsic opportunities for developing countries and for companies, in particular SMEs. A close partnership between trade and investment policy makers with trade promotion agencies is an essential ingredient to make this happen.

 I thank you for your attention.