WTO news: what’s been happening in the WTO

WTO NEWS: 1998 NEWS ITEMS

29 april 1998
The joint ADB/WTO Seminar on 29 April 1998 Director General's Opening Remarks  

I am very pleased to participate in this joint event of the ADB and the WTO.  Our institutions are separated by geography, but we have a common cause in promoting growth and stability and a shared commitment to working together.  This meeting is a tangible sign of that shared commitment, and I hope it is the first of many future undertakings.

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The challenge facing the multilateral trading system in the post-Cold War era is really the challenge of managing a globally interdependent economy.  When we talk of trade policy today, we are no longer just talking about the rules for goods crossing borders - the old focus of the GATT.  We are also talking about investment, competition, development, marginalisation, the environment, labour, ethical issues, and other policies which are in one way or another interwoven with trade.  Likewise, when we look to the future role of the multilateral system we must look beyond economics.  Deepening economic and technological interdependence means that the trading system is now as important to global stability and security as it is to global prosperity.

The recent financial crisis in South-East Asia is a major test not just for the countries immediately affected, but for the international community as a whole.  This, after all, must be what interdependence is all about.  The immediate focus has been on the stability of the region's financial systems  - and here the positive contribution of the international financial institutions and a number of governments has been crucial.  But this crisis is also reverberating through international trade and investment flows.  And part of the solution to restoring economic health to the region - and avoiding global contagion - lies with the trading system.  From the perspective of the multilateral trading system, I think we can draw three broad lessons from this crisis so far.
 
First we have so far resisted protectionist pressures.  Our great advantage today - which was disastrously absent in the 1930s - is the existence of a strong and secure multilateral trading system, which has prevented a serious financial crisis from spiralling into a serious trade crisis, through protectionist-motivated reactions and counteractions.

The full recovery of the economies in crisis is going to depend also on their continued access to foreign markets.  As a result of the crisis, trade accounts in a number of export markets can be expected to deteriorate, and perhaps quite significantly, in some key traders.  All markets must remain open; only in this way can growth prospects fully reestablish themselves.

The rights and obligations that Members have taken under the WTO are the cornerstone to keeping markets open and to their further liberalization.  The legal bindings entered into by Members ensure stable and predictable market access, protected by an effective dispute settlement system.  A more real concern is what might be termed creeping protectionism  - any unwarranted or excessive use of safeguards, antidumping actions or other discretionary policy tools to block out international competition.  We in the WTO are watching the situation very carefully.  To date there is no evidence of any protectionist measures being taken.  But the trade effects of the crisis are only now beginning to be felt.  Widening trade deficits could provoke protectionist sentiment; this must be resisted and we will continue to monitor developments carefully.

The second lesson is that the WTO system can play an  important role in economic restructuring and reforms.  It is universally acknowledged that one of the main causes of the Asian crisis was financial sector weakness.  Whereas closed financial systems are inherently opaque and unresponsive, open financial systems have a built-in incentive to be transparent and prudential - if only because they must be responsive to consumer and shareholder demand.  Some countries have taken significant liberalizing measures in their financial sectors.  I suggest that confidence would be more rapidly restored if these measures were to be bound, as Korea has announced for some financial liberalization actions, investors would gain an added measure of certainty, to the benefit of investment prospects in these economies.  The Financial Services Agreement in particular allows these countries to reinforce and lock-in financial restructuring - but without compromising their ability to pursue sound macroeconomic and regulatory policies.

More broadly, this crisis underlines the fact that deeper trade and investment integration requires strengthening the rules, the structures, and governance in global markets.  The new trade agenda is as much about strengthening markets, as about opening markets.  And its focus is issues such competition and investment policies, on sound regulatory frameworks, and transparency.

A third lesson is that we need to maintain the forward momentum of the trading system.  The trade agenda has never been broader or more fast-paced, but still, in the last 18 months alone, we've negotiated agreements to free trade telecommunications, financial services and information technologies - with the possibility of an ITA II coming down the pike.  This is comparable to having achieved a new major round, the ninth one, the technological and financial round for the 21st century.  Now ahead of us at the turn of the century, we have further important negotiations, with commitments already to negotiate in agriculture, services and aspects of intellectual property.  We have 31 accession negotiations underway - ranging from giants such as China and Russia, to small island states - we're working on bringing the least-developed countries into the system more meaningfully.  Then there is the building momentum for work on electronic commerce - a medium which, more than any other form of trade, is pointing the way forward towards a world without barriers.  We're running to keep up with the even faster pace of global economic and technological change.

By opening new markets, widening participation in the system, and strengthening the foundation of rules, we can stimulate trade, boost global demand, and help to restore investor confidence to the regions affected.  It is undeniable that the integration of the world economy and the spread of new technologies represent a powerful engine of global growth.  We need to ensure that the multilateral trading system keeps pace with these developments - both reflecting and reinforcing the reality of our globalized and interdependent world.