SEE ALSO:
press releases
WTO news
Mike Moore's speeches
Renato Ruggiero's speeches, 1995-99

In a thought-provoking address, Mr Ruggiero sketched out the most pressing aspects of the current and foreseeable agenda confronting the multilateral trading system, emphasizing that the WTO must accommodate a wider range of interests as it becomes a more inclusive and encompassing institution.

A key objective was to bring China, Russia and other economies in transition into the multilateral trading system on terms which contribute to their own reform process but which were fully supportive of the integrity of the system. Many developing countries had "chipped away the old North-South divide" and "put faith in the WTO trading system for continuity, stability and the promise of trade opportunities" by shifting towards liberal trade policies and a greater reliance on international competition to generate income and growth. But for low-income developing countries which were clearly not sharing in increased global prosperity, the WTO carried a shared responsibility. For its part, the WTO must ensure that these countries were able to diversify their export production and expand their export markets on a competitive basis.

Mr Ruggiero stressed that the landmark creation of the WTO needed nurturing into a robust system, continually in evolution just like the world economy it underpins. Its credibility rested on the member governments' full compliance with the rules, disciplines and market-opening commitments resulting from the Uruguay Round and the successful execution of the built-in mandate to conduct further negotiations, particularly in the area of trade in services.

Mr Ruggiero went further by outlining the possible new agenda of issues thrown up by the wider geopolitical process of global economic integration - issues such as trade and environment, trade

and social standards, reciprocity and the MFN principle, growth of regionalism and the multilateral trading system, and investment and competition policy. "The challenges facing the multilateral trading system," said Mr Ruggiero, "are about much more than trade issues as they used to be defined. The confluence of political and economic events of the last few years places us on the threshold of an historic opportunity of establishing a truly global system for the effective conduct of international economic relations."

The full text of Mr Ruggiero's speech is attached.

Note to editors:

Paul-Henri Spaak (1899-1972) was Belgium's foremost statesman in the decades following World War II and a leading advocate of European cooperation. He played a major rôle in forming the European Economic Community and the North Atlantic Treaty Organization.

THE GLOBAL CHALLENGE: OPPORTUNITIES AND

CHOICES IN THE MULTILATERAL TRADING SYSTEM

The Fourteenth Paul-Henri Spaak Lecture

Renato Ruggiero

Director-General, World Trade Organization

Harvard University, 16 October 1995

I am delighted to be here today to deliver the 14th Paul-Henri Spaak Lecture, and to honour the memory of a great European visionary and statesman. Spaak devoted his life to the cause of international cooperation, making his greatest contribution at a time when leaders the world over sought to redefine the global order, following the most generalized armed conflict in human history. It is entirely consistent that Paul-Henri Spaak was both a committed pan-European and an Atlanticist - these were interlocking pieces of the same jigsaw. In just the same way today, in our extraordinarily interdependent world, I do not think we can talk of international cooperation without taking a global view. It is for this reason that I should like to focus upon international cooperation in the broadest sense, and I am sure you will not be surprised that my emphasis will be upon the fundamental importance of the multilateral trading system to international growth and stability. I want to give you the sense of a system which is continually in evolution, just like the world economy it underpins. Let me start where Spaak started, in the struggle to rebuild a better world after 1945. I hope to show you as we move on, that the challenges and the opportunities we face today are somewhat comparable to those which confronted the founding fathers of our system. Their vision is something we need urgently to recapture. With the lessons of destructive nationalism and inward-looking economic policy fresh in the mind, post-war international trade arrangements were designed to draw all nations into a mutual economic interdependence which would help safeguard peace and security. Trade was to play a central role in cementing relations among nations, in underwriting international harmony. From its largely American-inspired beginnings and trans-Atlantic orientation, the GATT trading system has made a vital contribution to peace and prosperity over the last half century, on an ever-expanding global stage.

The foundations of the system were rooted strongly in the principle of non-discrimination and emphasised a solid rule-based contractual relationship among members. These two elements were the source of GATT's success. It is a success which is reflected in a 13-fold increase in international trade since 1950. More and more, economic opportunities rely on international exchange. In the United States, for example, exports amounted to only five per cent of national income in 1960; by the early 1990s, the share of exports in GDP had more than doubled. Unfortunately, we lack good statistics on international services trade, but we do know that trade in services is expanding even faster than trade in goods, and now represents some 20 per cent of international trade flows.

As trade grows in importance, so does its contribution to the creation and the maintenance of jobs. In the United States alone, over 7 million jobs are supported by merchandise exports. Around one-third of all jobs created in the United States over the last 10 years or so are due to increased merchandise exports, and practically all new manufacturing jobs emanate from export activity. If we had figures for services, these numbers would be even more impressive.

Furthermore, international investment flows have also grown dramatically in the last few years. Foreign direct investment inflows to all countries averaged US$50 billion per year during the first half of the 1980s, and have risen to US$194 billion by 1993. There was a time when international business tended to see trade and investment as alternative means of securing access to foreign markets. Today, firms need to be able both to invest and to trade on a global scale - and for this they depend upon open, predictable trade and investment regimes.

The GATT presided over eight rounds of multilateral trade negotiations. In doing so, it gradually eroded tariffs, bringing them down to an average of less than 4 per cent today, one-tenth of what they were in the immediate post-war period. As tariffs have been reduced, other trade-restricting measures have become more obvious. In later rounds of GATT negotiations, emphasis shifted towards non-tariff trade barriers, generating an increasingly comprehensive and complex set of rights and obligations. At the same time, negotiators have ventured into new areas of policy, outside those relating purely to trade in goods, thus seeking to ensure that the system is equal to the task of managing international economic relations in today's world.

The recently completed Uruguay Round is the clearest example of how our agenda has expanded to keep up with the times. The Uruguay Round transformed the GATT into the World Trade Organization, putting the trading system on coherent and solid institutional footing. A new, integrated dispute settlement procedure was created to guarantee quick, objective and neutral adjudication when trade disputes arise between governments. The Round also made significant progress in sectors where protectionist policies have been most resilient, notably in agriculture and textiles and stronger disciplines were established on subsidies, state trading, technical standards and licensing procedures, to name a few. The Uruguay Round was the first to address trade in services and intellectual property rights protection. This continuing commitment to trade liberalization and enhanced competition is a key contribution of far-sighted governments to globalized economic activity.

Globalization, by which I mean a multiplicity of interlocking economic relationships among national economies, is a natural outgrowth of technological advances in communications and transport. It has also been encouraged by the favourable environment which the rules and the market access commitments of the multilateral system provide. Thus, supportive government policy and modern technology have induced businesses and entrepreneurs to operate - as most of them naturally wish - across frontiers in a manner that would have been very difficult twenty or thirty years ago. The evidence of global integration is clear in the way trade growth has outstripped production growth year after year - each 10 per cent increase in world production has been associated with a 16 per cent increase in world trade. This trend is accelerating; last year's increase in world trade was nearly triple the growth in world production. This rising ratio of world trade to world output not only shows the growing interdependence among nations. By drawing attention to the fact that international trade has consistently shown greater dynamism than production throughout the post-war period, it also highlights the central role of international trade in post-war economic growth.

There are those who would like to put the clock back, to wish away the mutual dependence of nations. But no-one can stop the course of history. Interdependence has made a huge contribution to rising incomes and peace among nations, and it is here to stay - and grow. The challenge that we face is how to make it work for all nations and work better.

This is a formidable challenge, it is true. But recent events also have presented us with an historical opportunity, a chance to define something different and durable in international relations. The long-standing and predictable political assumptions of the Cold War have become irrelevant. North-South relations, dominated so often in the past by unnecessary polarization and a dialogue of the deaf, have also changed irrevocably. While the collapse of communism was vividly symbolized by the tumbling of the Berlin Wall, no such image drew attention to the changes that have taken place in relations among developed and developing nations. Yet these changes will prove just as momentous.

II

From the perspective of the multilateral trading system, then, what does all this mean? We face a dual task. We must extend the reach of the system geographically to make it truly global, and we must also ensure that it remains effective in the face of growing complexity in international economic relations. You will all be aware of the continuing debate within the European Union about choices between geographical broadening of the Union and the deepening of its substantive provisions. This is a politically charged debate because broadening and deepening are often seen as competing alternatives. But for the multilateral trading system, these are not alternatives. Precisely because the WTO aspires to be a truly global and commercially-relevant entity, we must press ahead simultaneously on both fronts.

As far as geographical extension is concerned, we face a number of challenges. First, the dozen or more states created by the collapse of the Soviet Union have sought, or soon will be seeking, WTO membership. Russia's accession process is underway, as are those of several other Former Soviet Union countries, including the Baltic States, Ukraine and Armenia. Work on China's relationship with GATT has been underway for some ten years now. Bringing China, Russia and other economies in transition into the WTO as full participants is a key objective for the coming months and years.

In the old days, centrally-planned economies such as Poland, Romania and Hungary were allowed to join the GATT in the absence of any serious economic reform effort. Special accession protocols were drawn up. These protocols recognized that trading opportunities would not be created by market forces, so they were based on import expansion commitments while allowing discriminatory trading arrangements to persist. But the political expediency and limited economic relevance of those arrangements have no place in the WTO today. The transition economies are engaged in dramatic and difficult economic transformations towards a market-based system. The terms on which they accede to the WTO must contribute to the reform process, and must be realistic. But the sheer size and economic power that some of these countries represent also makes it important to ensure that accession terms are fully supportive of the integrity of the WTO trading system. The coherence of the system must not be sacrificed in pursuit of universality - even if universality is the ultimate goal; because a global trading system which excludes a significant proportion of the world's people is a contradiction in terms.

The other geopolitical revolution in the trading system is the leap in developing countries' participation. Over the last decade or so, dozens of developing countries have shifted towards liberal trade policies and greater reliance on international competition to generate income and growth. More than 70 developing countries have undertaken unilateral liberalization measures during the last ten years. That process has chipped away the old North-South divide. Many countries at quite different levels of income and development have put their faith in the WTO trading system for continuity, stability, and the promise of trade opportunities. This does not mean that the interests and priorities of countries are identical. While part of the WTO's job is to define commonality of interest where possible, and foster joint action, countries cannot be coerced; they must be brought along through a recognition of their own interest. Hence, as the WTO becomes a more inclusive and encompassing institution, it must accommodate a wider range of interests. This might be more difficult than in an older and simpler world dominated by a few like-minded countries; but we have to succeed, and success will be at least as rewarding.

However, as I have said, different developing-country WTO members have different interests. While many countries continue to grow and modernize, generating enough wealth to make their people progressively better off, some low-income developing countries are clearly not sharing in increased global prosperity. No society can participate effectively in the opportunities of a global market if many of its citizens lack the basic necessities of life. We carry a shared responsibility to provide the conditions for such countries to get themselves off the floor. As far as the trading system is concerned, we must do our utmost to see that low-income developing countries are able both to diversify their export production and expand their export markets on a competitive basis. At the WTO, we are developing a special programme for Africa, in particular, which aims to help governments take better advantage of international trade and foreign investment opportunities. This is a modest effort, and more must be done, especially in collaboration with other multilateral economic institutions.

III

So much for the task we face in making the WTO trading system truly universal in a geographic sense. What about the deepening of the system? By pressing on with liberalization, by successfully providing a way forward in areas of trade where protectionism had long proved intractable, and by boldly addressing entirely new but very important aspects of trade, the Uruguay Round made a signal contribution to international trade relations. It was a landmark achievement to create the WTO. But following any birth, the offspring must be nurtured. I see three major challenges facing our new institution in the years ahead. The first is to consolidate what we have done. The second is to give substance to our built-in negotiating agenda, which essentially constitutes unfinished business emanating from the Round. The third is to meet the new challenges already gathering on the horizon. Allow me to say a little about each of these.

First, consolidation, or implementation. The sheer range of subjects that were covered in the Uruguay Round is daunting for even the hardiest trade hands. The texts of the results comprise no less than 19 Agreements, 24 Decisions, eight Understandings, and three Declarations. Some of these texts are obviously more important than others, but together they represent nearly 500 pages of carefully crafted language, replete with commitments. (Perhaps I should not mention the other 24,000 pages of specific market access commitments.) For some countries, a number of these commitments will coincide with existing policies. In other instances, they call for change. A concerted effort is required by all WTO members to consolidate the Uruguay Round results, and ensure full compliance. It is an open question whether phase-in arrangements for some of these commitments should be speeded up. For my own part, I cannot see why the benefits of liberalization in any country should be delayed one day longer than absolutely necessary. Even as they are, the commitments require steady, continuing work in national capitals and in the WTO on a day-to-day basis. It is activity which seldom catches the headlines, but it is essential to the proper functioning of the system.

However, our biggest, short-term, priority is to make sure the new dispute settlement system works in a legally and politically credible manner. When difficulties and disagreements arise, the WTO's consultation, conciliation and dispute settlement provisions can be called into action. A willingness to abide by the dispute settlement procedures and findings, is just as important as respecting the rules. With just nine months of experience under our belts, I think we can be encouraged already by the operation of the new system. First, governments are making use of it in a manner which demonstrates considerable faith in the WTO. Around 20 cases have come to the Dispute Settlement Body - a number far greater than in any single year of the GATT's 47-year existence. Second, the rapid automatic procedure together with the knowledge that at its conclusion the system is enforceable seems to be concentrating minds and encouraging quick settlements through the initial consultative process - the recent US-Japan dispute on cars and spare parts is one of these cases. And that is the objective - to resolve trade disputes quickly, not, primarily, to generate jurisprudence. Of course, many disputes will run their full course, and I have no doubt that we will be able to produce objective, clear, well-argued judgements which will command the confidence of governments and legislators everywhere. Nobody need have any fear of arbitrary conclusions or a lack of neutrality on the part of WTO dispute panels or the new Appellate Body.

For all countries, new and detailed obligations have been created to notify policies and measures, so that trading partners can be confident that they have full knowledge of each others' policies. Transparency is an essential ingredient for fostering mutual trust and encouraging respect for the rules. Indeed, one of the results of the Uruguay Round was the creation of a trade policy review mechanism, whereby the trade policies of individual WTO members are examined multilaterally by turn, and in depth. These examinations provide an opportunity for countries to hold frank and non-litigious exchanges of view about each others' policies. They are a valuable contribution to transparency, and help to raise awareness among trading partners of policy issues.

In previous multilateral trade negotiations, unfinished business tended to reflect failure to agree on quite fundamental issues, such as whether to do anything about agriculture, or textiles, or whether to redesign the rules on safeguard measures. This was hardly the case in the Uruguay Round. However, by the end of negotiations in 1993, it was clear that extra time would be needed in a few key sectors. This is clearest in the field of services, where we have already held post-Uruguay Round negotiations on trade in financial services and the movement of natural persons, and are in the midst of negotiations on the opening up of basic telecommunications and maritime transport services. We certainly did not achieve everything we would have liked in the financial services and natural persons negotiations, but we made progress. In financial services, in particular, some thirty countries undertook valuable, additional market-opening commitments.

The negotiations on basic telecommunications are to be completed by the end of April next year. They will open up significant new trade and investment opportunities. The negotiations coincide with industry trends towards liberalization, attributable both to pressure from user industries and rapid technological development. But there is nonetheless resistance to the eradication of monopoly supply arrangements in many countries, and concerted multilateral action offers the best hope of securing far-reaching results. Success in these negotiations will mean that telecom operators should be able to offer a broad spectrum of competitively priced services, in both national and international markets. The United States is in the vanguard of this negotiation, with one of the most liberal and low-cost telecommunications markets in the world. This is why its commitment to a genuine multilateral result is of vital importance. We need a strong result from the WTO negotiations if we are to make the vision of the Global Information Society a reality - with all that it will mean for revitalizing economies, transforming our societies, and empowering people.

The negotiations on maritime transport services, on the other hand, deal with one of the most ancient means of exchange among peoples, one which retains its fundamental importance for the flow of merchandise trade. The prodigious improvements in shipping technology over recent years need to be matched by improvements in the policy environment in which these ships sail. This also is a negotiation where there are some firmly held positions, and it is essential that we keep on recalling that it is every bit as valid and important as the negotiations in other areas.

Another part of the Uruguay Round's unfinished business is the built-in agenda for future work. This comprises several elements. WTO members have already established a mandate to enter into successive round of negotiations in trade in services, with a view to achieving progressively higher levels of liberalization. The first such negotiation must begin within five years. Similarly, in agriculture members are committed to engage in negotiations aimed at further reductions in agricultural support and protection. The time frame envisaged is the same as that for services. These commitments and a number of others in the WTO Agreement clearly reflect recognition of the need for continual, incremental trade liberalization - a virtuous circle of global cooperative efforts that is the basis of an effective multilateral system.

Then there is the so-called "new agenda" - those issues which, as the process of global economic integration continues, suggest themselves naturally as likely subjects for the WTO Work Programme of the future.

One "new" issue that is already in the WTO work programme is the relationship between trade and the environment. At the heart of the matter is how we relate the rules-based multilateral trade system, continued trade liberalization and further development of the global economy to environmental concerns and objectives. It is possible to envisage circumstances in which trade, unsupported by sound environmental policy, could involve damage to the environment - or, on the contrary, in which environmental regulations could harm legitimate trade. In such circumstances, however, careful judgement is necessary in weighing whether it is trade policy or environmental policy which must be adjusted. It is also not difficult to see how ill-considered international environmental agreements could needlessly frustrate trade and reduce incomes - and even put at risk environmental reform and improvement. At the same time, it is just as important to recognize the circumstances in which, by encouraging efficiency and a better allocation of scarce resources, trade liberalization may be supportive of an improved environment. I am optimistic that our current work on the subject in the WTO will contribute to a better understanding of the issues, and assist governments in developing more coherent policies in this area.

Trade and investment is a leading candidate for the new agenda, since one of the consequences of globalization is to lessen the distinctions among different forms of market access. In the GATT framework, we used to think of market access simply in terms of tariffs and non-tariff measures. Reducing tariffs and eliminating other trade barriers at the frontier was the recipe for liberalization. Foreign investment was an altogether different matter. Indeed, countries often used to regard tariffs and other trade barriers as convenient mechanisms for inducing foreign investment. Protection of the domestic market offered attractive profits to foreign investors. This was the essence of the import substitution development strategy - a strategy that in large measure failed and has now been discredited. In today's world of international business, trade and investment are increasingly viewed as complements, not substitutes. Different parts of internationally-based businesses can be located in several different countries. Increasingly, businesses trade to invest, and invest to trade. The WTO cannot afford to concern itself only with the trade side of the equation - that would be to deny the reality of modern global business practices.

It is no coincidence that foreign direct investment flows worldwide quadrupled, to almost US$200 billion per annum, in the ten years to 1993. Indeed, the importance of investment was recognized in the General Agreement on Trade in Services negotiated in the Uruguay Round, where investment, or commercial presence, was one of the four modes of service supply in respect of which WTO members undertook market access commitments. But I think we need a broader, or more horizontal approach to international investment rules. Such rules would build on the WTO principles of non-discrimination and national treatment, and create a policy environment to encourage and safeguard foreign investment, whether in goods or services. The OECD has already started work in this direction, but I believe governments will increasingly recognize the need for work on investment in a more global setting as well. Especially so since developing countries are not only the target of a growing proportion of international investment but are themselves becoming important overseas investors. I should note that the Uruguay Round Agreement on Trade-Related Investment Measures calls for an examination by members within five years of the case for developing provisions on investment policy.

That same mandate refers to competition policy, which we will also have to examine as a possible candidate for further work. Of course, what we have done in the GATT and the WTO over 50 years in promoting a liberal trading environment is precisely the enhancement of competition. But if we have succeeded in getting the rules of competition between countries to work effectively, that very success requires us to go further and consider how the behaviour of companies can serve to distort international competition. We will need to see whether there are any areas where explicit competition rules, or specific understandings, are necessary internationally to complement the statutes that many governments already have on their books. I have no doubt that competition rules are essential to the proper functioning of markets - what we need to clarify, however, is how best to promote such disciplines, both nationally and internationally.

Some WTO members would like to see the new agenda include the subject of trade and social standards. This is a highly controversial issue, and in the absence of a consensus there is no possibility that it could be brought into the agenda of the WTO.

It is clear that what we need first and foremost is a comprehensive effort to bring some clarity to the many complex issues that are involved here.

The first issue to be clarified is the nature of the subject; are we talking about the comparative advantage of developing countries which comes from lower wage levels - as the issue is sometimes presented - or are we talking about human rights or labour standards? It is fundamentally important to clarify the terms of the debate as it relates to trade.

The second point is to identify what are the key issues related to trade; for example, are we talking about child labour or trade union rights in terms of labour standards or in terms of human rights?

These are just some of the preconditions for opening a discussion on whether a useful debate is in fact possible on these issues.

Fortunately, we are not starting from zero. The debate on this issue started in fact at the Versailles peace conference and some of the principles involved have been reflected in Article XX of the GATT from its beginning. In the UN, in the OECD, in the ILO and in national administrations, the debate has made valuable progress and has even produced some practical measures. I would like to refer especially to the most recent work of the ILO, in order to identify some principles that could be important for any discussion in the WTO. These principles have been presented as "shared values" without any dissent from the ILO's membership.

One of these principles is that economic and social growth and development are to a large extent interdependent. When the economic situation is poor, the social situation is also likely to be poor. And correspondingly, where there is economic growth, social development is more likely to come too.

While no-one should challenge the legitimate right of developing countries to use the comparative advantage of lower costs, and no-one should use human rights and issues of social standards as an excuse for disguised protectionism, no country should deliberately deny workers' rights or attempt to generate artificially-lower costs by forced labour, discrimination against women, exploitation of children or other such abuses.

We should on no account allow this debate to re-open a North-South divide. Dialogue is the best approach to finding ways to improve the observance of labour standards.

Finally, the ILO has recognised the necessity of improving its means of acting on these issues.

I wanted to underline these points presented by the chairperson of the ILO's Working Party on the Social Dimensions of the Liberalization of International Trade earlier this year because I think that on the basis of these shared values there is the possibility of establishing the starting point for a discussion of the issue. I also believe that in order to convince developing countries that no protectionist considerations are involved in the debate, it is essential to prove that all possible measures other than trade sanctions are being taken to alleviate the problems. One excellent example is the Memorandum of Understanding on the elimination of child labour from the garments industry in Bangladesh that was signed in July of this year by the industry, the ILO and UNICEF, with support from the Bangladesh and US Governments. This joint approach combines restrictions on child labour with the improvement of educational opportunities for the children involved. This is a targeted and constructive approach to a specific problem, and as such I believe it offers a useful model for future efforts. On the other hand, to simply restrict imports of garments from the industries concerned would in all likelihood have just worsened the situation of these children.

Let me sum up my thinking on this issue by repeating the need that I see for a wide-ranging and comprehensive consideration of the issues; only in this way will it be possible to generate the necessary confidence to build consensus for a discussion on whether, and how, they relate to trade.

IV

Last but not least, I should like to say a few words about two related subjects - reciprocity and the growth of regionalism in international trade relations.

There are from time to time calls for trade policies based on reciprocity instead of the basic MFN principle. These are based on the assumption that the degree of liberalization already reached by certain countries does not give them any real defence in a multilateral negotiation vis-à-vis those countries whose liberalization process is much less advanced. Advocates of reciprocity argue that such countries have no real incentive to deeper liberalization, given their benefits from the MFN system.

I would like to make a couple of points on this question. The first is that to present reciprocity as an alternative to MFN is a major departure from the trading system we have built up over 50 years, and it is just the opposite of what the founding fathers of the multilateral system envisaged.

Secondly, I can understand that a nation or regional group which believes itself to be an open market has the right to fight hard to obtain from all its partners the greatest possible degree of liberalization. If this argument is used tactically and temporarily as a negotiating device, there is less need for alarm over its implications for the system as a whole. But if it becomes a permanent instrument of policy, then the risk for the multilateral system could become serious.

Trade is technical in its substance but highly political in its consequences. Reciprocity as a structural alternative to the multilateral system equals bilateralism; bilateralism equals discrimination; and trade relations based on power rather than rules are the result. This would be a very dangerous departure from the success story of the multilateral system.

The growth of regionalism is a more complex issue. There is no natural contradiction between regionalism and the multilateral system. This has been the shared assessment of the great majority of the international trade community. The real contradiction, it must always be emphasised, is between open trade and protectionism. Regional trade initiatives can certainly help to lower trade barriers and thus promote economic growth. But the relationship between regionalism and a multilateral system based on the MFN principle is nonetheless a complex one. The provisions of the GATT have sought to ensure compatibility by requiring regional agreements to cover substantially all trade among the partners and to promote trade policies which do not lead to higher protection or extra restrictions on the trade of non-members. In practice, however, it has been almost impossible to assess the consistency of regional agreements with the multilateral system under these provisions. Since the creation of the GATT nearly 50 years ago, 108 regional agreements have been notified. Eighty existing agreements have so far been examined, and only six have been found consistent with the rules I mentioned above (the EU is not one of them). In recent times 20 new regional agreements have been notified, and are waiting to be examined in the WTO. It will come as no surprise that inconclusive results are likely here as well. Clearly there is a need to improve the rules and the procedures under which the WTO's members can assess this crucial relationship. But it is also clear that the legal issues are only part of the story.

The relation between regional and multilateral liberalization in practice has been a different and generally more positive story. For example, successive enlargements of the European Union have been followed by multilateral trade negotiations, which have maintained a de facto link between progress at the regional level and at the multilateral level. These links are the reason why most people have seen regional agreements as building blocks for multilateral free trade.

Is the situation changing, and do we need to adjust this generally positive perception? Let me suggest some considerations.

Until quite recently, there was only one large regional grouping, and that was limited to a number of western European countries. The US was historically opposed to regionalism. But this situation has changed. Since the 1980s, the US has begun to build its own regional agreements, through free trade with Canada, through NAFTA, and through APEC, etc. Now, almost all the member countries of the WTO also belong to a regional trade agreement. The importance of regional agreements as a means of tariff reduction has declined (this is also thanks to the success of the GATT). Regional agreements are becoming more and more important in terms of trade rules, and for the political weight they represent in international negotiations. These are elements which could break up the parallelism between regional and multilateral progress; there is the risk that antagonism between regional groups could make progress in the multilateral system more difficult.

Furthermore, regional initiatives such as the suggestions for a trans-Atlantic free trade area could give the impression of re-erecting a discriminatory divide between the rich North and the poorer South.

The conclusion I draw is that we must be very attentive to strengthening the linkage which has existed up to now between regional and multilateral progress. What this means in practical terms is that regional liberalization initiatives must proceed almost in tandem with multilateral ones. What countries are willing to do regionally, they must then be willing to do multilaterally, so as to keep this parallelism between regional and multilateral commitments.

At the core of this relationship, there is the basic question of the kind of international system we want: a global system based on the principle of non-discrimination embodied in agreed and enforceable rules, or a world divided into regional blocs with all the consequences this would imply for political stability and security.

V

To sum up, it is clear that the challenges facing the multilateral trading system are about much more than trade matters as they used to be defined. I know that for some people - and for some countries too - the pace of change is unsettling and even alarming. Whether in the challenges that the information revolution presents to anyone over 30, or in the pace of economic globalization, there is an understandable reflex which asks the world to slow down a little. However, we know it will not.

If we decrease our imports from the developing countries, we decrease their growth and our growth alike. And the growth of many developing countries will be the most powerful engine for growth in developed countries.

At the same time, if we reduce export opportunities for developing countries we only increase unemployment and poverty in these countries, and further restrict opportunities for their young people.

And if we try to close our borders both to goods and to people we will just increase instability, violence, war and terrorism. So the only sustainable policy for us and for the developing countries is to continue a strong commitment to openness.

That is why we need to keep the multilateral system, with its reliable framework of principles and rules in good repair; it is a firm foothold in a shifting world. Liberalization within the multilateral system means that this unstoppable process can be implemented within internationally agreed rules and disciplines. This is the opposite of a chaotic and unchecked process - without the security of the multilateral system, change would indeed be a leap in the dark.

At the same time, the multilateral system is becoming more and more a political issue. This is happening because its evolution increasingly concerns national regulatory policies more than cross-border obstacles; and it is happening because the challenges to the system are increasingly political rather than technical. In this context, it could become very important to consider the possibility of strengthening the institutional basis of the system - for example by enhancing the political dimension of its central institution, the WTO.

It is my profound conviction that the confluence of political and economic events of the last few years places us on the threshold of an unusual historic opportunity: that of establishing a truly global system for the conduct of international economic relations, a system that responds readily to change and to changing needs, and one for which every nation will wish to claim ownership. Let us rise to this challenge, just as Spaak and the other builders of the postwar world did to theirs. Their achievements have shaped our present, and they should inspire our future.