perspective of the multilateral trading system, we now face a dual task of extending the
reach of the system geographically to make it truly global, and of ensuring that it
remains effective in the face of growing complexity in international economic
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
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.
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.
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
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.
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 r˘le in forming the
European Economic Community and the North Atlantic Treaty Organization.
CHALLENGE: OPPORTUNITIES AND
THE MULTILATERAL TRADING SYSTEM
Fourteenth Paul-Henri Spaak Lecture
World Trade Organization
University, 16 October 1995
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.
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.
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
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
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.
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.
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.
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.
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.
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
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.
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.
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.
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.
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.
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.
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.
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.
"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.
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.
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.
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.
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.
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
just some of the preconditions for opening a discussion on whether a useful debate is in
fact possible on these issues.
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.
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.
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.
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.
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-Ó-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
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.
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.
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.
situation changing, and do we need to adjust this generally positive perception? Let me
suggest some considerations.
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.
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
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
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.
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.
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
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
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.