address entitled Implications for Trade in a Borderless World, Mr. Ruggiero
called for open regionalism in which regional groups would eliminate internal
barriers to trade on the same timetable as the lowering of barriers towards non-members.
Each one of the existing and emerging regional groupings has to contribute with
vision and determination to ensure that at the end of the process both regional and
multilateral approaches will have contributed to full liberalization in a free global
market, he said.
On telecoms, Mr. Ruggiero said
that as the WTO negotiations approached the 30 April deadline, the commonality of
interest of industrial and developing countries alike is clear. The issues, he said,
related not to the sovereignty of national telecommunications regimes but rather to
the need for all economies to be open to modern telecommunications in order to
lessen the constraints of space and time on their traders and to widen the access of their
citizens to the most important raw material of the 21st century - information.
agenda for WTO's first Ministerial Conference, to be held on 9-13 December 1996 in
Singapore, Mr. Ruggiero stressed that in reviewing the implementation of the Uruguay Round
Agreements, the grave problems of the least-developed countries should have a
special claim to our attention. He also underlined the need to monitor progress in
addressing the problems of net food-importing countries.
The full text
of Mr. Ruggiero's speech is attached.
Implications for trade in a borderless world
by Renato Ruggiero, Director-General,World Trade Organization
to the World Trade Congress, Singapore, 24 April 1996
give me more pleasure than to speak about the reality of a borderless world, if we were
living in one - but as we all know that is far from the truth. Instead I want to
concentrate on what trade, or rather the World Trade Organization, can do to help bring us
closer to that ultimate goal. In so doing, I will focus on some of the issues which are
likely to confront the WTO's first Ministerial Meeting, due to be held here in Singapore
in December, and on the broader challenges facing the multilateral trading system. Let me
also take this opportunity to commend the Singapore Government and the International
Herald Tribune for their initiative in organizing the present conference, which I am sure
will make a considerable contribution to improving the understanding of those issues and
providing a useful intellectual background of the work of the Ministerial.
Singapore vantage point, the borderless world may, perhaps, seem closer at hand. Few other
economies have embraced the opportunities offered by global economic integration with the
same vision and determination. Singapore's contribution and growing economic strengths are
more and more in those areas where globalization is furthest advanced - services,
high-technology, and intellectual capital of all kinds. However, for other Members of the
WTO - those dependent on agriculture or textiles exports, for example - the borderless
world might appear a more remote goal. It can seem a long way away in African or other
least-developed countries whose immediate problem is to integrate with the trading system
as it is today.
The WTO, with
its membership of 120 countries, has to help shape the economic and trade agenda of the
21st century, while not overlooking the continuing need to find solutions to problems
which have been with us for many years. Its agenda must therefore be a broad and balanced
one in line with the consensus principle on which the WTO works, but it must be a
constantly evolving one.
reality against which the WTO agenda has to be developed is the continuing and unstoppable
momentum of global economic integration. Recent trade data shows that the globalization of
economies is continuing at a rapid pace, making nations, including developing countries
and economies in transition, ever more interdependent. World trade is growing at a rate
that is nearly three times that of growth in world output. In 1995, world merchandise
exports expanded by 8 per cent in volume terms, while the growth of world merchandise
output was 3 per cent.
economic integration is best reflected in Asia. Asian developing countries have become a
major focus of global commercial activity; they are also the fastest growing markets. The
volume of imports into Asia as a whole grew at an annual rate of 10 per cent between 1990
and 1995. In 1995, the imports of the ten leading Asian developing economies amounted to
almost US$750 billion.
growth of 13 per cent in 1995 exceeded the world average for the fourth consecutive year.
1995 was also the fourth consecutive year in which the volume of imports into Asia
expanded more rapidly than Asia's exports.
In the next
five years, the increase in the volume of merchandise imports into the ten leading Asian
developing countries could well be as large as that into the EU and the US combined. More
than a third of the real increase in global imports could go to just these ten markets.
the preparatory process for the Ministerial is now under way. Its first achievement has
been an agreement on the structure of the meeting itself. This will be a flexible and
balanced framework which provides an opportunity both for the broader political statements
that ministers will wish to make and for substantive treatment of issues with the aim of
producing solid results.
the meeting's agenda has just begun, and it has done so in a positive climate. Certainly
there are different priorities and emphasis among the members, but none that seem at this
stage to be irreconcilable.
In my view
this positive climate results at least in part from an evolution in the way issues are
approached in the WTO. This is showing up in two main ways. Firstly, we are seeing that it
is now possible to undertake very important sectoral negotiations without necessarily
having in all cases to construct a wide-ranging cross-sectoral package as we did in
successive GATT Rounds. The necessary elements of give and take can exist within the
sector, as we have found in the recent negotiations on services.
these sectoral negotiations of global significance have confirmed and advanced the
achievement of the Uruguay Round in putting industrial and developing countries on the
same side of the negotiating table. Take the example of financial services: it was clear
that the interest of the industrial countries lay in opening up access to the growing
markets of developing economies. But it was equally clear that the interests lay in the
same direction, since by agreeing on a more open, transparent and predictable structure
for financial services they both maximize their investment appeal and ensure one of the
basic conditions for growth across all economic sectors.
The same is
true in telecoms, where we must reach a success next week. As we near the end of the
negotiation the commonality of interest of industrial and developing countries alike is
clear. It is also clear that what is at stake is not the sovereignty of national
telecommunications regimes; this is a concept which fast and radical changes in technology
are requiring us to rethink. The issues here relate instead to the need for all economies
to be open to modern telecommunications in order to lessen the constraints of space and
time on their traders and to widen the access of their citizens to the most important raw
material of the twenty-first century - information.
financial services and telecoms we are truly trading into the future.
technologies involved are older, I could make much the same points about the continuing
negotiation on maritime services. There, too, the fundamental importance of the sector to
most forms of economic activity in practically every country makes it unthinkable to
are not just true of the services sector. Consider trade and the environment, once
considered dangerously divisive of industrial from developing countries - there, too, we
are seeing an emerging common ground.
This is the
encouraging background against which we are approaching the Ministerial agenda. A basic
structure for discussing it, broadly based on an earlier proposal by Minister Yeo, appears
to be winning a wide level of acceptance. I would like to make a few brief comments on
some of the items on that list.
foremost is implementation. This must not mean just a quantitative stocktaking exercise
but also a renewed political vision and commitment. It must mean in particular how we are
all taking into account the situation of developing and especially least developed
problems of the least developed countries should have a special claim on our attention at
the Ministerial. In the light of the Marrakesh texts we have to see what further specific
actions might be taken to assist them by opening markets, fostering investment and
promoting the enhancement of institutional and human capacities through an ambitious
programme of technical assistance in co-operation with other agencies.
must not forget that we also have an obligation to monitor progress in addressing the
problems of net food-importing developing countries.
Let me now
turn to the so-called new issues. The first thing to point out is that so far there is
only one which is really new - that is the US proposal to take up corruption in the WTO.
It would be hard to deny that this is a concern which is at least worth considering
others, I would like to focus especially on trade and investment.
trade in goods, investment does not imply a relationship which is time-bound. Once the
goods are delivered and paid for the exporter's interest may move elsewhere - but when
investors put money into a country they acquire a stake in its success. Investment
represents a very effective mechanism for diffusing knowledge and expertise, as well as
growth around the world. It is essential in order to release the untapped production
potential of developing and transition economies, while at the same time opening up new
markets for those exports of goods and services which generate the best-paid jobs in
In a world
where budgetary constraints increasingly limit traditional development aid financing,
foreign direct investment is more than ever the key to development. However, significant
imbalances remain in investment flows; only some 35 per cent of all FDI goes to developing
countries. Even this figure paints an overly bright picture, since it hides the fact the
lion's share of FDI goes to only 10 major developing countries.
show the size of the task involved in encouraging investors to spread their confidence
more widely. Clearly this is a shared effort; the countries involved also have to welcome
investment and ensure its basic security in a credible way. It is hard to see how this can
be done effectively or equitably outside the multilateral trading system.
recognize that some members see difficulties - even political problems - in the idea of a
negotiation on investment in the WTO. Their concerns may be understandable, but it is
worth recalling that the existing experience of international agreements on investment
shows that there are always elements of flexibility. There is surely no reason to refuse
to contemplate taking up this vitally important issue in the WTO - and thereby denying the
majority of the world's countries the possibility of taking part directly in shaping
decisions on its future international treatment. This silent majority, I would remind you,
includes those who are most in need of the benefits of investment. Like the other sectors
I have mentioned, the approach to investment in the multilateral system should start from
the premise that these are issues which can and should bring us closer together rather
than divide us.
so-called new issues have been discussed more outside than in Geneva, and I do
not want to go into them in detail.
simply like to note that the issue of trade and competition becomes more significant the
more trade barriers are reduced - we have seen this in practice on recent occasions.
Competition questions have a history in our system - they were taken up in the Havana
Charter, and are now an important element in the telecoms negotiation. Thus, whether or
not we recognize it, competition is making itself part of our agenda. It is just a
question of when and how this becomes explicit.
On a very
different and very complex issue, trade and labour standards, I just want to note that in
the last informal meeting in Geneva, both the EU and US delegations have made the
important statement that any WTO discussion must not have as an objective the enforcement
of core labour standards through trade sanctions, nor put into question the comparative
advantage of low-wage countries.
following Minister Yeo's outline, we come to further liberalization - a topic which brings
home how much remains to be done before we are entitled to speak with conviction of a
If the seven
long years of the Uruguay Round negotiation taught us anything, it is that the existing
barriers in long-established industries like textiles an agriculture are some of the
hardest to reduce, not least because they have built up extensive and powerful political
constituencies over the years. Achieving a world which, if not borderless, at least does
not simply replace one form of trade restriction with another, demands a constant effort.
This effort will need the renewed support of Ministers here in Singapore in December.
consider the points on the Singapore agenda, governments should also have in mind the need
to respond to three major challenges which confront the multilateral system as we approach
the new century.
The first is
to respect and strengthen the fundamental contract that now unites countries at all levels
of economic development. The industrialized world has to keep open its markets and improve
their openness in the years ahead. On their side, the developing countries have to
continue with their liberalizing reforms and increase their integration into the global
system. And together, both industrialized and developing countries have to work to improve
the situation of the least developed.
challenge is to accept the shared responsibility, shared among existing WTO members and
those countries wishing to become members, for constructing a truly universal system which
all the present and future candidates can join in and contribute to.
third challenge is to ensure that national barriers are not just replaced by regional
ones, but that, on the contrary, regionalism and multilateralism converge at the end of
the road. I see this as the main challenge facing the multilateral system at present one
which will shape its future and help shape the world of the 21st century.
system is now moving forward on two tracks - regional and multilateral. Regional trade
initiatives are expanding and have ambitions to expand further. It would be wrong to
assume that the multilateral system is in a period of dormancy. I have given you some
examples of the system's dynamism. Where we are perhaps lacking, however, is in showing a
level of ambition at least equivalent to that of the major regional systems. Let me
explain what I mean.
regional initiatives are truly gigantic, at least in perspective; take for instance the
European project to create a preferential trade area with all the Mediterranean countries
by 2010; or the framework agreement between the EU and MERCOSUR or the plan set out in the
Miami Declaration to create a free trade area of the Americas by 2005; or, finally, APEC's
commitment to create a free trade area in two stages between 2010 and 2020.
multilateral system has no comparable road map towards the elimination of all trade
barriers. However, some of the newer regional groupings (such a APEC and MERCOSUR) contain
a commitment which is very important for the future of the multilateral system: this is
Of course, we
need to be clear about what open regionalism means. Among the different possibilities, I
see two basic alternatives.
The first is
based on the assumption that any preferential area under consideration will be consistent
with the legal requirements of the multilateral system. This would mean that such areas
could at the same time be legally compatible with the WTO's rules and preferential in
their nature, which means they would be an exception to the m.f.n. clause which is the
basic principle of the multilateral system. The possibility of making such a legal
exception to the principle within the rules was conceived in a completely different time
and situation. Today, with the proliferation of regional groupings, the exception could
become the rule, and this would risk changing completely the nature of the system.
interpretation of open regionalism is the one I hear from a number of governments who are
members of APEC or MERCOSUR. In this scenario, the gradual elimination of internal
barriers to trade within a regional grouping will be implemented at more or less the same
rate and on the same timetable as the lowering of barriers towards non-members. This would
mean that regional liberalization would be generally consistent not only with the rues of
the WTO but also - and this is very important - with the m.f.n. principle.
between these alternatives is a critical one; they point to very different outcomes. In
the first case, the point at which we would arrive in no more than 20 to 25 years would be
a division of the trading world into two or three intercontinental preferential areas,
each with its own rules and with free trade inside the area, but with external barriers
still existing among the blocs. Is this the sort of world any of us would want?
I leave you
to imagine the consequences of this vision in terms of economic and political equilibrium;
the problem of those who did not fit into any of the blocs would be a serious one - and
where would China and Russia be in such a world?
alternative, on the other hand, points towards the gradual convergence on the basis of
shared rules and principles of all the major regional groups. Each one of the existing and
emerging regional groupings has to contribute with vision and determination to ensure that
at the end of the process both regional and multilateral approaches will have contributed
to full liberalization in a free global market. At the end, we would have one global free
market with rules and disciplines internationally agreed and applied to all, with the
capacity to invoke the respect of the rights and obligations to which all had freely
subscribed. In such a world there could and must be a place for China, Russia and all the
other candidates to the WTO. The global value of a system based on rules and disciplines
will be a limited one as long as some major player remain outside.
Only a free
global market and a free global trading system can cope with the global challenges of our
time. In the next 20 years the world population will grow by some two billion people.
Already at present we have almost two billion people in Asia, in Latin America, in the
economies in transition and in parts of Africa who are joining the global market economy.
In the face
of facts of this magnitude, it is clear that there is no rational alternative to an
increasingly integrated global market within the rules and disciplines of the multilateral
system. It is not a case of imposing aims or timetables on the system from outside; if we
choose the global option, as I am convinced we must, these will be part of the organic
evolution of the system, and will respond to the logic of global needs.
genuine world free trade area would make a tremendous contribution to promoting growth and
ensuring a safer world in the century to come. This is the message that I hope will be
passed on from this very timely conference by participating governments, business and