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19 June 1997

Address to the to the XII meeting of the common market council at the MERCOSUR Heads of State Summit in Asunciˇn, Paraguay.

Attached is the full text of the address delivered today (19 June 1997) by Mr. Renato Ruggiero, Director-General of the World Trade Organization
Let me first thank you for this invitation to address such a distinguished audience. Through your leadership, MERCOSUR has emerged as one of the most dynamic and imaginative initiatives on the world stage today. Surging trade, rising investment, expanding output - every economic indicator points to MERCOSUR's remarkable achievement in just five years.”

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Let me first thank you for this invitation to address such a distinguished audience. Through your leadership, MERCOSUR has emerged as one of the most dynamic and imaginative initiatives on the world stage today. Surging trade, rising investment, expanding output - every economic indicator points to MERCOSUR's remarkable achievement in just five years. But more than this, integration is helping to transform your relations with each other and with the world as a whole - forging a new sense of shared leadership and shared purpose which is sending ripples of hope across the continent and beyond. A powerful idea is at work here - an idea whose success, I believe, is key to managing the opportunities and challenges of the new era we are entering.

The defining event of this new era - and the new century - is globalization. Globalization is about more than the liberalization of trade, capital movements, communications or technology. It is about the gradual convergence of our interests, our goals and aspirations, and our perceptions of the world. What is most remarkable about this period of world politics is the way the great divisions of the last century - so destructive and so fruitless - are slowly fading into history. In their place, we find a new momentum towards a new kind of international order.

Take the divide between North and South. Not only are the lines between these worlds somehow blurring, but developing countries like the members of MERCOSUR are poised to become growth engines of the world economy. A recent OECD study has predicted that per capita output in the developing world could expand by as much as 270 per cent by the year 2020 - compared to growth in the industrialized countries of 80 per cent.

Globalization is also bridging the divide between economies at different levels of development. As telephones, fax machines, and computers weave our world together, they are also levelling the development playing field - giving countries the technological tools they need to accelerate growth and to fast-forward their modernization. Whereas the developed world is the product of over two hundred years of industrialization, billions in the developing world will reach the same level of progress in a generation.

And the ideological debate over the r˘le of the state and market in our economies is also losing its sharpness. Open trade, free markets, and deregulation - these policies are now viewed throughout the world, even if with different emphases, as key to growth and development. A point eloquently made by British Prime Minister Tony Blair when he observed that he belongs to "a new generation that claims education, skills and technology as the instruments of economic prosperity and personal fulfilment, not old battles between state and market economies".

The absence of knowledge or understanding has always been the greatest barrier between people, and nothing is breaking down this invisible wall more rapidly or irreversibly than the globalization of information and ideas.

Latin America has been an indispensable player in these sweeping global changes, and MERCOSUR is in many ways the most striking manifestation of this policy.

What MERCOSUR reflects - and reinforces - is the march of integration in the southern half of this continent. This is a process which will continue to move beyond more intensive trade linkages to encompass converging infrastructures, common production and distribution networks, and an increasingly intricate web of cross-border cooperation. MERCOSUR's trade has grown by an average of 18 per cent a year since 1991 - while trade within MERCOSUR itself has increased by some 28 per cent a year. Foreign investment has risen as dramatically - by an average of 18 per cent a year - reflecting the gravitational pull of a combined market of some 200 million. This in turn has helped contribute to growth rates of 4 per cent a year since 1991 - with a projected rise to almost 5 per cent in 1997 and 1998.

As impressive as your progress has been over the last five years, there is room to go further still. It is encouraging that mechanisms for further liberalization are in place and strict time-tables have been set. Most importantly, the political will and vision to move forward is unambiguous. There is every sign that MERCOSUR will remain one of the most successful and fastest-moving integration processes into the next century.

The main challenge facing MERCOSUR, like all other regional initiatives, is not internal, but external. However ambitious the scope of regionalism, the reality is that we are moving towards an economy of global - not regional - dimensions. In this global economy, companies will need access to world-priced inputs and world-wide markets - access which will increasingly determine where they produce and invest.

MERCOSUR has already proven itself to be a valuable instrument for managing these global opportunities and challenges. Regional integration within MERCOSUR must continue to be an important stepping stone to global integration - sharpening the efficiency and skills of your industries, building on your comparative advantages, and providing a springboard into the world economy. MERCOSUR helps to amplify and harmonize your voice in the global system - a factor which, as your meeting today underlines, will only become more important as we design the rules of the twenty-first century economy.

As we move towards a world of global trade and global competition, the key challenge will be to strengthen the global rules and structures embodied in the multilateral system. More and more MERCOSUR's success will be measured by your ability to help design and build this new economic order - both in terms of your own interests, and in the interests of the global economy as a whole.

I cannot over-emphasize the scope and ambition of the agenda that lies before us in the WTO even if every step forward has to face significant difficulties.

This year alone we have concluded an agreement to liberalize global telecommunications services and to launch free trade in information technology products - initiatives which, in terms of trade coverage, are the equivalent of global trade in agriculture, autos and textiles combined. Moreover the value of these initiatives cannot be measured in trade figures alone. In a global economy driven by information, telecommunications and information technology are two of the essential building blocks. Liberalization in these sectors will provide a necessary foundation for economic growth throughout the developing and developed world, dramatically reducing costs for business and consumers, while at the same time dramatically improving efficiency. It therefore makes a major contribution to blurring the divide between North and South.

The third key initiative this year is financial services - and clearly the successful conclusion of current negotiations in this sector is of the highest priority over the coming months. With the globalization of financial markets, the advent of 24 hour trading, and innovations in financial technology, financial services cannot - and should not - be constrained within borders. The global economy is only as strong as the global financial system which underpins it.

The MERCOSUR countries have made significant steps forward in financial liberalization, and made important commitments under the WTO. Your efforts to liberalize services trade under the MERCOSUR agreement itself are moving forward. I urge you to continue to participate actively in the Geneva negotiations knowing that your countries stand to benefit substantially from an efficient and competitive financial sector.

The WTO's growing r˘le in the global economy is reflected in the movement to widen its coverage as well as to deepen it. Of the 28 countries currently negotiating accession - including China, Russia, Saudi Arabia, the Baltic states, and Vietnam - all are developing countries or economies in transition. This, perhaps more than any other feature of the WTO's future agenda, is a positive referendum on the value of the multilateral trading system. With these countries inside the system - and I have every reason to think they will be - the multilateral system will be truly universal for the first time in its fifty-year history.

"Widening" also means helping those countries still on the margins of the global economy to participate fully in the system and benefit from it. Among the highest priorities for the WTO's programme for this year is a high level conference to combat the marginalization of countries in the global economy. Working together with UNCTAD and the ITC, as well as the World Bank, the UNDP and the International Monetary Fund and other major financing institutions, we aim to establish an integrated strategy to help the poorest countries in the world - a strategy that extends from improving technical cooperation through new technologies, to improving market access and the capacity to make use of it.

Let me conclude with the observation that rule-based global integration will not be a smooth or painless process. The walls between us stood as buffers as well as barriers; and as these walls come down, some will only see our differences and disparities, not our common interests.

Nor can we afford to underestimate the social changes that are following in the wake of the most significant economic transformation since the Industrial Revolution. In Latin America, as elsewhere, open trade and technological change have gone hand-in-hand with massive pressure for adjustment and restructuring, placing strains on employment and social security in all countries, rich and poor alike.

But these challenges are eclipsed by the immense opportunities that globalization offers. Throughout history we have dreamed of a global community of nations based, not on might or domination, but on the rule of law and reason. This is what is at stake in our efforts to complete the creation of an open, universal, rule-based, multilateral trade system. Today this system is within our reach. Once we have agreed to free trade in MERCOSUR, in the Asia-Pacific region, in North America and in Europe, it is difficult to see our ultimate goal as anything other than a single world market - global free trade.

Managing a world of converging economies, peoples and civilizations, each one preserving its own identity and culture, represents the great challenge and the great promise of our age. We are only on the threshold of this new era and the future is still unclear. But if there is one certainty today it is that the universal rule-based multilateral trading system is rapidly becoming a central pillar of the new international order; a key link between North and South - developed and developing - an indispensable foundation for our ever more interdependent world. Assuring social cohesion and addressing questions of distribution is the responsibility of national governments around the world - but the powerful engine of growth that is the multilateral system helps provide them with the resources to do so more effectively.

The alternative would be a world divided into trading blocs, whose relations would be mainly established on power and not laws, influenced by economic and political nationalism. In brief, a world moving towards repeating the well-known tragedies of our history. This is what makes the future of the multilateral trading system such a key political issue.

Next year we have an opportunity to celebrate the 50th anniversary of the multilateral system. This should be an occasion to look back on the unique contribution of this system to the modern age, and to send out a clear message about the opportunities of the global system we have helped to foster. But it should also be an occasion to look towards the future evolution of the WTO and the global economy - an opportunity to start building the next 50 years of prosperity and peace. Each of you - and all of you - in MERCOSUR share in the responsibility for constructing this architecture of the future.