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WTO NEWS: 1999 PRESS RELEASES

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19 February 1999

"The New Multilateral Trade Negotiations, the European Union, and its Developing Country Partners: An Agenda for Action"

Attached is the address by WTO Director-General Renato Ruggiero given on 18 February 1999 in Brussels to the REX (Relations économiques extérieures) Committee of the European Parliament.

I want to first thank you for this invitation – all the more so because the subject of today's meeting is so important and so timely. The third Ministerial Meeting later this year will have to take important decisions about a major new round of multilateral trade negotiations – many of the key subjects of which were already agreed to at the end of the Uruguay Round.

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It could not come at a more critical time. The past year has been dominated by the financial crisis – a crisis whose damaging effects have been felt most severely in the developing world. This past year has also seen a dangerous widening of the gap between the transatlantic economies, which have so far been less affected by the crisis, and the rest of the world economy, which has seen its progress towards economic development dramatically set back by financial instability, retreating investment, and falling commodity and industrial prices.

Our increasingly interdependent global economy cannot maintain for long these imbalances. In a world made ever smaller by television, telephones, and the Internet, the idea that billions can sink deeper into poverty, while millions more grow richer, is simply unsustainable - and unconscionable.

What does the developing world want – and need - from the multilateral trading system? First, the full implementation of existing liberalization commitments. This is of course a concern for all WTO Members, but for a number of developing countries in particular it is an issue which influences their attitude to further trade negotiations. These countries have stated that they have encountered unexpected problems with implementing existing Uruguay Round commitments, and furthermore that some of those agreements have deficiencies that have only become apparent during the implementation process. On the other hand, they claim that anticipated benefits have failed to materialize because, for example, industrialized countries have not lived up to the spirit of liberalizing agreements (such as textiles), made excessive use of anti-dumping measures, or failed to respect the principle of special and differential treatment. In short, these countries see an imbalance in the way existing agreements affect them, and they see this as a problem which needs a political solution, not just more technical assistance. They also argue that since this is a question of righting an existing imbalance, it should not become something they are expected to "pay" for in a new Round.

I want to underline the importance of approaching this complex issue with all the necessary attention and good will in our preparations for the next Ministerial Conference. As recent meetings of developing-country leaders, most notably the G-15, have shown, their support for a new Round cannot be assumed as long as they feel that their legitimate concerns are not being adequately addressed. I hope and I am sure, the European Union will continue to take a lead in doing so, as you are helping to do through this meeting.

Second, developing countries need improved market access for their exports. A 1998 joint study by WTO and UNCTAD shows that, even after the successful implementation of the Uruguay Round, a substantial number of high tariffs will remain both for developed and developing countries. About 10 per cent of all Quad country tariffs are still above 12 per cent ad valorem. Moreover, there is a very high variation in these rates, with some tariff peaks reaching 350 per cent or more, and the majority of peaks being somewhere between 12 and 30 per cent. These sectors include textiles and clothing, footwear, leather and travel goods, fish, processed food stuffs, agricultural products – many of which are of primary interest to developing countries. The point is that it would be misleading to assume that tariffs are no longer an issue in trade policy today. And these areas must receive due attention in future negotiations.

Improved market access is an especially important objective for the least developed and the less dynamic developing countries. I have urged WTO members to provide bound duty free access for the export products of least-developed countries since the Lyon summit of 1996. A number of WTO Members have taken steps in this direction; I know the European Union is one of them, and I congratulate you. However, I also want to emphasize that more can – and must – be done. The elimination of all obstacles to trade with least-developed countries by all industrial countries and – with a different timetable – by the most dynamic developing countries, must be a key objective of the next Round.

Third, the importance of new technologies to development. Many of the issues we will face in future negotiations will involve new, technology-based issues like telecommunications, financial services, information technologies, and electronic commerce. Again some have portrayed these as developed country issues. Nothing could be further from the truth. New technologies like computers, cell phones, or the internet help to shrink distances and time, providing an escape route from physical marginalization. They equalize access to the most important resource of the 21st century – knowledge and ideas. They determine whether a country is equipped to participate in the new global economy, or is left behind. Far from seeing technology as a barrier between North and South, we should see it as a bridge – and work to make this bridge a reality.

Fourth, we need to underline the importance of investment and competition policy to development – and the need for flexibility and creativity in considering these issues in order to take full account of developing country needs. On one side there is no doubt that a more level investment playing field is essential for the great majority of developing countries and for practically all least-developed countries. Today the threat to developing countries is not from a flood of foreign investment, but from the lack of it. Net private capital flows to emerging markets plunged in 1998 to $152 billion, down from $260 billion in 1997 and $327 billion in 1996 – although it should be said the most of the decline has been in the flow of short term capital, not long term investment.

We are not just talking about access to productive capital. We are talking about access to developed country markets, access to managerial and marketing techniques, access above all to technology and advanced processes – all of which now flow through cross-border investments and business alliances. The case for considering investment rules in the WTO is a simple and compelling one: The need to create a level global playing field – for developing and developed economies alike – by building a framework of secure, predictable and non-discriminatory rules. Of course, there are sensitive issues as is the case with every key issue. But the role of negotiators is to take account of these sensitivities and to find the appropriate answer.

The case for considering competition rules in the trading system is equally compelling. The idea that developing and least-developed countries have no interest in this subject must be dispelled. In reality, if we want to encourage the development of the private sector in these countries we have to help them to create the regulatory environment that will allow markets to operate – the commercial, competition, and financial laws that must underpin business confidence and investor security. Competition rules have a great role to play in this context for developing and developed countries alike.

Fifth, we need a coherent and integrated strategy for development – particularly for the least developed and the less dynamic developing countries. Trade alone cannot solve all their problems. Very little can be done without an integrated strategy which takes into account the great number of issues these countries face – from health and education, to technical assistance, capacity building and - very importantly - debt relief. This is the area where we are beginning to move - in collaboration with the ITC, the IMF, the World Bank, UNDP, UNCTAD - in the framework of integrated programmes of technical assistance. An ambitious integrated approach to technical assistance and debt relief – together with full market access in the advanced economies - should be a third pillar of a new effort in favour of least-developed countries in the trade field.

But we need much more political will – where your support is critical – and more resources. The budgetary needs for technical cooperation are already of a large magnitude - and will only grow in the future as more least-developed countries join the system, and as the system itself becomes more and more complex. At present, 80 per cent of technical assistance is paid by voluntary contributions of a very small number of very generous countries – who are not themselves among the biggest trading partners. This dependence on ad hoc grants makes it extremely difficult to effectively plan for technical cooperation activities. It is also basically unfair. How can we be credible in our commitment to the least-developed countries if we can't find even a minimum of resources in the budget of the organization?

This is the case with two very important initiatives which have been made possible because of the generous contribution of the Commission. As a follow up to a proposal made by Sir Leon and by President Clinton earlier this year, the WTO is now hosting a High Level Symposium on Trade and the Environment on 15-16 March, followed by a High Level Symposium on Trade and Development on 17-18 March. These two meetings, which will take place at the WTO's headquarters in Geneva, represent a very important initiative for the multilateral trading system because they bring together - for the first time – capital-based senior officials, intergovernmental organizations, NGOs, the business community, trade unions, consumer, development, and agricultural representatives, and members of the academic world.

It is a unique opportunity to encourage a high-level dialogue and an open exchange of ideas about the complex issues involved, and about the responsibilities of the trading system. It also provides an important stepping stone to the WTO's third Ministerial Conference in November this year. And these two initiatives are further evidence of the high degree of transparency and democracy in our system – one which is rules-based, and whose decisions are taken by consensus and ratified by every national government.

Last but not least we need to strengthen the multilateral trading system by ensuring that developing countries have an equal responsibility for the system. Trade is now even more critical to the economic future of the developing countries than the industrialized countries. In 1970, trade as expressed as a share of developing-country GDP was slightly less that 20 per cent. Today it is 38 per cent – compared to less than 15 per cent for the EU, and 11 per cent for the United States. Between 1973 and 1997 the developing countries' share of manufactured imports in developed markets tripled – from 7.5 per cent to 23 per cent. What these figures reflect is the developing world's truly remarkable integration into the global economy over the past three decades. But what they also underline is the fact that there will be no sustained economic recovery in the developing world, without a sustained recovery of their global trade.

It is in this context of uncertainties and increasing imbalances - together with the certainty of interdependence and of unprecedented opportunities - that we are facing the challenge of a new Round. We are now at the end of the first phase of the preparations for the Ministerial Meeting which has essentially been one of issue clarification. The second phase, from February to July, will centre on specific proposals from WTO Members. This process has the challenging task of preparing recommendations to Ministers about the work programme that will take the WTO into the new millennium. We are already committed to negotiations in important areas such as services, agriculture, and aspects of intellectual property. And there is now a growing consensus in favour of a substantial and ambitious multilateral Round, though it should be said that not all countries – especially not all developing countries - are guided by the same vision.

Against this background, I want to make first a general but very important observation. If we want – as we do want – the new multilateral negotiations to be really multilateral, really global, and very much centred on bringing the developing and the least-developed countries more and more into the mainstream of the multilateral trading system, then the world's main trading powers have some very clear responsibilities. The first is to decrease tensions among themselves. These tensions can paralyse the normal work of the WTO, and they must be avoided.

Second, agriculture cannot again be allowed to become the predominant issue of the new Round. And we cannot give the impression that success or failure depends only on the possibility of agreement among the major trading partners on agricultural issues. By focussing too much on traditional issues, we risk overlooking how much the world economy has changed since the Uruguay Round and how important the new issues have become to developing and developed countries alike. I would like to point out that in a new Round we will have to put more emphasis on the factors that will dominate economic development and the global economy in the twenty-first century - especially new technologies and services.

Third, it is absolutely vital that the WTO's negotiating agenda should be a balanced one, and should be seen to be so from a developing country perspective. Clearly the active participation of developing countries will be essential to the launching and success of such a Round. Developing and least developed countries now make up almost four fifths of the WTO's membership. Politically this system will not be able to move ahead confidently through its next Ministerial Conference and into the next century without these countries sharing in the belief that new negotiations are warranted and in their economic interests. Though their trade interests are not homogenous, I hope that everything I have said today shows how important they all are in terms of development and the process of our interdependent world.

When we look at the figures showing how much the developing world's output is now tied to trade, it is very difficult to ignore the degree of our integration and our interdependence. With so much of our economies dependent on one another, no country has an interest in closing off markets or weakening its ties with the rest of the world. For the advanced economies, like the EU, resisting protectionism should remain an uncompromising objective. The challenge today is to improve the governance of interdependence. And to increase its human and development dimension, not to refuse it.

Let me conclude with this observation. At the present moment we face an upsurge of criticism of globalization. More and more the call for a "human face" in this process is widening. More and more, public opinion would like to include in the management of the global economy subjects which go beyond the traditional parameters of finance and trade. I believe that the high degree of interdependence we have reached, which will increase in the next few years, lends a powerful weight to this view – a new vision which embraces not only capital movements and trade liberalization, not jut labour standards, but also social safety nets, environmental, health, education – especially the role of new technologies – poverty elimination, cultural diversity, and the reduction of inequalities as subjects which must be embraced in an improved concept of global economic management.

The next multilateral trade round has to reflect a growing awareness of the inter-linkages among all these issues; not to pretend that the trading system has to find an answer to each and every one of them, but to ensure that at the highest level they will be brought within an inclusive global architecture.