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28 September 1999

"Challenges for the global trading system in the new millennium"

Following is a speech delivered today (28 September) by Mike Moore, Director-General of the World Trade Organization, to the Council on Foreign Relations in Washington, D.C.

I can think of nowhere more fitting than this venue to make my first public statement in the United States as Director General of the World Trade Organization. Indeed, it is a great honour for me to have this opportunity to speak before the Council on Foreign Relations - a body that for more than three-quarters of a century has done so much to advance international cooperation and understanding, and to keep the United States engaged in the world.

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On the eve of the next millennium, we face fascinating challenges. They are challenges shared by a more closely-knit community of nations than has existed at any time in human history. We are bound together in a proximity driven by a growing consensus in favour of openness, an openness underpinned by liberal democratic values, and by the powerful forces of new and rapidly evolving technologies. The United States is central to this story of interdependence. We face imminent danger to peace, security and development when America doesn't engage. It's hard sometimes to be American, because you are asked to lead and then accused of bullying when you do. But we need your leadership and your vision. We need your generosity. A former President of Tanzania said that when America sneezed, the world caught a cold. By the same token, when America leads and defines an inclusive global vision, the world can prosper.

In just over a month it will be ten years since the Berlin Wall fell. It fell because millions of people rebelled, not only against the loss of their political freedom, but their economic freedom too. The end of the Cold War meant the end of any pretence of a viable competition between centrally-planned and market-based systems of economic and social organization. Freedom and democracy are values embraced in more parts of the world than ever before. We have a long way to go, but the trend is promising. These values are not the property of any nation. They are widely shared. The spread of democracy does not amount to the Americanization of the globe, and it is unhelpful to the process if people think it does. America has set a fine example of democracy in practice, but democracy is a very old value, with broad historic appeal. These are now universal values. Democracy has been practised in different forms for centuries and has evolved to democratic internationalism where sovereignty is enhanced by treaties and global institutions We learned in the middle of this century that freedom cannot survive in one nation alone, that when freedom is threatened in one place, it is threatened everywhere. This is even more true now as the world becomes ever more inter-dependent.

While the nation state remains the core unit of global economic, social and political organization, a defining feature of our time is that no country is viable in isolation, no matter how large it is. Cooperation is not a choice, it is indispensable to survival. As President Clinton observed on the occasion of the celebration in Geneva in May last year of the fiftieth anniversary of the multilateral trading system, "Globalization is not a proposal or a policy choice, it is a fact." No nation, large or small, can secure its future alone. No nation can even run a tax system, an airline, a good health system, fight Aids, or guarantee a clean environment, without the cooperation of others.

Globalization is about many things, and in the popular perception not all of them are good. The United States has enjoyed an unprecedented period of economic growth and low unemployment, in what Alan Greenspan recently described as "history's most compelling demonstration of the productive capacity of free peoples operating in a free market." Yet people feel less secure, are more worried and uncertain. Increasing numbers, not just in the United States, feel excluded, forgotten and angry, locked out and waiting for a promised train that may never arrive. They see globalization as a threat, the enemy, the reason for all their woes. A central policy challenge for governments is to make the prosperity that flows from globalization accessible to people. Unemployed workers everywhere are not impressed when told that statistically they are far better of than ever before. This challenge has many complex dimensions, going far beyond international economic policy, but it has an unmistakable international dimension as well. Governments must act cooperatively in the trade, investment and financial spheres to secure maximum benefits from international specialization, while at the same time leaving the necessary space to address the fallout from change that affects particular groups.

John F. Kennedy once said that if a free society could not help the many who were poor, it could not save the few who were rich. Inequality, growing inequality, is a scourge of our times. It is a problem both among and within countries. Nationally, governments must work to create the conditions that promote inclusion, especially through helping displaced workers to acquire new skills. Justice and a fair deal makes economic sense. All of us need new customers. This and other social policies are beyond anything that the multilateral trading system can deliver, but the international trading system will deliver less and less if these problems are left unattended. Internationally, we need to find ways of bringing low-income countries increasingly within the system, and seek to create the conditions under which they can benefit more and catch up. According to the World Bank, per capita incomes in the richest 30 per cent of countries rose from a little over $10,000 in 1970 to $20,000 in the mid-1990s. In the middle and lower two-thirds of countries, income did little more than stagnate at far lower levels.

But, people are appalled and dismayed when they see the few living in splendour and the many in squalor, with half the world dieting and the other half starving. This is not only about a widening gap, with everyone better off than before. Some are absolutely worse off than they were two or three decades ago. Certain people are tempted, in demagogic style, to blame globalization and trade for this state of affairs. In reality, international specialization is a modest part of the story – a far more important source of pressure in this sense is technological change. We can all understand how populists and politicians will find it easier to blame foreigners for social tensions and inequality than to make Luddite cause against technology. They study opinion polls to discover their principals But whatever the root cause of this problem, the reality is that international specialization is central to the solution of the problems of inequality and exclusion. We need a strong and well-functioning trading system to generate the income to address these problems. The evidence that those countries which have liberalized their trade have done better than those that have not is undeniable. We must say so. Benjamin Franklin once observed that no country was ever ruined by trade. He might have said that no country has ever prospered without trade. However, trade is not an end in itself. We should remember to say Because: because we want more jobs, more income for social expenditure and because we want a safer world.


Mindful of the bitter experience of the Great Depression and the role that protectionism played in prolonging and deepening that agony, the United States assumed the central role in shaping the post-war multilateral trading system. It is a system that has served us well now for more than fifty years, a system based on the rule of law. Outcomes are determined by the interplay of economic forces underpinned by a system of rules instead of the exercise of power. The recent Asian financial crisis came as a profound shock just at the time when many commentators and economic forecasters were beginning to talk of a globalized economic system that would deliver uninterrupted growth and untold prosperity into an indefinite future that history was dead. Well, the future still looks good, and while the Asian crisis was a humbling experience in some ways for policymakers world-wide, it was also an impressive demonstration of our multilateral trading system at work. In stark contrast to the late 1920s and early 1930s, governments did not resort to the temptation and false remedy of protectionism. They abided by their international commitments in spirit as well as letter, and kept markets open. Some of the worst affected countries even opened their markets further.

This is the system created by our fathers and that we are charged with preserving and strengthening. This is the challenge of Seattle. It is not always easy, in the face of all the pressures on governments to defend the status quo, and to resist change. The status quo is yesterday's compromise. In the United States, one of the most open economies in the world, added pressure for protection comes from arguments based on the trade deficit. A trade deficit of some $300 billion, it is argued, is eloquent evidence of the need for restraints on imports. But basic economics tells us why a trade deficit has so much less to do with trade policy than it does with other macroeconomic fundamentals. Moreover, economics force us to ask whether trade deficits are always undesirable. Pressure to lessen the trade deficit also translates into demands for other countries to open their markets. Open markets are much better than closed ones, for all countries, but this is a goal that we must achieve through negotiation and exchanges based both on the reality and perception of mutual advantage. Unilateralism is the antithesis of a rules-based system, a recipe for tension and instability in international economic relations which always turn to something more dreadful. America has largely resisted the temptation of the unilateral expedient, and for this I thank you.

We are entering a crucial phase in our preparations for the Seattle Ministerial meeting, which is now a mere two months away. We must define our agenda for that meeting as a matter of urgency. I think we should be ambitious, motivated not just by the bicycle theory, but by an appreciation of what trade liberalization has already delivered and can still deliver. We know that there will be negotiations on further liberalization of trade in services and agriculture because governments are already committed to this as a result of the Uruguay Round. But will we extend market access negotiations to industrial products as well? And what of the rules, of further strengthening them and perhaps extending them to new areas? These are questions on which governments don't yet agree, and the time has come for serious engagement. We are doing no less in Seattle than defining the direction of trade relations for a new millennium. The message is as important as the concrete result. Governments must rise to the occasion, and face down the short-term and narrowly-based opportunistic arguments against the embrace of new opportunities. Governments must refuse to turn their backs on five decades of remarkably successful cooperation through the GATT/WTO system.


I would like to end my remarks tonight by focusing on two particular aspects of the challenges that face us – the plight of the least-developed countries and our relationship with civil society. It cannot be too difficult for us to agree that unless the benefits of development, peace and security can be more widely shared. We will have failed. The objective of ensuring that the fruits of the system are widely shared is not a matter of altruism. It is in everybody's self-interest. There should be no mistake about this. There are many reasons why the LDCs have yet to share fully in the benefits of globalization, and some of it begins at home. History is a grim master. How can we in all conscience refuse products from a country which has inherited a debt service burden nine times larger than what it spends each year on health in the midst of an Aids epidemic. We know how crucial sound domestic policies are, and how good governance is a fundamental determinant of progress. The trading system cannot diminish these challenges. Indeed, an Agreement on Transparency in Government Procurement would be a modest start albeit with a profound message.

Yet there is something of significant value that we can do. We can make sure that LDCs do not face additional obstacles to their growth and development as a result of other countries' trade barriers. I wholeheartedly support the proposal made three years ago by my predecessor Renato Ruggiero, at the G-8 summit in Lyon, for the elimination of trade restrictions against LDCs. This means so little in economic terms to richer countries, and what it does mean is unambiguously advantageous in the aggregate – lower prices and wider consumer choice. In the case of the United States, for example, the group of countries designated as LDCs by the United Nations only account for 0.7 per cent of total imports. The figure for the world as a whole is a mere 0.5 per cent. Surprisingly, only some 20 per cent of LDC exports enter the United States free of duty. But at the same time, these taxes on imports represent a trifling 1 per cent or less of total tariff revenue.

As the legislative debate here in Washington continues to define the national trade regime facing countries in Africa, wouldn't it make sense to treat this issue on an international plane as well? I can see two immediate advantages. The WTO system is still defined by our opponents as a rich man's club. Some truth perhaps remains in this characterization, but it could be challenged in a stroke by a multilateral initiative to guarantee unfettered market access for the products of LDCs. Secondly, by taking a multilateral approach, market conditions can be modified at a stroke not just in the United States, but in the EU, Japan and elsewhere as well. The trade regime is only one aspect of how

we can contribute to securing a fairer deal for the least advantaged countries. Many countries have real problems of technical implementation and need assistance. This is in everyone's interest. Resources are needed to upgrade skills, build institutions, assist with implementation and prepare these countries for fuller participation in the international economy. I hope we can achieve something on this front too in Seattle. That’s a deliverable where everyone wins.


A remarkable feature of the situation today compared to a few years ago is the active interest of non-governmental organizations in our work. The Uruguay Round was launched in the silence of public apathy. Seattle will be very different. That’s another deliverable. Hundreds of NGOs and tens of thousands of individuals will converge on the city to tell us in a variety of ways what they think of what we are doing. For some, it will be a celebration of every conceivable thing they think is wrong with the world. For others, it will be a more focused engagement on the challenges we face. Civil society is not always civil. However, they deserve to be listened to. If we are not inclusive, we cannot expect public support.

Not all of our critics are wrong. We can do more to make our work transparent and open. This requires the assent of governments, and there will always be a legitimate place for confidentiality, as there is in any system of law. Governments need also to engage with civil society effectively at the national level. Public opinion is as important in India as it is in the United States. Engaging civil society is the responsibility of sovereign governments, but we can do our share as well. And finally, I would like to appeal to the supporters of the system, those that see and live its benefits, to take an active role in supporting governments as they work to preserve and strengthen the multilateral trading system. Both sides of the argument need to be heard. The case for our cause should not be taken as self-evident. On the contrary, we badly need to explain ourselves.

I'm proud of what Ambassadors in Geneva do. What could be more democratic than sovereign governments instructing Ambassadors to reach agreements that are then accepted by cabinets and parliaments? Our job is to advance the sovereignty of States by giving rules within which our ever more inter-dependent world can manage itself better. Too much of this century was marked by force and coercion. Our dream for the next century is that it be one of persuasion; a global civilization based on rules, law and engagement to back up and reinforce the decisions of government.

This is a simple proposition. Do we want a world based on rules or not? As I mentioned earlier, President Clinton correctly stated that globalization is a reality and not a policy option. How then do we face it? That’s the only question. Therefore, values that represent democratic, political and economic principles are what international organizations should be about.