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WTO NEWS: SPEECHES — DG PASCAL LAMY

Hong Kong, China 16 October 2005

Speech by Director-General Pascal Lamy

Hong Kong Foreign Correspondents Club

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In 1780, Abigail Adams, wife of the second American President and mother of the sixth, sent a letter to her son John Quincy Adams in which she expressed a point of view that I find quite pertinent to our circumstances today.

She wrote: “It is not in the still calm of life or in the repose of a pacific station that great challenges are formed.”

An eloquent phrase — and it neatly summarizes the situation of the World Trade Organization and our Doha Development Agenda global trade negotiations; very little calm, little chance for repose and a very great challenge ahead of us. That challenge, of course, is to find in the coming weeks and months a consensus among the 148 governments now engaged in some of the most complex commercial negotiations ever undertaken.

A significant part of this challenge will be taken up here in less than two months. The Hong Kong Ministerial Conference is not the conclusion of the round, that will not come until the end of 2006. But the Hong Kong meeting must take us most of the way there and deliver enough to provide us a platform from which to construct the final deal.

That the WTO's Ministerial Conference should take place in Hong Kong is entirely appropriate because the people of this region know a thing or two about challenges. From its somewhat humble origins as a fishing village and fortress it has emerged as one of the world's great cities.

It is also a place where people know a thing or two about how to trade. Hong Kong boasts little by way of natural resources, but it is blessed with a superb harbour and an ingenious and hardworking people. It has always embraced trade and is virtually without rival when it comes to successfully dismantling barriers to the flow of trade. It is a place where, incredibly, the Gross Domestic Product of the region ($234.5 billion in 2004) is exceeded by both gross exports ($268.1 billion) and gross imports ($275.9 billion).

And yet while people here may inherently realize the value of trade and recognize that most of them benefit from trade, it's unlikely that they devote much thought to it. Locally, the enhanced competition created by trade stimulates innovation, keeps prices in check and can lead to the creation of new jobs. Globally, trade facilitates the efficient allocation of resources and increases overall welfare gains. The evidence is overwhelming that nations which are open enjoy higher economic growth and levels of development than those which are closed. And it is an irrefutable truth that no poor nation has ever become rich without trade.

Yet, the majority who benefit from trade are largely silent. The minority who are hurt by trade — and there are those who are hurt — are anything but silent and they are extremely active politically. You will be hearing from this not-so-silent minority often in the weeks to come.

I could spend a great deal of time tonight stating the case for trade generally, but I think the time would be better spent making the more specific case in favour of the Doha Development Agenda Round of global trade talks and the importance of the Hong Kong Ministerial Conference in that context .

Many of you will have seen the many economic projections which forecast the gains in global output resulting from a successful outcome to the round. The University of Michigan forecasts that a reduction of trade barriers by even one-third would boost global economic output by $574 billion. UNCTAD says a deal leading to Duty-Free, Quota Free treatment for exports from the Least-developed Countries would raise LDC exports by 10 % and result in welfare gains of $8 billion.

This is what the economists say. But many others are urging negotiators to reach a successful conclusion. NGOs in the North and South have called for an agreement which produces more equitable rules for poor countries. The business community wants more market opportunities and rules which better reflect the way international business is conducted in the 21st century.

Increasingly the world's politicians see trade as one of the best means for alleviating poverty in developing countries and for supporting stable economic growth in the developed world. The degree of attention given to the Doha Round at the G-8 summit in Gleneagles this year is but one indication of the growing awareness of the importance of trade.

So, there is much at stake and we have but 58 days to prepare for the conference. From the point of view of the future of the Doha round, it is difficult to overstate the importance of this meeting. Hong Kong is not just another Port of Call for these negotiations. It is our best opportunity to bring the round to conclusion by the end of 2006. We have missed deadlines throughout the course of this round, notably the deadline we set at Doha in November 2001 to conclude the round at the beginning of 2005. But missing the 2006 target would present us with problems far more profound than in the past, because unlike the others, this deadline is real.

Like it or not, the timetable for these negotiations is set on Capitol Hill in Washington, D.C. Uniquely, the United States of America has a legal structure in which the legislature holds constitutional authority to conduct trade and must transfer that authority to the President and his team of negotiators. That authority expires at the end of June 2007. In the past, renewal of this authority was taken for granted. But renewal is very unlikely to happen this time given the current congressional concerns about trade. This means the President must send a Doha agreement to Congress for consideration early in 2007 and we must finish our work in Geneva by the end of 2006.

The timetable is extremely tight and there is much work to do.

If we are to conclude the round by the end of next year the Hong Kong Ministerial Conference must be a success. Success can be defined in many ways. In my view it means we must use this occasion to resolve two-thirds of the issues on our agenda. We must complete the bulk of the work in agriculture, industrial tariff reduction and services.

In agriculture this means agreeing on an end date for all forms of agricultural export subsidies and ambitious and corresponding ambition in market access and the reduction of trade distorting domestic support. It also means resolving the issue of cotton.

In industrial tariffs we need agreement on the numbers which would both reduce tariffs and bring more convergence in national tariff structures.

An ambitious and balanced Hong Kong result in industrial tariffs and agriculture, including cotton, will have the effect of galvanizing work in other areas including services, trade and environment, intellectual property and rules including anti-dumping and trade facilitation.

A few words about the development dimension of these negotiations; Remember this is called the Doha Development Agenda. While it is impossible to forecast precisely how these negotiations will unfold I do know one thing for certain — if we do not achieve a package of results acceptable to developing countries, there will be no agreement. Developing countries comprise three-quarters of our membership and many of them believe that their interests have not been adequately addressed in previous negotiations under the GATT. I agree with this now and I agreed with it when I was the EU Commissioner who agreed to launch the negotiations in Doha in 2001. In fact, all WTO Ministers shared this view, which is why the round was successfully launched.

While developing countries all share the view that WTO rules need to be more balanced and equitable with respect to development issues, the specific concerns vary from country to country. Yet some points are common; trade distorting agricultural subsidies must be sharply reduced and in the case of export subsidies, eliminated. Special and differential treatment must be extended to developing countries and special rules and procedures must be in place for the Least Developed Countries, our poorest members.

The objective is to assist developing countries in gaining more opportunity from the trading system. This means, by the way, greater market access opportunities in other developing countries. More than a third of global trade is now between developing countries and this figure is rising. It stands to reason that in those areas where tariffs are highest, significant reductions can present new trade opportunities to assist economic growth and development.

I am convinced that more than 70% of the development outcome will arise from agreements struck in agriculture, industrial tariffs and services. But there will need to be more work done in other areas of interest to developing countries as well, including special and differential treatment.

Another important element of the development dimension will be a substantial Aid for Trade package of financial assistance. This idea received a strong boost from the G-8 in July and from Finance Ministers and Development Ministers at the World Bank and IMF last month. A substantial package of Aid for Trade will be crucial to improve developing countries' supply side capacity, improve customs procedures and help these countries take advantage of the new opportunities that will flow from a Doha deal. It will be important for all of us to work together so that we may translate improvements in market access into realities for developing countries. I hope that by Hong Kong we can agree to enhance the existing assistance for the world's poorest countries.

One area of great importance that I have not yet addressed in detail is services. For many Members, not least Hong Kong, services represent a critical piece of the Doha puzzle. In many developed countries, the service sector produces more than 70% of output and employment. While the figures are somewhat smaller in developing countries, negotiators from many of these countries have taken an offensive interest in this issue, a big change from previous trade rounds. Many countries in the developing world now look to the services sector as a new stimulus for growth and innovation. The remarkable rise in Indian growth and development, for instance, owes much to the ingenuity of service sectors entrepreneurs.

The complexity of the services negotiations has contributed to the rather lacklustre result so far. The request/offer process of seeking to open services markets requires a great deal of specificity and highly technical exchanges between negotiators. Some delegations have discussed looking at complementary approaches to the existing negotiating structure.

Hopefully, progress in agriculture and industrial tariffs will unlock these services negotiations and lead to critical mass of good offers on the table by the Ministerial Conference. There is no possibility of reaching an agreement in this round without a healthy services component.

For some people the amount of work ahead of us appears overwhelming. Many of you will have read, or perhaps written, stories about a Plan B to be implemented in the event that the Hong Kong Ministerial Conference falls short of our objectives. Many have spoken of reducing expectations and lowering the level of ambition.

Let me respond to this by saying that am not convinced of the argument that Hong Kong will produce a meagre result. Last week in Zurich and Geneva we saw real commitment on the part of Ministers. We saw constructive proposals and real numbers in the areas of subsidy reduction and tariff cuts which should allow real negotiations to start. Not everyone will agree with these proposals, but everyone agrees that they are serious and constructive.

People are seriously discussing fundamental changes to the global trading landscape. No one is introducing procedural roadblocks or obstructing the talks through unrealistic proposals. This is because none of our Member governments wants the Hong Kong Ministerial Conference to fail. We could certainly get a consensus on this. Whether we can get a consensus on a final package of results in Hong Kong, is still not clear. But everyone is working towards that outcome and this was not always the case during the preparations for other Ministerial Conferences.

As to the level of ambition, well clearly realism has to be injected into the process at some stage. At the beginning negotiators attempted to gain everything while surrendering nothing. But this means that someone else would gain nothing and surrender everything. Such tactics are not the means to secure a consensus of 48 members. No one will come out of this round with everything they sought. At the same time there is also a zone where meagreness doesn't fly. It's like a plane, you need some speed to fly. You can reduce speed but there comes a zone where the speed is insufficient to give you the lift you need and — BOOM – you fall. The question to ask about any Doha agreement is not whether it gives you everything you sought. The question is more, are we better off today as a result of this agreement than we were before it was reached?

But first we must reach agreement. Although I am not downcast on the prospects, I remain concerned about the size of the task at hand. With so little time remaining we cannot afford to waste even a single day and you can be sure that I and the Secretariat will spare no effort to bring about a success in December. Which is why I fly back to Geneva tonight to prepare for ministerial-level meetings this week which hopefully will bring us closer to accord on market access improvements in agriculture which we need to unlock the rest of the negotiations,

Ultimately, though, the responsibility lies with Member governments. It will be the politicians, the representatives of the people, who will have to make the decisions that will determine the outcome of these talks. This is how it should be. These will not be easy decisions. Bringing about change and reform is never easy.

But there is no other option. The status quo is insufficient for addressing the needs of developing countries and making the WTO rules more balanced and relevant.

In less than two months time, we will know the result of the Hong Kong meeting and the future of the Doha round, the WTO and the global trading system will be more clear. The world expects a great deal from us in the coming weeks and months and we must all work together to ensure that collectively we meet this challenge.

Thank you.