> Lowy Institute
(audio of Pascal Lamy speech)
> Pascal Lamy’s speeches
Ladies and Gentlemen,
It is a great pleasure for me to be at the Lowy Institute for
International Policy. The Institute’s mandate is to generate new ideas
and dialogue on international developments and on Australia’s role in
the world. I guess these are busy times for you. The world desperately
needs new ideas and there is certainly scope for improving the dialogue
over international challenges.
I would like to share with you some ideas about where I see the place of
trade in the current economic crisis, the inspiration we can draw from
60 years of the multilateral trading system and our endeavour to further
open trade within a framework of rules through the conclusion of the
The place of trade in the economic crisis
Trade has become another casualty of the global economic crisis. The
slump in demand and the difficulties to access trade finance have led to
a significant contraction of world trade. According to current
estimates, world trade will contract by some 3 per cent in 2009, the
first decline in trade growth since 1982. Just as trade tends to grow
faster than output in good times, it typically contracts faster in times
This means that one of the most powerful engines of global growth is
hampering efforts to lift people out of poverty. And this is affecting
both developed and developing countries. It is affecting the 12 million
jobs in the US which are dependent on exports. It is affecting the 6.2
million jobs in France which are dependent on trade. Not to mention the
100 million or so jobs in China which are turned to export markets.
I think it is important to reflect on this as we think of devising
responses to the current crisis and as we hear talk about “protecting
domestic jobs”. The reality is that today a huge proportion of domestic
jobs are reliant on access to export markets and without trade, these
jobs risk disappearing.
This is why we hear many voices against isolationist measures. Is it
credible to imagine that one country can protect its domestic market
without others doing the same?
Let’s imagine for a second that the US decides to close its automobile
market to imports, let’s say Chinese, Japanese and European automobiles,
worth US$ 80 billion. It is highly probable that the Chinese, Japanese
and Europeans would decide to close their markets to American planes,
cranes and chemicals, all this worth US$ 120 billion.
Ladies and gentlemen, the domino effect that such moves could cause
would be devastating. And this is why isolationism, even “smart”
isolationism as some are advocating, is a recipe for global slump. And
this is why resisting protectionism and avoiding an aggravation of the
current crisis is an imperative today.
The reality is that protectionist measures by individual countries are
unlikely to help in the recovery efforts. Instead, what is necessary is
to coordinate the domestic stimulus packages, to cooperate in addressing
global challenges and to think of using the least harmful trade policy
This is where activating the WTO’s mechanism of trade policy review is
essential. It provides WTO members with a forum for dialogue on how best
to use their trade policies to help the recovery, while allowing a
thorough scrutiny of trade-distorting measures.
Australia has been a strong advocate of putting this sort of WTO radar
to its full use, in particular in the current circumstances, and I count
on Simon Crean and his team in Geneva to contribute to this. After the
first report that I tabled in January, and which was discussed by
members shortly after, a new “radar picture” will be produced by
This is why I disagree with those who say that the current economic
crisis requires a shift in the WTO’s priorities — that we need to
concentrate on fighting protectionism and that therefore we should
de-emphasize or even abandon the Doha Round.
In fact, trade and the Doha Round have a place all their own in global
efforts to revive the economy. Open trade flows have a role in
maximising the G20’s efforts to stimulate the global economy. At the
same time, the Doha Round is the most effective way to further constrain
protectionist pressures by reducing the gap between bound commitments
and applied policies.
Indeed, if all WTO members raised their currently applied tariffs to
today’s WTO ceilings, tariffs worldwide would double. A recent study
estimates that world trade could then shrink by up to 8 per cent,
reducing global welfare by up to US$ 350 billion. Conversely, with what
is currently on the table in the Doha negotiations, tariff ceilings
would be halved and the savings for economic operators could amount to
over US$ 150 billion annually.
Values of the multilateral trading system
We have recently heard ideas for a Global Economic Charter — an occasion
for the international community to re-build a consensus over the basic
principles and values that would underlie their economic relations,
emulating the founding fathers of the United Nations Charter of 1945.
The WTO and its predecessor, the GATT, can provide a source of
inspiration in this regard. Let me briefly mention some of the WTO
principles which could help formulate a new global economic consensus.
First among them is openness through the gradual reduction of obstacles
to trade. This is accompanied by flanking regulations aimed at ensuring
a level playing field and avoiding excesses. A third element is
transparency and monitoring: processes ensuring a brighter spotlight to
foster compliance with the rules and avoid the eruption of disputes. The
fourth element that I would mention is non-discrimination, which in the
WTO is embodied in the principles of most-favoured nation and national
treatment. The fifth element is fairness, as enshrined in the special
and differential treatment for developing countries. All of this with
the overriding objectives of raising standards of living, ensuring full
employment and achieving sustainable development as described in the
preamble of the Marrakesh Agreement establishing the World Trade
Concluding the Doha Round to advance the multilateral trading system
The principles on which the WTO is premised and its objectives are as
relevant today as they were when they were adopted in 1947. And the
depth and breadth of WTO rules have evolved along with world economic
realities and the changing needs of our members.
The last major overhaul of the world trading system took place in 1995
with the conclusion of the Uruguay Round, which by the way took over
eight years to conclude. Subsequently, the WTO family forged a consensus
to further reform the world trading rules with the launch of the Doha
Round in 2001. I would note that we are still capable of beating the
duration of the Uruguay Round!
It was agreed under the umbrella of the Doha Round to substantially cut
trade-distorting agriculture subsidies, chief among them cotton
subsidies, to curb fishery subsidies which contribute to the depletion
of the resources of our oceans, to a greater opening of services trade,
to facilitate customs operations, to open trade in clean technology, to
adjust anti-dumping rules, to offer duty-free and quota-free access to
the exports of the world’s poorest countries, and to achieve greater
market access in agriculture and industry, to name a few.
This is the consensus on which the Doha Round is premised and this is
the menu which needs to be served at the conclusion of the negotiations.
And the good news is that we are over 80 per cent there and that with an
extra effort we could get to the finish line.
I have recently read some academics argue that this is an outdated
agenda. That the world has moved on. That fluctuating commodity prices,
cartelisation of oil exports, currency undervaluation, sovereign wealth
funds, financial instability and environmental insecurity have
significant global implications that demand a global solution that the
Doha Round would not offer. They therefore argue that the Doha Round be
scrapped and a new round of Bretton Woods talks be launched with a more
ambitious agenda and wider organizational coverage to deal with all
This seems to me, at best, a classic example of trying to “bite off more
than you can chew”! At worst, it is a disingenuous appreciation of the
politics of trade negotiations, with two-thirds of its active
participants nowadays being developing countries.
Is it fair to tell African cotton producers that they need to wait until
a new agenda is set to address the pressing issue of cotton subsidies,
which contribute to depressing their domestic prices? Is it credible to
say that we need to build a new agenda tomorrow to discipline subsidies
which are contributing to over-fishing today? Is it wise to delay a
global agreement reducing tariffs on environmental technology? Can the
world’s poorest countries wait until a new consensus is built and a new
agenda is agreed upon to receive duty-free and quota-free treatment for
My own sense is that the vast majority of WTO members want to see the
current agenda tackled and concluded as soon as possible. They want a
result on the priorities which were agreed when the Round was launched
and whose results are long overdue.
My own sense is also that WTO members need to start thinking about the
next agenda: about future priorities and challenges, whether in terms of
subjects, negotiating processes or participants. Serious thought needs
to go too into a better distribution of roles among international
organizations and the challenges of coherence.
But I am convinced that the road to the future starts with the
conclusion of the Doha Round. This is now as much a political imperative
as it is an economic necessity.
And this is where Australia has a leading role to play. Prime Minister
Kevin Rudd and Minister Crean have been strong advocates of the Doha
Round and I wish to thank them wholeheartedly for this. All of you can
rely on them and on me to carry this message to the global community in
the coming months.
Thank you for your attention.
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