Amigas y amigos,
Es un placer visitar a Costar Rica por primera vez como Director general
de la OMC y celebrar los veinte años de la entrada de este país en el
sistema multilateral de comercio. No les voy a fatigar con mi español de
Normandía. Pero quisiera que estas palabras sirvan para mostrar mi
aprecio por el idioma de Cervantes, de Borges y de Octavio Paz y mi
cercanía con todos los que lo hablan.
What better way of marking two decades of
successful participation in the multilateral trading system than to
think about what that system represents for a country like Costa Rica.
Costa Rica’s economic and trade
I would like to start by registering my
admiration for Costa Rica’s extraordinary economic success in
maintaining steady growth and development over many years, a process
that has been transformational for the country — and this against a
background of sustained and remarkable social and political stability.
Abstracting from the economic crisis that affected virtually every
country on the globe over the last year and a half or so, Costa Rica has
registered a steady average of around 5 per cent of real GDP growth for
several years, implying that the size of the economy doubles in less
than a decade and a half.
Engagement with the world economy is not
something that Costa Rica has shied away from. On the contrary,
according to the Foreign Policy Magazine 2007 index of globalization,
Costa Rica is the 39th most globalized country in the world.
Trade, of course, has played a key role in
Costa Rica’s success story, typically growing faster than output. The
importance of trade for this country is attested to by the fact that the
trade to GDP ratio exceeds 100 per cent. The centrality of trade to
Costa Rica’s economy explains the careful attention your Government pays
to trade policy, and your active involvement in the WTO as well as in
regional trade cooperation.
Small economies and the multilateral
Turning now to the question of how small
economies might expect to benefit from the multilateral trading system,
I would first note that the vast majority of WTO Members are small and
medium-sized, so if the WTO cannot offer these countries anything, I
would be on very thin ice if I were to say that the WTO strives to be a
truly global institution! If I do say this, it is because I firmly
believe that the WTO offers something for everyone — inclusiveness is a
basic aspiration of our system, based as it is on the principle of
My second point is that we know there is room
for improvement, when it comes to creating the conditions in the WTO
that allow all parties to defend and promote their interests
effectively. Smaller countries — especially if they are developing or
least-developed — should not be expected to match precisely the
obligations of bigger and richer ones, and at exactly the same time,
when such obligations are not appropriate at a particular level of
development. “Special and differential treatment,” as we call it in our
WTO jargon, has to be fully recognized.
But even if we got everything right on the WTO
side, there is no guarantee that everyone in small and medium-sized
countries would necessarily benefit from the multilateral trading
system. Countries need to take the necessary domestic measures to reap
the benefits of trade opening. The WTO helps in creating benefits, but
not in distributing them — this is the role of domestic policies.
Another essential ingredient in securing the
benefits for one's country is constructive engagement, on the basis of
national interests. If governments do not care to participate in the
day-to-day operation of the WTO, and do not align that participation
effectively with national aspirations, then the WTO may turn out to be
irrelevant for them or, at best, a serendipitous source of incidental
benefits as crumbs falling off the negotiating table. Costa Rica is an
excellent example of the opposite behaviour.
To use a boxing metaphor, there are three
types of Members in the WTO: those who punch equal to their weight,
those who punch below their weight, and those who punch above their
weight. Costa Rica is clearly in the latter category. Your country has
consistently established its priorities and pursued them in an extremely
effective way in the WTO.
The benefits of engagement
How can a small open economy expect to benefit
from the multilateral trading system? I divide my remarks on this
question into four elements that correspond to the core functions of the
Let me start with trade-opening. Successive
rounds of negotiations have lowered tariffs and non-tariff obstacles to
trade. These have benefited all WTO Members because of the application
of the most-favoured-nation treatment, or non-discrimination principle.
The most notable successes in removing barriers to trade have been among
industrial countries in the area of manufactures. Except for the
relatively high protection levels affecting a range of labour-intensive
manufactures, tariffs in industrial countries on a very large share of
these products are very low or zero. As you are no doubt aware, the
picture is somewhat bleaker in agriculture, where the reduction or
removal of tariffs and subsidies has proven very difficult. And in
services, we have only just begun.
So in terms of what has been done, the
benefits have been widespread because of the WTO’s commitment to
non-discrimination. But one may well also observe that less has been
done in areas that are of interest to small and developing countries,
and that the improvement of this unevenness through non-reciprocal
tariff preferences has only been partial and discriminatory. If I were
to try to provide an explanation for the contention that the WTO is not
always as fair as it could be to its smaller and weaker members, the
historical product pattern of trade opening would be one of them.
I do not wish to be misunderstood. I believe
that the WTO’s contribution to rendering markets more open is very
valuable. The point is that it would have been even more valuable if the
principles of non-discrimination and reciprocity were not so tightly
linked. This link tends to make large countries reluctant to exchange
trade opening commitments with smaller ones, for fear that other large
countries will free-ride on them and offer less reciprocity on their own
This, for me, is part of the reason the system
has not done better at establishing a less varied pattern of trade
opening, in terms of product coverage. It is ironic indeed that we have
finally come closer than ever before, in mainstream Doha Round proposals
— especially those in industrial goods — to redressing this historic
imbalance, and yet so far WTO Members have found it difficult to move
expeditiously to complete the negotiations.
But I have also observed a seeming reluctance
of many smaller countries to define their market access commitments in
the WTO. Take Costa Rica which has an all-product average real tariff of
around 6 per cent and a maximum allowed of over 42 per cent. Clearly,
WTO commitments do not constrain trade policy, except perhaps in extreme
I would argue more generally, therefore, that
so far, market access benefits deriving from the WTO for small open
economies in the export markets of the major trading countries are
positive but not as large as they could be, for the reasons I have
However, on the import side, many small open
economies have in the last decades reduced barriers to trade — sometimes
importantly — but have not relied on the multilateral trading system to
do so. Market opening has tended to be unilateral in nature, or
undertaken in the context of preferential trade agreements. Indeed, over
three-quarters of Costa Rica’s exports are, or soon will be, covered by
One of the key challenges currently facing WTO
Members is how to ensure that the trade opening conferred by
preferential agreements synergizes with the multilateral trading system.
The multilateralization of bilateral
preferences can be achieved in different ways. One is to ensure
high-quality regional trade agreements that avoid product exclusions or
restrictive rules of origin that will limit their impact. In my view,
regional trade agreements should be comprehensive in scope and depth
even in sensitive sectors, thereby opening the possibility for dynamic
gains from trade opening. For instance, Costa Rica's ratification of
CAFTA entailed the opening of its telecommunication and insurance
markets to competition. Likewise, the use of cumulation in rules of
origin will generate complementary paths to multilateral liberalization.
Another way to spread more evenly the benefits
of existing regional trade agreements, which has been discussed by some
WTO Members, would entail the inclusion in such agreements of MFN or
sunset clauses, with reasonable periods of adjustment for sensitive
domestic industries. This would ensure an inbuilt convergence between
bilateral and multilateral trade opening.
Let me turn to the second of the functions of
the trading system, that of rule-making. Creating rules has become
increasingly important in the work of the WTO over the years, as
governments have sought to harness changing economic realities. All WTO
Members, large and small, have benefited tremendously from the existence
of rules. Now, just as with the market-opening story, I do not want to
claim perfection for the WTO. Not all the rules are as good as they
could be. And this is one reason why they are continually under
negotiation in successive trade rounds. But the WTO rules provide a
unique public good, which in my view is a very attractive and valuable
feature of the multilateral trading system. And this has proven
extremely valuable in the crisis we are just living through.
As for the third core function of the trading
system — rule-keeping — the WTO dispute settlement system has been
widely praised for its effectiveness in settling trade disputes among
WTO Members. Its high success rate is testimony to the commitment of
Members to maintaining the integrity of the rules and of the WTO system
of trade cooperation more generally.
Indeed, the WTO rules are far more meaningful
because they are enforceable through respected legal processes. Larger
and smaller countries alike have been able to benefit from the dispute
settlement mechanism. Take the example of this country, which has been
complainant in three cases and sought consultations in four others.
Fostering cooperation through transparency
The final function of the WTO that I mentioned
above is to foster cooperation through transparency and
information-sharing. Information about what governments’ trade policies
are and how they change is essential for efficient trade policy conduct.
To the extent that information is available, the benefits can be shared
by all in the fashion of any public good.
Sharing information also provides a basis for
informed dialogue among trading partners. And it also provides a
platform for a better discussion of policies at home.
I have tried to give you a sense of where I
see the strengths of the WTO as a vehicle for promoting a better trading
environment for its Members, including the small and open economies
among them. The case I seek to make is for informed engagement and
sustained commitment to making the WTO work for all parties. I believe I
am preaching to the converted as far as the majority of this audience is
concerned. Costa Rica has consolidated a reputation for serious
engagement in the multilateral trading system, thanks in no small
measure to the hard work of its Mission in Geneva and that of its
Ministry here in San Jose.
Let me close by briefly noting some of the
challenges I believe we will face in the months and years ahead. The
first, most immediate priority is for governments to take the necessary
decisions to complete the Doha Round. An unfinished Round means foregone
economic opportunities and, I believe, mounting credibility costs for
multilateral cooperation. The Doha Round is not an island in a sea of
alternative opportunities — failure on Doha would spill over into other
present and future cooperation efforts, and not only in the trade policy
domain. In our joined-up world, countries simply cannot go their own way
and disregard the costs of neglecting international cooperation.
As far as trade is concerned, the economic
crisis has played havoc. We saw a 12 per cent reduction in the volume of
trade in 2009, and trade actually fell more than it did at the height of
the Great Depression. We know that this is a reflection primarily of
collapse in demand, accentuated in the early stages by a fairly
widespread shortage of trade finance.
The trade policy implications of this have been a source of concern in
many quarters, but so far, trade policy has remained robustly oriented
towards an open stance, with only moderate slippage in some instances.
The challenge for all governments is to remain open, notwithstanding
protectionist pressures that are likely to persist if the nascent
recovery proves fragile, or if unemployment remains stubbornly high. We
need to remain vigilant and keep trade channels open.
Unless we can complete the Doha Round in the
near future, and maintain markets open, we will find it harder to
address other challenges where international cooperation is essential.
This involves issues such as climate change, coherence between a future
climate change regime and the trade regime, managing increasing prices
and scarcity of some raw materials, and ensuring adequate coherence
between regional and multilateral approaches to trade cooperation. This
is not an exhaustive list, but it does convey the urgency, I believe,
for all of us to play our parts in advancing the trade agenda.
Let me finish by quoting a recent speech by
President Arias, in the Third Ministerial Meeting of “Caminos de la
Prosperidad en las Américas”. You said, Mr President, that “If we all
aspire to prosperity, then we should not step down from the train of
free trade. On the contrary, we must make sure that there are always
more people stepping onto the train.” Costa Rica has been a faithful and
well served customer of the train of free trade. I can only support you,
Mr President, in encouraging others to join.
I thank you once again for the invitation to share in the celebration of
this occasion with you. Thank you very much.