> Pascal Lamy’s speeches
It gives me great pleasure to say a few words
on the occasion of the launch of the WTO's flagship, the World Trade
Report. Each year we pick a subject of current trade policy interest and
undertake a detailed analysis of salient issues in that particular area.
The World Trade Report does not pretend to provide a definitive or
prescriptive statement of how an issue should be addressed in an
international cooperative framework. Rather, the treatment is
exploratory, seeking to identify useful theoretical insights, their
practical relevance and policy implications. In this way, we seek to
deepen understanding of sometimes complex issues and enrich debate about
how to approach them in the policy community.
I will confess, however, to one element of advocacy. It is the advocacy
of cooperation over confrontation. This reflects the core rationale for
the existence of the WTO — to provide a context for governments to
identify and act upon their mutual interests, including where these will
In one way or another, natural resources are essential to almost
everything we do, to what we have come to rely upon, and to the way we
lead our lives. Natural resources are, in effect, essential to human
life. That is why the way we manage them, consume them and trade them
are such a crucial element of policy. Non-renewable resources such as
oil and natural gas are transformed into the energy that is essential
for the production of virtually any other good or service. Renewable
resources such as forests, fisheries and aquifers are some of the
world’s most precious natural assets.
Natural resource markets are changing, primarily reflecting rapid growth
and increased demand in certain parts of the world, especially in
certain Asian countries. Natural resources represent a significant share
of world trade, amounting to around one quarter of all merchandise
exports. The volume of natural resource trade has been quite steady over
the past decade, but in value terms has grown annually at 20 per cent.
Natural resources embody particular characteristics that may sometimes
call for a re-examination basic economic assumptions as well as the
shape of current trade rules. A complexity arises from the fact natural
resources are essential to many production processes, and yet they are
either finite in supply or exhaustible and potentially finite if they
are not properly managed. Their extraction and use need to be carefully
managed in order to balance the competing needs of current and future
generations. Careless use of these precious assets by society today can
weigh heavily on society tomorrow.
Some natural resources are by their nature what we refer to as
potentially “open access” resources. This means that the resources may
be harvested by individuals with scant consideration of the fact that
they are finite or exhaustible, and in the absence of a price that
reflects true scarcity. In the absence of effective government control
or the establishment of an enforceable property rights system, these
resources will be over-exploited and extracted at a socially sub-optimal
Negative environmental effects of significant proportions can also
result from the way in which natural resources are extracted and
consumed. Many natural resources are distributed very unevenly among
countries. This can offer the promise of gains from trade but can also
generate tension among those that possess the resources and those that
want access to them. The prices of natural resources can be highly
volatile for a variety of reasons and this can constitute sources of
international tension. Volatility can also present challenges for
Another developmental challenge arises where the economies of small
countries are dominated by a single or very few natural resources. This
can make it difficult to secure an even pattern of development with less
single-sector dependence. The economic rents associated with the
extraction and use of such resources can also present serious governance
problems in some instances.
As the world emerges from global recession, competing interests in
natural resource trade are likely to become a stronger source of policy
tension. Adequately designed trade rules, perceived as fair and
effective, are particularly valuable in these circumstances. Trade in
natural resources will take place regardless of whether the global
community has adequate rules, as the needs that motivate these exchanges
persist and increase over time.
However, less than adequate rules risk stoking the fires of natural
resource nationalism, where power asymmetries across countries and
beggar-thy-neighbour motivations dominate trade policy outcomes. It is
noteworthy that in trade policy terms, import restrictions tend to be
minimal and of little economic consequence. This reflects inherent
natural resource scarcity and the interests of importing countries in
securing natural resources as inputs into their own production.
It is, rather, export policy that dominates trade debates involving
natural resources. We know from economic theory that a range of factors
explain why governments may wish to restrict exports of natural
resources. Such restrictions may be distortionary in nature, designed to
extract a terms-of-trade advantage. Or they may reflect an attempt to
rectify market failures and various kinds of external effects that are
not taken care of by markets. Governments may wish to diversify economic
activity and promote domestic industries by reducing the prices of
essential inputs into production — an effect that can be achieved
through an export tax or restriction.
Alternatively, governments may wish to reduce extraction rates for
environmental reasons or to preserve resources for future generations.
Some governments also rely on export taxes for revenue. No mainstream
economic doctrine that tells us these are all bad policies that should
never be pursued. But it is well known that such polices, if not
carefully designed and implemented, can impose undue costs both on the
countries applying them and on foreign countries interested in acquiring
natural resources that they do not possess themselves.
In touching briefly upon all of these issues surrounding natural
resource economics and trade in natural resources, I think I have said
enough to demonstrate why international cooperation is at a premium.
There are doubtless important differences of interest among nations in
this sphere, but I also believe there are mutually beneficial trade-offs
to be struck. This is why active efforts to solidify international
cooperation in this sphere are so important. It is also why coherence
among the various venues that exist for international cooperation is at
I thank you for your attention.
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