WTO NEWS: SPEECHES DG PASCAL LAMY
Lima, 31 January 2006
“The Perspectives of the Multilateral Trading System”
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Your Excellencies, Ladies and Gentlemen,
It is a privilege for me to have the opportunity to address this
impressive gathering this afternoon. It is no coincidence that my first
trip following our recent Ministerial Conference in Hong Kong, and in
fact the first visit that I have initiated myself since I took up this
post, has taken me to Latin America. Quite apart from a personal
admiration for the environment and cultures of your region which I have
had the good fortune of exploring in my previous incarnations, Peru and
its regional partners have always been constructive actors in the
multilateral trading system. Since becoming Director-General of the WTO
in September last year I know I have been able to count on the solid
support of your region as we have moved the WTO agenda forward.
The year 2005 was an important year for the multilateral trading system.
Not only did the WTO celebrate its 10th Anniversary but we also
successfully concluded the Sixth Ministerial Conference in Hong Kong and
provided a road-map for the final stages of the Doha Round negotiations.
2006 must be an even more important year – the year in which we conclude
the Round for the benefit of all participants.
The past ten years have radically transformed the way in which nations
interact commercially and have propelled the WTO onto the front pages of
media reports across the world. In stark contrast to the tranquil and
rather obscure GATT, the WTO has gained significant notoriety from world
financial centres to small villages. I continue to be amazed that an
organization which spends the vast majority of its time deciding matters
of a supremely arcane nature has attracted so much media attention and
controversy. One of the reasons for this popularity is that the
expansion of subjects with which the organization has been called to
deal with – from tariffs and services to intellectual property rights,
technical barriers to trade, rules of origin and a vast array of
subjects which, in spite of their bureaucratic names, have a bearing on
the everyday lives of millions of people. Another reason is that the
expansion of multilateral trade is the emerged part of globalization for
a lot of people, hence the focus on WTO for many pro- and anti-globalizers.
Whichever side one takes in this debate, I think that there is broad
agreement on the need for an effective multilateral trading system in an
era of ever increasing economic integration. The global economy has
advanced with remarkable speed over the past decade. Developments that
no one could have foreseen in 1995 are today shaping the way we live our
lives. Products which many of us had never imagined and which few people
owned are now a central part of everyday life. Regions such as Latin
America and Asia now play much more prominent roles in the global
economy and in international economic policy-making.
Technological change and global economic integration have not come
without cost. There has been displacement in the work force and there is
anxiety about the future in many countries. For this reason, the concept
of globalization has sparked much debate. Many of the fears and concerns
that have arisen from this remarkable economic transformation have been
laid at the feet of the WTO. Many people enjoy the benefits of trade
opening, but they either do not know it, or they are silent. The fewer
who suffer the negative consequences – and there are negative
consequences of trade opening – are very vocal, as protestors in
Ministerial Conferences show us. There is no escaping the fact that
global problems require multilateral solutions. Absent global rules we
are left with uncertainty, instability, heightened international
tensions and possibly chaos. No progress in global rules means more of
the law of the jungle.
In some ways the WTO is perhaps the most advanced multilateral
institution in the international system and this is in no small part due
to its dispute settlement system. In establishing this mechanism WTO
member governments have proven that multilateral solutions to disputes
are not only possible — they are desirable. The facts speak for
themselves - the WTO Dispute Settlement System has been used more often
in the past 10 years of activity than the old GATT system was used in
nearly a half century. This system has been successful largely because
WTO Member governments have been prepared to implement panel and
Appellate Body rulings and to bring their laws and regulations into
conformity with WTO rules should a panel decision go against them.
Similarly, the increased utilization of the system by developing
countries confirms that the multilateral approach protects all Members,
not just the large, strong, or rich.
One of the most important achievements of the last ten years has been
the enhanced integration of developing countries into the WTO system.
Never before have so many been such active participants in the global
trading system and the development focus of the Doha Round is an
appropriate reflection of this. With you today I would like to look more
closely at what the Doha Development Agenda – and the WTO System as a
whole – mean for developing countries and then consider what needs to be
done in order to get the most out of it.
The Doha Development Agenda gives development issues headline treatment
for the first time in a trade Round. By doing so, governments have given
their negotiators a challenge: How to make sure the Round lives up to
its title? What will it take to move from sound-bites to a sound result,
one that will keep development centre-stage on the trade agenda?
I am convinced that the answer must be found first and foremost within
the substance of the negotiations themselves. The development dimension
can no longer be an afterthought or an add-on, a sort of pisco you add
to the main dishes of market opening. Exceptions and derogations have
their place, but they can too easily lock developing countries into the
status quo and put a ceiling on their future possibilities. Technical
assistance is also important in bolstering the capacity of poorer
countries to get the most out of this Round – but it can never become a
substitute for the main event. That has to be a negotiation which
integrates the issues and concerns of developing countries – like those
of all other WTO Members – into every stage leading up to an outcome
which is positive for all, starting with the disciplines on agricultural
subsidies, and tariffs which are more similar to the tariffs on
industrial goods.
This is possible. We should remember that trade is not a zero-sum game.
But achieving it will depend on all participants being prepared to
understand and accommodate the needs of their partners. This Round calls
for nothing less than a new mindset among negotiators, from developed
and developing countries alike, where we banish the ghost of
mercantilism and set these negotiations firmly in the context of our
common interest in a world where economic growth is more widely shared.
The importance of trade to developing countries cannot be
overemphasized. It is generally accepted that trade is an engine of
economic growth and sustainable development. During the last two
decades, a significant number of developing countries have implemented
far-ranging reforms with the aim of increasing their exports,
diversifying their economies and integrating them into the global
economy.
To some extent, these reforms have started to produce results. For the
last decade, developing countries recorded an average merchandise export
growth rate which is one-third higher than that of developed countries.
The dollar value of the exports of least-developed countries, whose
economies have mostly stagnated, have also increased by the same rate.
The year 2004 saw a marked increase in the share of developing countries
in world trade to 31 per cent, the highest in fifty years. This was due
not to the rise in oil prices but to the increase in their share in the
export of manufactures. They now account for 28 per cent of world
exports of manufactures which is significant considering that their
share a decade ago was only 22 per cent.
While these figures are impressive and may give reason for optimism, the
fact remains that still too few developing countries have benefited so
far from the expansion in world trade. The 50 least-developed countries
account for less than 1% (one per cent) of world trade. The share of
sub-Saharan African countries in world trade is also not encouraging; it
was a mere 2 per cent last year. Overall, the evidence is clear that the
developing countries which have derived the greatest benefits from the
multilateral trading system, and most successfully integrated their
economies into the global economy, are those which have pursued sound
economic policies, including open trade and investment regimes. Latin
America offers us some significant examples of this point.
Economic growth and sustainable development will be all the more
meaningful and evident as developing countries play an active part in
the negotiations and undertake commitments towards each other as well as
with their developed counterparts. Undertaking commitments should not be
seen negatively. Lowering or abolishing barriers greatly reduces the
scope for monopolistic practices which stifle competition and growth.
Increasing transparency creates more of a level playing field among
economic actors. In an enabling environment, firms can innovate and
increase their export of goods and services, through access to cheaper
and better quality inputs or components from a wider range of sources.
The multilateral trading system offers developing countries the
opportunity to adopt and lock in reforms which underpin economic growth
and development. It gives added credibility to policies implemented by
governments and sends clear signals to investors about a country's
commitment to an open economy.
In considering whether a developing country has secure access in the
markets of its major trading partners, investors are more likely to
attach greater weight to commitments made under the auspices of the WTO.
This is because amending or withdrawing them carries with it a cost in
terms of providing compensation to the Members which would be affected
by the measure, or the risk of those affected countries suspending
concessions.
To improve the security and predictability of their trade regimes,
developing countries have, on average, committed not to raise the import
tariffs of three-quarters of their tariff lines for industrial products
during the Uruguay Round. Latin American countries have showed great
leadership here, with commitments on market access approaching 100 per
cent. The current negotiations offer an opportunity to all developing
countries to increase the level of their bindings and reduce their
tariffs on each other's exports. While the share of developing countries
in world trade is 31 per cent, they pay over 40 per cent of the world's
total tariff bill. One reason for this anomalous situation is the high
tariffs developing countries generally impose on each other's exports.
With trade between developing countries growing rapidly, these countries
have every interest in reducing their own tariffs on both industrial and
agricultural goods during the current negotiations, as well as those
they face in wealthier markets.
A significant reduction in the overall level of tariffs and non tariff
barriers will increase the market access opportunities of developing
countries and facilitate the diversification of their economies. It
would assist in adding value to raw materials and reducing dependence on
primary commodities. This in turn generates growth in employment and
investment.
Similarly, to reap the maximum benefit from the Services negotiations,
developing countries have an interest in opening up as many services
sectors as possible. Reasonable commitments should enable them to
attract foreign investment in certain critical sectors of the economy
including financial services, telecommunications, transport and tourism.
I should emphasize that – contrary to some claims - the WTO agreement on
services is a flexible one. It does not impede the right of governments
to decide which services sectors to open nor to monitor or regulate the
activities of foreign service suppliers.
To sum up, developing countries have a great stake in the multilateral
trading system, but much of this still remains a potential. In order to
realize this potential, developing countries themselves need to engage
actively in all aspects of the work of the WTO. After all, they
constitute over three-quarters of the membership of the organization.
Regional and bilateral trade liberalization initiatives have been a
growth area in recent years, not least on this continent. Today, almost
all WTO Members are a party to at least one regional trade agreement and
many, including Peru, are in the process of concluding further
agreements. Clearly, difficult and slow progress at the multilateral
level will generate interest in other possibilities. This happened in
the Uruguay Round and it has happened in the Doha Round. However,
despite the contribution that bilateral and regional trade agreements
can make towards further trade liberalization we all also know that they
cannot be a substitute for the multilateral trading system. In the long
run the limitations in terms of coverage and balance will become costly
in comparison to an unified system of shared and enforceable
commitments. They can and do complement the multilateral system; they
cannot replace it. Concern about the slow rate of progress in the
multilateral system is not a reason to turn away from it, but a reason
to put more effort into moving it forward.
To sum up, where is the multilateral trading system heading to, and who
is likely to benefit from such a system ? Let me conclude this
presentation by expressing my firm belief that improved market opening,
lower subsidies and a predictable and more stable set of rules for
international trade, which are to result from the current Round, will
not change the current system dramatically. The system is already in
place, the WTO is a solid organization. But the results of this round
can make this system better, adapt it to the realities of the XXI
century. And this will benefit, in a particular way, countries like
Peru, on which support the WTO – and myself – hope to continue to count.
Thank you for your attention