WTO NEWS: SPEECHES — DG PASCAL LAMY

“The Doha Development Agenda: is time running out on U.S. leadership?”
Doha Series Luncheon, US Chamber of Commerce, Washington, 23 April 2007

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Dear Tom,

Ladies and Gentlemen

I am very happy to be back in Washington to share with all of you some thoughts on the on-going WTO Doha Development Agenda negotiations.

Tom's choice of the title of this event: “Is Time Running out on US Leadership?” may sound rather provocative here in Washington. But let me reassure you, it is the same question that I get about Brussels, New Delhi, Brasilia or Beijing.

During the last Round of trade negotiations in 1995, the Uruguay Round, US and EU leadership was determinant to the fate of the Round. Today, leadership from these two economic giants is a necessary albeit insufficient condition for a success of the Round. Leadership from key emerging players and ownership by developing countries is now just as important.

Today we know that the Doha Development Round will not be concluded until and unless all these participants are ready to walk the extra mile and table additional contributions to the collective success of this multilateral enterprise. It is clear that the contributions will be linked to the degree of development and wealth of each participant, with the world poorest countries making the smallest contribution. It is also clear that no one will be asked to move first: countries will have to move in concert, like a big orchestra playing to the same tune.

For the moment, a group of major actors — the EU, US, Brazil, India — despite being politically committed to concluding this negotiation by around the end of this year, are somewhat paralysed by fear that any move in the negotiation by any one of them will be pocketed by the others and will not lead to reciprocal moves. They are locked in a sort of “prisoner's dilemma”, as if the only concern of each individual player would be maximizing his/her own payoff, without any concern for the other player's payoff. It is as if the cooperation, essential to the multilateral trading system, was dominated by withdrawing, so that the only possible balance for the game would be for all players to withdraw.

As we mark the 60th anniversary of the creation of the multilateral trading system, it is time to go back to the basics of trade negotiations, a win-win game where the sum of the collective gains is certainly much larger than the contribution each participant makes.

Trade has been and is an incredibly powerful engine of growth for the United States. Just in the last 10 years trade has helped raise the US national economic output by nearly 50% and over the same period the US economy added nearly 19 million jobs. Trade has contributed to the strength of the services sector, which employ 8 out of 10 Americans. Indeed, services represent today 30% of US exports and the US runs a surplus with the rest of the world. In manufactures, since the entry into force of the Uruguay Round over 10 years ago now, US exports have more than doubled. One in five manufacturing jobs in the US is directly linked to exports, that is, an estimated 5.2 million jobs. A quarter of US agriculture production is exported abroad. Agricultural exports support around one million jobs.

All this points in a clear direction: trade is a vital component of the US economy. Since the US is a relatively open economy, with trade barriers being among the lowest in the world, it is clearly in the US interest to ensure a reduction of barriers to trade abroad. And this is why it is in the best interest of the United States to ensure a robust and rapid conclusion of the Doha Round.

Given the complexities of a multilateral deal involving 150 members and covering over 30 topics, I know that many countries — and the US is no exception to this — may be tempted to give priority to bilateral deals. This is nothing new. While bilateral agreements can be a useful complement, I do not believe they can substitute a strong multilateral trading system. Bilateral agreements are by their very nature discriminatory. They have obvious limitations in terms of issues covered since they do not tackle the toughest areas where trade restrictive and distorting measures, such as subsidies, still prevail. They may lead to trade diversion as opposed to trade creation. And they complicate the trading environment of economic operators who have to abide by a spaghetti bowl of different rules. In short, bilateral agreements are not the easy way out.

But while freer trade is key to the growth of the US economy, here as in many other countries around the world, concerns are growing over the current pace of global economic integration, of which trade opening is seen as a salient element. Similar episodes have occurred in the past, but today's scale and pace is unprecedented and is creating frictions which are resulting in a sort of “malaise” about trade. Shifts in production structures impose costs on workers and entrepreneurs in some industries and leads to constituencies opposing greater economic integration. There are also growing concerns over the impact on the environment or the effects for the weakest countries. It is therefore clear that if we are to progress towards freer trade, policymakers need to make sure that the benefits of greater global economic integration are better shared and that the instruments to help those affected by the changes are adapted to today's new circumstances.

Building a bi-partisan consensus based on the above is what I see taking place today in the US. The hearings that were held in the House Ways and Means Committee and in the Senate Finance Committee examined many of these issues, evaluated advantages and disadvantages and discussed them thoroughly to build a trade agenda for America's people. And I must commend the open and transparent way in which this was done.

But as the US discusses these issues, the world watches carefully to read the commitment of the US Administration and Congress to the Doha Round. Signals coming out of Washington on the extension of Trade Promotion Authority, on the shaping of the new Farm Bill or over the future Trade Adjustment Assistance, even if clearly US internal affairs, are read with great attention by trade negotiators around the world, and especially in Geneva.

Take the example of the renewal of Trade Promotion Authority. It is clear that the contract between the two branches of government is an internal US matter. It is also clear that legally speaking, having TPA on the table will only be needed to enact the results of a Doha Round agreement and does not prevent the Administration from negotiating with WTO partners. But many US trade partners consider that no movement on TPA means that the US has lost faith in the Doha Round. As if the US was shifting gear from “drive” into “park”. This would certainly have an impact on the dynamics of the negotiations. At the same time, there is recognition in Geneva that progress in the Doha Round and the prospects for a rapid conclusion of the negotiations are also likely to be taken into account by members of the US Congress as they discuss the renewal of TPA. It is therefore no surprise that many WTO members believe we have a window of opportunity which will close unless there is clear progress over the coming weeks.

Recently major WTO players meeting in Delhi pledged to conclude the Doha Round by the end of this year, when the stars will be aligned. If we take just agriculture and industrial goods, working back from the conclusion of the Round, participants will have to elaborate their detailed schedules of commitments, which in turn will have to reflect agreed modalities. And to achieve those modalities, a cross-cutting negotiation will need to take place on both issues. And this does not take account of progress needed on services, trade facilitation, rules or the environment, just to name a few of the topics on the agenda. I am not offering a specific timeline for these steps, but it is obvious to that there is precious little time to waste.

We now need to see serious substantive engagement by all WTO members in the multilateral process in Geneva, under the guidance of the Negotiating Group Chairs. We need all members to support the work of these Chairs with constructive inputs and a real willingness to negotiate, which means, of course, defending their positions, but also showing the necessary flexibility. The multilateral process will obviously greatly benefit from input coming from smaller group discussions. But it is also clear that now we cannot afford to let the multilateral process wait upon the timing of negotiations among a handful of members.

If WTO members do not energise the negotiations soon, governments will be forced to confront the unpleasant reality of failure. This will mean throwing overboard the very significant package of trade opening and rule-making that is available and stripping the global economy of one of its most powerful and enduring sources of strength and stability.

It will also mean failure to address remaining inequities in the multilateral trading system. Improving trade opportunities for developing countries, eliminating trade restrictions that continue to penalize their exports and handicap their economic growth, is at the heart of today's international agenda to promote political stability, development and alleviate poverty.

Finally, it would mean failure of the first WTO trade Round, and of one of the most important exercises in multilateral economic cooperation of the past decade. The basis for international economic cooperation can never be taken for granted. The complexity of the process of globalisation presents a constant political challenge to measure up to its critics and to manage economic adjustment, particularly at the national level. The rules-based, multilateral trading system is there to help governments deal with that challenge. Failure to complete the Doha Round would undermine the system and weaken the ability of member governments, individually and collectively, to stand firm against trade protectionism. That is a risk which we cannot afford to take lightly.

A breakthrough in the negotiations in the next few weeks would send a much needed message of confidence, that WTO members remain committed to open markets and multilateral rules and that the foundations of the global economy are reinforced. This is perfectly doable. The challenge is less technical, than political. It is about leadership, about compromise, about countries recognizing their common interest in success and the collective costs of failure.

I am confident that the United States will put all its energy and commitment into concluding the Doha Round. US leadership is always required to sustain the WTO but the exercise of this leadership by the Administration and Congress in the weeks and months ahead will be key to the fate of the Round. At this critical juncture in the negotiations, the WTO urgently needs their full support.

Let me conclude by thanking the US Chamber of Commerce for your contribution to the strengthening of the multilateral trading system. Your full support will be crucial for the US Administration and Congress over the coming months.

Thank you for your attention

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