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WTO NEWS: 1995-99 SPEECHES - RENATO RUGGIERO, FORMER DG

25 March 1998
Danish shipowners' association

Address to Danish shipowners' association, Copenhagen

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I want to begin by thanking the Danish Shipowners' Association for this opportunity to address such a distinguished and influential audience.   Denmark has been one of the strongest supporters of the multilateral trading system - and as we mark the system's fiftieth anniversary this year, it is fitting to pay tribute to the contribution one outstanding Dane made to its development.  Finn Olav Gundelach was successively Deputy-Director General of the GATT, where he had a major hand in the success of the Kennedy Round, and a European Commissioner.  His belief in open trade and his vision of its wider significance are qualities we need to recall and reaffirm as we steer the multilateral trading system into the new century. 

I know how important the maritime transport sector is to your country and how much influence Denmark has on maritime policy in the European Union - and therefore how much your opinions count.  I also know that the inclusion of maritime transport in the General Agreement on Trade in Services - or GATS - has met with a certain resistance among you.

But what I want to suggest tonight is that the issue of maritime services negotiations is about to come back to life, as a new round of liberalizing negotiations approaches.  That these negotiations offer the best chance of promoting liberalization and competition in your industry.  And that the best way to take full advantage of these negotiations in two-years' time is to be fully prepared now. 
 

The GATS covers all tradeable services - the only important exception being in the air transport sector.  It therefore covers maritime services, which means that the 132 Members of the WTO may make commitments, enforceable through a powerful dispute settlement mechanism, to allow the shipping industries of other Members to invest and trade in their markets on the same terms as the domestic industry.  There is no possibility that the maritime sector could now be withdrawn from the scope of the Agreement.

But, unfortunately, the impact of the Agreement on shipping has so far been modest.  It is well known that last-minute negotiations in the Uruguay Round between the European Union and the United States failed - leading to a withdrawal of the offers they had made, and the decision to resume negotiations after the Round with a deadline of June 1996.   Even then, of the three services sectors that have been the subject of subsequent negotiation - maritime transport, financial services and basic telecommunications - maritime is the only case in which the negotiations clearly failed.  Only 36 countries have made market access commitments, and the most-favoured-national principle has been suspended for countries which have not made commitments.  Only two countries, Iceland and Norway, added to the market access commitments which they had made in the Uruguay Round.  The US and the EU made no commitments at all - leading to another suspension of the negotiations.

The contrast with our major successes in telecommunications and financial services over the past twelve months is striking.  Both were at least as difficult in technical and political terms as the maritime sector.  And yet both were concluded in 1997 with impressive results and with the essential backing of industries.  The agreement in telecommunications involved 69 countries representing 93 per cent of the global market.  The financial services agreement represented 95 per cent of the global financial services market, and brought trade in banking, insurance, securities, and financial information in the realm of multilateral rules for the first time.  Customers will benefit hugely from the increased competition, increased choice and lower prices that global liberalization will bring.  But industry will also benefit greatly from the new national markets which have been opened, and from the predictability and stability that will flow from enforceable global rules in these sectors.

The simple reality is that the principles of the GATS are as important to your industry as to others - indeed, the most-favoured nation clause owes its existence to the trade and navigation treaties of the past, and national treatment has been the objective of all bilateral maritime agreements for the last 150 years.  More than most other service suppliers, shipowners stand to benefit from the binding of market access commitments and effective dispute settlement because they are so vulnerable to arbitrary customs treatment.  As you well know, every day a ship is blocked in a port costs thousands of dollars.  In the absence of multilateral dispute settlement provisions, the shipowner also faces the danger of unilateral sanctions, such as Section 19 of the US Shipping Act, or EEC Council Regulations.  Even for the country applying them, these are slow and cumbersome, and they carry heavier diplomatic costs than a multilaterally-accepted procedure.  

There are two main reasons why the application of the GATS to maritime transport has inspired some misgiving, if not distrust, in the industry.  The first is the fear that GATS does not go far enough - and that by scheduling specific commitments in GATS certain restrictive practices might be locked in.  I fully understand your desire for ambitious liberalization and full National Treatment.  But this is not a rationale for avoiding future multilateral negotiations in this sector.  Just the opposite.  Restrictive policies are already widely practised without an agreement - and may proliferate.  Outside the GATS process, there is no obligation to remove these restrictions, no mechanism for negotiating them away, and no recourse to dispute settlement.

To say "it is better to steer clear of the GATS than to legitimize practices we disapprove of" is to deprive yourselves of the possibility of attacking these restrictions in future negotiations.  By scheduling these restrictions we are at least explicitly recognizing them as limitations on access or national treatment.  We are also erecting a policy wall against further restrictions.  And if these restrictions are exceeded, then they can be challenged in dispute settlement.
  
More importantly, the dynamic of negotiations in the GATS is that once the system of offers is set in motion it can only move forward:  thus, commitments in the field of financial services, already far-reaching in 1993, were extended once in 1995 and again in 1997 to a degree which seemed inconceivable a few years earlier.  The speed of negotiated change was even more striking in telecommunications.  Liberalization under the GATS has acquired a strong and irreversible momentum.
 
The second common objection to the involvement of maritime in multilateral negotiations is that the industry's interests may be traded off against some objective sought in another sector.  Of course, that argument could be used by every industry.  But the single-sector negotiation on maritime in 1996 failed even to get off the ground:  in the Uruguay Round with a huge agenda and the interests of other exporting industries in mind, the United States at least reached the stage of tabling an offer on maritime, though it was a modest one.  Despite the successes in financial services and telecommunications, experience suggests that difficult objectives such as liberalization in maritime transport are more easily reached in the context of a great negotiation - where trade-offs are possible - than in self-contained negotiations.

Your goal in the next negotiations should be to push hard for liberalization.  Only in the WTO context can you engage the US and other major players in such a debate.  And only in the WTO context can the benefits of liberalization be anchored in mutually binding and enforceable rules.  If there are to be trade-offs, then these trade-offs will only be to your benefit.
  
Making progress in the Maritime Services negotiations will be an important part of moving forward on a much wider trade agenda in the coming years.  Average tariff levels among industrialized nations have come down to less than 4 per cent today from 40 per cent in 1950.  World trade has expanded fourteen fold over the same period.  And we have established the trading order on a firm institutional foundation with the creation of the WTO in 1995 - providing a permanent forum for future negotiations, and a binding mechanism for settling disputes. When China, Russia, and the 29 other candidates including the three Baltic countries join the WTO - and I have every expectation they will - we will have created a truly universal trading system.  An achievement that will be a major contribution, not just to global prosperity, but to global stability and security as well.

I began by noting that Denmark has always had a strong interest in the multilateral system.  And of course no sector exemplifies your worldwide interests more than the maritime sector - a sector which, as a result of advances in shipping capacity and containerization, has been one of the single most powerful engines of globalization. 
 
Deepening dependence on global trade and the need to maintain global competitiveness is central to the broader European agenda as well.  The completion of the single market, the creation of a single currency, the challenge of shaping a common European foreign policy to match a common commercial policy - all of these issues are both familiar and new.  They rose out of the demands for European security.  They will advance because of the need to ensure Europe's competitiveness in a fast-changing world.

As the multilateral trading system enters its next fifty years, the voice of the business community, and the shipping sector in particular, will be critical.  Already Danish business has successfully pushed for global telecommunications liberalization and for free trade in information technologies.  Denmark has been one of the most generous financial contributors to the system - especially towards ending the marginalization of the least-developed countries.  I trust we can continue to count on your support and your guidance, as the WTO begins to chart the trade routes of the future.