World Trade WT/MIN(96)/ST/114
12 December 1996
Singapore, 9-13 December 1996
I am sure that our gracious and very well organized hosts, the Government of Singapore, will understand this and accept that our thanks for their hospitality follow this statement. As a new democracy, as an economy and society in profound transition and as an African country, this meeting is very important. The future of our democracy, the process of reconciliation to build one nation and the yearning of our people for a better life depend on our socio-economic success.
The decisions of this Ministerial Conference and the direction in which they steer the WTO will have a very real impact on those prospects for socio-economic success. This is why South Africa has paid such close attention to the WTO and why we are determined, within the possibilities of our limited capacity, to make a positive contribution to the outcome of this Ministerial Conference.
South Africa has been given the honour and responsibility of being President of UNCTAD. At Midrand UNCTAD IX was under pressure to reform. It did this by accepting that the realities of globalization required an effective concept of partnership between countries at different stages of development, between North and South and between governments and the components of civil society. Along with this came a commitment to dialogue, increased understanding of the differing conditions facing nation States and the need to accommodate such differences.
This requires an effective and facilitatory Secretariat that can respond to needs and enhance dialogue and partnership. The Secretary-General of UNCTAD is achieving this task. In short we are attempting - with success, to change mind-sets, to re-focus activity and to respond to realities and not preconceptions or static positioning.
It is South Africa's submission that it is not UNCTAD alone that has to make this change. It is a challenge for all multilateral organizations. There are necessary changes of mind-sets within the WTO as well. The GATT started out as a small, self-selected and probably elite group of trading nations. Inevitably it grew in size and more developing countries entered the GATT. In 1964 the UNCTAD initiative offered both greater scope for developing countries to be heard but also the potential for tension between GATT and UNCTAD.
As trade in goods and services grew, cross-border investment expanded and technology unified our financial services and knowledge base the emerging realities of what would be called globalization led to the Uruguay Round and the WTO.
The WTO therefore is not the initiator of globalization but an effective response to globalization. It is a great achievement that the WTO is no longer an elite group but it is the home for the trading nations of the world. Moreover, its Members have chosen to conduct crucial economic activities within a set of rules. This is an acknowledgement that trade and the rapid changes in initiatives around finance, services and technology, to mention a few, cannot be left unto market forces alone - rules have to be set and complied with.
This is an important new situation that is now some two years old. For the WTO Ministerial Conference this poses new challenges as to how we proceed to unfold the built-in agenda and address new issues.
Since globalization increases the linkages between us then it follows that the consequences of our different abilities to participate in this process must be dealt with. Trade and investment are both shaped by and themselves shape the overall development of a national economy. These national economies differ in their endowments, historical development and how their governments over the years have managed those economies.
These complexities define the starting points for how easily countries can participate in and comply with the WTO. That there are very stark differences between economies is manifestly clear. The United States, Canada, European Union, Japan, China, Hong Kong, Chinese Taipei, Republic of Korea, Malaysia, Singapore and Thailand between them account for about 80 per cent of both exports and imports in 1995. It is 26 countries that account for this large proportion of world trade. For many of them their trading prominence is relatively recent. There will be shifts in the trading patterns and there is particular growth in Latin America.
The question that arises out of this quantitative domination of trade by relatively few countries is whether there is a risk of the WTO becoming a de facto select group of trading countries once again.
This must not be allowed to happen. If trade liberalization is to benefit growth and development then it must be an inclusive process and not exclusive either for countries or for particular citizens within a country.
How do we, therefore, balance the clear need for rules with the fact that the players are of unequal strength? This can only be done by acknowledging and clearly understanding that there is both great potential in globalization for growth and development and potential dangers of marginalization for many. We must jointly evolve ways to address this reality.
We will not do this if our multilateral organizations, working in their clearly defined areas of competence do not work together. If the WTO becomes the terrain of the strong and UNCTAD the defensive shield of the weak then we destroy a partnership for growth, development and trade.
The reality is that these two organizations can work together and in doing so enhance their work. Distrust by developed countries of one and by developing of the other is not useful. It only encourages less than frank negotiations. It inevitably is cause for a self-fulfilling prophecy. Mutual distrust leads to conduct that confirms in practice the basis for the original mistrust.
We cannot afford this and a concerted effort must be made and made continuously to encourage the cooperation between WTO, UNCTAD, the ILO, UNDP and the Bretton Woods institutions. This does not have to be done by the creation of elaborate organograms and structures of cooperation. It must be done on the basis of need and the complementarity of available resources.
For South Africa, the massive human expenditure in debating "core labour standards" is misplaced. The bulk of world trade takes place between countries where labour standards are high. The reasons for differing cost structures in an economy are complex and to ascribe them to labour standards alone will inevitably become protectionist. Forced labour and child labour are no longer the basis for any nations trade. Where these exist they must be specifically addressed. Core labour standards are the legitimate aspirations of workers and have been widely endorsed in all societies, they must be further promoted. The ILO deals with the establishment, monitoring and enforcement of labour standards and it undertakes a large amount of work related to labour relations and the advancement of socio-economic equity.
The WTO deals with trade and inevitably with wider issues of investment and competition that arise out of the processes of globalization. The processes impact on labour and generates changes in labour markets. This is a self-evident fact that virtually every government continually grapples with. The IMF tells governments as a matter of economic orthodoxy that flexible wages, will attract investment, which will promote trade which will in turn solve balance of payments problems. Do we tell the IMF to keep out of labour issues? No we do not because the link is an economic link. But since the IMF does not really talk to the ILO, their competence in labour markets is low and their advice not always good. The IMF continuously advises on tariff policies - is that not a WTO concern?
We must not lose sight of practicalities. Each multilateral was established because there was a need and a competence has been built to address that need. There must be cooperation and consultation. It is South Africa's view that this failure to cooperate is a prime reason for the very low success rate of the multilateral organizations in promoting development.
However, we must not be understood to imply that the lack of development is caused by the multilaterals. There are barriers - particularly in LDCs - that have to be addressed to facilitate development. But national governments have to assume responsibility for facilitating the process. This is not an easy process. It is a very difficult process.
Each country charts its own way forward. Many developing countries are succeeding and in the main through their own efforts in utilizing outside support and engaging with the global flows of trade and investment.
There can be little doubt that technology now plays an important role. It offers such rich opportunities since it can be defused at the knowledge level more easily than ever before. The challenge is to harness this knowledge into the process of growth and development in the national economy. This cannot in general be done from outside, it requires internal strategies and policies that are implemented with consistency. The truth of the matter is that governments can no longer be only regulators or spectators of economic processes. They have to be intelligent facilitators of, and efficient participants in, economic efficiency and effective social delivery. Clean and transparent governance is what they owe their citizens but it will also facilitate trade and investment.
These changes will and do require investment and FDI plays a crucial role. Whilst the flows of FDI are not dominant in orders of magnitude to total investment, in the case of LDCs they are close to being decisive. FDI brings technology and markets and at present domestic resources are inadequate or consumed by debt servicing. FDI is also crucial for most developing countries since it accesses markets and technology even if a good domestic capacity for resource mobilization exists.
It would seem that to enhance FDI flows the message is clear - developing countries must form their own economic cooperation zones. This is necessary for a number of reasons. The first is that it would appear that a critical mass of investment possibilities is necessary to divert significant investable funds out of the global streams. Secondly, the low intra-developing country trade and investment is detrimental to growth and development in those countries. It has the effect of creating trading enclaves and does not maximize comparative advantage, particularly in Africa, where political boundaries do not coincide with geo-economic possibilities.
Let us take the case of the new SADC Trade Protocol. In this case we have South Africa (an economy in transition) combined with developing and LDC status countries. At stake is whether a grouping of such countries can create a synergy that allows the whole to be greater than the parts.
It is essential that the WTO assists this effort and does not hinder it by way of blind application of rules. We have to begin a serious dialogue on how developing countries link with LDCs in mutually reinforcing regional economic cooperation arrangements without making the WTO a series of exceptional regional agreements.
Current attitudes by developed economies to market access for LDCs are wrong. We need to recognize that the LDCs do not at present constitute an economically destabilizing factor for the developed economies, even if market access were dramatically improved. It is not enough for developed countries to point to the political realities of their agricultural and their other sensitive sectors. We have tried to illustrate the immense socio-economic and eventual political changes the developing world must make to try to engage with globalization. The developed world must do the same. It is self-seeking and ultimately short-sighted for the developed countries to plead all sorts of technical and political reasons for not dismantling agriculture subsidies or failing to ratify labour standards yet ask the developing world to agree to multilateral agreements that require far greater socio-economic and political change by developing countries and in particular the LDCs.
South Africa has not said much on the specific issues that are being discussed in this Ministerial Conference. By now we have had occasion to state those views on many occasions.
However, we believe that we, in SADC, have taken a very important step in agreeing on a broad common framework in our approach to this Meeting. Tanzania in speaking on behalf of SADC have ably set out these positions.
In this statement South Africa has focused more on the need to cooperate and create a real partnership of functions through pragmatic working relations. We believe this will have the added advantage of saving time in future meetings so that we can get down to realistic advances in the vital work of the WTO.