WTO news: what’s been happening in the WTO

Hong Kong
Wednesday 28 November, 2001

WTO and the new Round of trade talks

14th general meeting of the Pacific Economic Cooperation Council

Ladies and gentlemen

By any standards, the 4th Ministerial conference of the WTO was an extraordinarily successful meeting. We tend to talk rather glibly about the historic importance of such events, but this time, for once, the claim is not exaggerated; the meeting at Doha will be remembered as a turning-point in the history of the WTO and the trading system and in relations between developed and developing countries within that system.

Before I talk about where we go from Doha, I think it is worthwhile to reflect on the value of the multilateral trading system, indeed what mankind has done over the past 50 years to advance the human condition. I do this because “alarmists” have painted a picture of a world gone backwards over the past fifty years and I think the opposite.

The capacity of the human species to learn, adapt and improve marks us out as different to other species. This observation may seem a little hollow given a new type of war being fought on every front against terrorism when so many people are asking; why war? Will we ever learn? Yes, we have learnt, that's why the war. We make mistakes but we correct them.

That's why the Marshall Plan, the mirror opposite of the vicious Versailles Treaty, was implemented — the first case in history when the victors refinanced the vanquished. The great depression was made more lethal and deeper by protectionism which helped produce a second world war and gave life to the twin tyrannies of last century, fascism and Marxism, both of which have been destroyed and discredited. We suffered and learnt. That's why the GATT/WTO was created to build stable open trading rules, the UN and its agencies to promote political peace and to alleviate the problems and poverty that allow political hate to fester. Imperfect mechanisms, but the world would be a more dangerous place without them.

More has been done to reduce poverty in the past 50 years than the previous 500 years, yet many protest 'not enough' and have created a myth about globalization. Globalization is not new, historians argue we had about the same level of trade 100 years ago as today. Certainly more people were on the move then than now. We should not reject criticism and scrutiny, nor should we be smug.

It's this never ending debate that drives us to improve.

  • In a century, Illiteracy has fallen from 75 per cent to below 20 per cent in developing countries. In 1960 most people in developing countries spent only a third as long in school as people in industrialized countries, now it's half as long.
  • In 1900 people lived for 30 years on average, now they live on average 67 years. In 1950 life expectancy in the developing world reached 41, in 1998 it was 65. From being expected to die by age 24 in 1930, China has increased life expectancy to 70, a three-fold increase in two generations. In 1950, 18 per cent or almost every fifth child died in the developing world, in 1995, 6 per cent. In 1950 almost 6 per cent of all new-borns did not survive, now 1 per cent. Developing countries have the same infant mortality rate as the industrialized countries in 1950.
  • The share of people in developing countries with access to clean water has increased 30 per cent in 1970 to 80 per cent in 2000. Over 30 years the share of people with access to sanitation has more than doubled.
  • Despite the doubling of the US GNP over the past 30 years, they are using less steel. US population is up by a third but vehicle emissions have dropped by a third. Over the next ten years despite traffic increases, emissions will decrease by 20 per cent in the US and 30 per cent in the UK. The last 15-20 years has seen lead concentration levels fall by over 90 per cent. EU emissions have been cut by 60 per cent since 1984.
  • In 1992, more than 21 per cent of European beaches were polluted, by 1999 only 5 per cent were polluted. When measured naturally through fish in the US or through herring gull eggs in the great lakes, pollutant concentrations have declined by 80-90 per cent.
  • London is cleaner than it has been for a 100 years and pollution is New Delhi and Beijing is about where London was 50 years ago.
  • Remember the headlines about acid rain and the number of species that face extinction? Acid rain in the end affected 0.5 per cent of European forests,
  • Thirty years ago workers in Chinese Taipei earned USD 7.50 a month, now its USD 7.50 per hour.

Open societies, open economies do better. Development means security, means peace, means higher living standards and better outcomes in terms of the human condition and human rights improve. That’s why I wanted this job.

But now let's consider what was achieved at Doha. The accession of China and Chiese Taipei to the organization. The agreement on a massive programme of work and negotiations will set the content and direction of work in the WTO for years to come. This programme responds to the enormous changes in the Membership of the Organization. Ministers have deliberately set themselves a very demanding target in agreeing a three-year deadline for this huge work programme. But it can be done.

I have no doubt that to a large extent we owe the success in Doha to the political sense, and sense of responsibility, of the Ministers who attended. Raising a technical debate to the political level does not always produce the wider vision we hope for, but this time it certainly did. There was a conscious response to the need for solidarity in the face of dangerous economic and political uncertainty. For me, one of the most heartening aspects of the process was the readiness of Ministers to recognize and accommodate the needs of their colleagues, and to make concessions to achieve consensus. The agreement to negotiate on tariff peaks and high tariffs is one example of this. Another is the decision to negotiate on anti-dumping disciplines, which has long been a very sensitive issue and which was a major obstacle to agreement in Seattle.

The outcome at Doha brings to an end the uncertainty, loss of momentum and lack of confidence created by the equally spectacular failure at Seattle two years earlier. As Bob Zoellick said in the final plenary meeting “we have removed the stain of Seattle”. The issues facing Ministers were essentially the same as those they failed to resolve at Seattle. A second failure would have fatally weakened the Organization: the question would have been posed, inescapably, whether it had become impossible, given our greatly expanded Membership and the huge disparities between Members, to move the work of the Organization forward through our mechanism of consensus decisions.

We learned some hard lessons in Seattle, and were resolved not to repeat them in preparing for Doha. As a result the consultations which produced the draft texts sent to Ministers were undoubtedly the most transparent and inclusive that we have ever seen, as was the process in Doha. There is no doubt that improved working methods contributed enormously to the spirit of the meeting and to the outcome.

If I can now turn to the substance of the work programme agreed at Doha;

First, it invigorates and extends the negotiations for liberalizing access to markets which are the core business of the WTO. The negotiations on agriculture and services will move into a higher gear. There are big gains to be made in both of these areas; in services, for example the World Bank has estimated that welfare gains from a 50% cut in services sector protection would be five times larger than for non-services sector trade liberalisation. The agreement to work towards the phasing out of export subsidies in agriculture was vital to the agreement at Doha and is critically important for the future of agricultural trade. Everybody has recognized for years that these subsidy policies are unsustainable — in OECD countries subsidies are running at close to $1 billion a day. Abolishing these subsidies would be worth three times all the ODA and eight times all the debt relief extended so far. Subsidies are unfair to the consumers who pay for them and damaging to countries who cannot compete with them. Now we have a real prospect of doing something about it.

In addition, Ministers agreed to negotiations on market access, covering both tariffs and non-tariff barriers, for industrial products. The mandate is comprehensive, specifically covering peak tariffs and tariff escalation, which are key objectives for developing countries, as well as high tariffs. It is estimated about two-thirds of the benefits of further reductions in industrial tariffs will go to developing countries, whose share in exports of manufactures has risen dramatically in recent years.

Cutting barriers to trade would be like adding two more Chinas to the world economy. Three quarters of all the benefits from cutting industrial tariffs would go to developing countries. Each year developing countries command a larger and larger share of the industrialized world's imports, from 15 per cent in 1990 to almost 25 percent in 2000. Half of Japan's manufactured imports come from developing countries. For the US, the figure is 45 per cent and rising.

There is enough in the Doha package for everyone. Trade is not the only development factor, but it is an important motor for growth. Other issues such as good governance, debt relief, technology and investment matter.

The negotiating agenda also covers a range of “new issues” which were among the most heavily negotiated subjects at Doha. Thus, it has been agreed to establish multilateral frameworks of rules for competition policy and foreign direct investment, with negotiations proper beginning after the Fifth Ministerial Conference if the Members so agree by explicit consensus. A multilateral framework could bring more coherence to an area now dependent on a huge number of bilateral investment treaties: moving from a system based mainly on bilateral arrangements to one organized around a single multilateral framework brings to mind the reasoning which lay behind the creation of the GATT itself fifty years ago.

The Declaration also provides for possible negotiations after the Fifth Ministerial on transparency in government procurement and on trade facilitation. The trade facilitation mandate addresses all of the issues relevant to the movement of goods in international trade, and a successful negotiation would go far to reduce the costs and delays involved in doing international business. Many of these costs fall on governments, and countries with small and over- stretched administrations stand to benefit greatly from increased efficiency at the ports.

Trade and the environment was one of the most difficult issues at Doha. For the European Union it was a high political priority to demonstrate that the WTO is capable of addressing public concerns about the impact of trade on sustainable development and the protection of the environment, while for many developing countries the issue was seen as a potential cover for protectionism. The commitment to negotiate on the environment is focused on the relationship between existing WTO rules and the trade obligations in Multilateral Environmental Agreements, and on the reduction or elimination of tariff and non-tariff barriers to environmental goods and services. In its continuing work programme the Committee on Trade and Environment is directed to give particular attention to the effect of environmental measures on market access, the relevant provisions of the TRIPS Agreement and labelling requirements for environmental purposes. The Committee will make recommendations to the Fifth Session on future action, which may include negotiations on these subjects. If I am allowed to state a personal view, I must say that I am pleased that governments have been able to make a forward move in this area: they cannot afford to let it be said that the WTO system is deaf to widely shared public concerns, because trade liberalization also needs public support; it has many enemies.

The first major success of the conference was the completion of the Ministerial Declaration on TRIPs and Public Health. This had been a very difficult question, impossible to settle in Geneva, which raised economic and humanitarian issues of the highest importance. A delicate balance had to be struck between every Member government's right to act to protect public health and confront health crises and the need to avoid undermining the TRIPS Agreement, which could easily lead to the drying up of the investment funds needed for research into the drugs of the future. The job was well done, making it clear that there are important elements of flexibility in the TRIPS Agreement which can be used to respond to health emergencies. They include the right to grant compulsory licenses and to determine the grounds upon which they should be granted, and the right to establish national regimes for the exhaustion of intellectual property rights. The declaration removed a critical point of discord between developed and developing countries, and it has been welcomed by governments, by public health lobbies and by the pharmaceutical industry.

It has been said by some anti-globalisation activists that the Doha Agreements are a disaster for developing countries. This is a truly spectacular misreading of what happened there. For some of these critics, there is no conceivable text or process that would not be represented as a conspiracy against developing countries and the poor, but no unprejudiced reader of the Doha texts could fail to appreciate the common theme that runs through almost every paragraph, which is the fuller integration of developing countries into the trading system. Provision is made in almost every area for capacity building to help developed countries participate in and profit from the work. Special and differential treatment provisions will be reviewed and strengthened to make them more effective and operational. The commitments made by Member governments at the Third UN Conference for LDCs were for the first time translated into the WTO; this will improve LDC access to foreign markets and accelerate the accession of LDCs seeking to join the organization. More important, the separate decision on concerns raised by developing countries about the implementation of the Uruguay Round agreements means that nearly forty of these problems have been satisfactorily resolved. Another fifty have been transformed from unilateral requests into multilateral commitments to negotiate and progress these issues.

As I mentioned earlier, the accession of China and Chinese Taipei to the WTO was a massive achievement. Indeed it was enough in itself to make this conference a defining moment in the development of the trading system. These two countries alone, accounted for half of world trade which until now remained outside of WTO rules. Their integration into the WTO is an event of major political and economic importance.

On 10 November in Doha, Minister Shi signed China's accession treaty, a document of around 1,000 pages, the product of fifteen years of complex and arduous negotiations. It brings one of the world's most important trading nations into the rules-based multilateral trading system. WTO membership will provide the 1.3 billion Chinese people with secure, predictable and non-discriminatory access to the markets of 142 trading partners. It will commit China to implement legal and domestic policy reform. For other WTO Members, China's accession will cement and accelerate the benefits of the dramatic liberalization undertaken in China over the last 20 years. After implementing all its commitments, China's average bound tariff level will decrease to 15% for agricultural products. For industrial goods the tariff level will go down to 8.9%. Some tariffs will be eliminated and others reduced. Now that China has a seat at the table, the WTO has a more legitimate claim to be a truly universal organization.

In Chinese Taipei, tariffs, once implemented, will fall an average of just over 4% for industrial goods and to an average of just under 13% for agricultural items. Forecasts predict that a market for imports equivalent to roughly US$1 billion could be created once Chinese Taipei's concessions are fully implemented.

As I stressed on many occasions before the Ministerial meeting, the cost of failure at Doha would have been very high. Many governments would have despaired of getting their concerns addressed in Geneva and would have looked elsewhere. Regional trade agreements would have assumed even greater importance, further marginalizing the poorest countries. The current negotiations on agriculture and trade in services would have run into the sand - destroying hope of bringing an end to the wasteful and damaging abuse of agricultural export subsidies. The concerns of developing countries about the implementation of existing agreements, which have largely dominated the work of the WTO for the past two years, would have been sidelined. Inequities in the system — and they do exist — would have been set in stone. Happily that possibility is now behind us. We can begin to look forward and focus on tackling the many challenges that lie ahead.

Thank you.