DEPUTY DIRECTORS-GENERAL

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Ladies and Gentlemen,

As Robert F Kennedy, brother of U.S. President John F. Kennedy and a U.S. Senator, said at the University of Cape Town in 1966 --

Like it or not we live in interesting times. They are times of danger and uncertainty; but they are also more open to the creative energy of men than any other time in history. And everyone here will ultimately be judged --will ultimately judge himself -- on the effort [each] has contributed to building a new world society and the extent to which his ideals and goals have shaped that effort.(1)

Half a century later this is as true as ever. It is certainly relevant when we look at the current state of the global trading system and of relations among major trading countries.

Particularly for those of you studying International Relations, you can recognize the potential beginning of a trade war: when Country A raises tariffs on imports from Country B and Country B responds by raising tariffs on imports from Country A.   An incipient trade war is no longer hypothetical. It is the new reality which is unfolding as we speak.  Yesterday in Geneva, at the WTO, the U.S. filed notice that it would ask that dispute settlement panels be formed against China with respect to intellectual property issues, and against four WTO members for imposing retaliatory tariffs against U.S. exports in relation to U.S. trade restrictions imposed on steel and aluminium. For their part, 13 WTO members filed notices that they would ask for dispute settlement panels against the United States for imposing steel and aluminium tariffs. 

As the United States and China, and others, exchange threats and increased tariffs, the world is watching anxiously to see what the effect will on the global economy.

Whether or not a trade war is already under way, what is clear is that the uncertainty around the tariffs is forcing some businesses to shift production among countries and cut back on hiring. For example, foreign carmakers that employ thousands of workers in the United States are gauging whether tariffs, the main weapon in this war, may compel them to transfer jobs back to the United States or to other countries. 

In one instance BMW, one of the largest exporter of cars from the United States, has reportedly already planned to move some of the production of its popular X3 sports utility vehicle — once made exclusively in South Carolina — to a factory in Shenyang, China.  And it is not just BMW, it is its suppliers that produce for BMW that may be affected.  It is a matter of time before other companies, not only carmakers, will have to make similar decisions, sometimes to move production into the United States to meet new content requirements, sometimes out of the U.S. to supply markets for reasons of economic efficiency or because of increased foreign barriers. 

Fears of a global trade war already affect negatively the value of companies that rely on international trade.  It can also affect stock markets broadly.  This can be the case in any region, whether the U.S. or abroad.   Overall, the Shanghai market is down 24% from the beginning of the year.(2) No doubt this is due to a number of factors, but a continuing trade war is likely a prominent one.

This brings us back to the economic fundamentals. Increased tariffs cause the costs of international trade to increase.  This will affect prices for consumers and the cost of doing business in every market that is affected.  At the same time, increased tariffs can depress the rate of growth more widely.  If the use of tariff increases does not spread further, the effects on global GDP growth are in a range of just under a loss of 0.5 % to a loss of 2.2 %.  This is substantial, although more limited than one would expect, because sourcing patterns shift, exchange rates adjust, and macroeconomic factors swamp trade effects.  But if investor and consumer confidence fall generally, then the effects will be more dramatic, and all negative. 

The economic outlook gets cloudier if retaliation and counter-retaliation become the rule rather than the exception. The effects will not be limited to one country and one industry. In a globalised world, there can be material spill-over impacts in almost every economic sector.

The world has experienced seventy years consisting of a trend toward increased trade and greater economic growth -- lifting literally 100s of millions out of poverty(3), not to mention the absence of global war.  But at least one author, Robert Kagan, in his book The Jungle Grows Back, warns that this period defined by a liberal international order is not normal, but an aberration in human history.  His view is that it will take strong action to maintain what we have, not to mention improving on it. 

The WTO, with its 164 Member countries and covering 98% of world trade, is designed to provide within its framework of rules greater certainty for those engaged in international commerce. This is a vitally important global public good fostering international cooperation on trade issues. The benefits of public goods, however, tend to be invisible and under-recognized. This has led governments and businesses to underinvest in the multilateral trading system, to become complacent with what they have.  While advocacy for trade is now essential. all need to do a better job of supporting trade multilateralism not just with words but with deeds.

International trade is an essential foundation of international peace and prosperity.(4) It is useless to argue about the merits of globalization; the economic interdependence of national economies is now a fact. Global economic stability has relied on a multilateral trading system with its recognized and predictable framework for commercial exchanges. Without it, the world would be poorer and conflict and uncertainty could become the norm.  The purpose of the establishment of the GATT founded in 1948 was to provide an international economic order to rebuild the world economy after World War II and help countries aid development.  It was the desire of the founders to underwrite peace and security through the creation of the multilateral trading system.

The WTO encompassed and succeeded the GATT in 1995. The negotiations that led to the creation of the WTO resulted not only in bringing into international rules new areas such as services and intellectual property, but in the establishment of an organization that could oversee implementation of the commitments made, including global tariff reductions of 40%.  The multilateral trading system which relies on the WTO is not a cure-all, as Nelson Mandela said on the 50th anniversary of the founding of the GATT.  It can make a major positive contribution but other factors are at work.

Income inequality has grown.  Technological change and automation cause disruptions in the workforce.  While economic progress has always provided more jobs than have been lost, this is never seen in advance. This was true when telephone operators at switchboards were replaced by electro-mechanical switches generations ago, and it is true when you think of the jobs that smart phones have replaced. 

Trade is often blamed for the consequences of other forces and policies, not only technological change but inadequate national domestic adjustment policies.  We live in a swiftly changing world, and as many of you belong to the so-called Generation Z(5), growing up with computers in the palm of your hands, you know it better than anyone else.

Technology transforms the way we think, the way we interact and certainly it affects patterns and channels of trade. Trade is faster, easier and truly global today. For instance, Amazon shipped more than 5 billion items worldwide via free one- or two-day shipping in 2017. It also offers one-hour delivery service for customers in the United States.  Alibaba is transforming the market in China.

Just a decade ago ordering food online or booking AirBnB using your phone and a credit card was science fiction. It is still hard to believe, though, that it takes 2.5 seconds to process payment transactions with a banking card.  It is estimated that E-commerce in merchandise will experience double-digit growth by 2020, when sales are expected to exceed USD 4 trillion. The upcoming wave of technological advances, in artificial intelligence (AI), robotics, machine learning tools, and 3-D printing will continue changing the mechanics of trade. Some skills, products and transaction means will become obsolete and be replaced by new ones. And the truth is that we need up-to-date international rules to keep up with changes in the way that trade takes place.

The good news is that all WTO members profess that there is a demand for the multilateral trading system. However, the WTO must adjust to the realities of the 21st century. A conversation between WTO Members about WTO reform is gathering significant momentum.  Just a couple of weeks ago, in Ottawa, a group of Trade Ministers from countries representing roughly 40 percent of world GDP agreed that addressing modern economic and trade issues, and tackling pending and unfinished business is key to ensuring the relevance of the WTO.

Expanding the scope of the issues covered by the WTO – for example, with respect to E-commerce -- is only a part of the ongoing conversations between WTO Members. The more challenging task may well be to address how to improve the current system without prejudice to the core values of the Organization.

  • First, the nature of our times dictates that global governance should be far more prompt and responsive in its decision-making process. The WTO is not an organization with majority rule; it requires consensus among its membership which can be difficult to reach. So, how to get 164 members to agree?

In the Uruguay Round, as the WTO was yet to be created, there was a one-time leverage: any holdouts were risking their membership in the new organization. As the Doha negotiations illustrated, reaching consensus without such a lever is very hard. Launched in November 2001, the Doha talks were intended to conclude by 2005; to date there is no unanimity as to what kind of future the Agenda’s issues have. So, a key question that we need to answer is: how can we ensure that rule-making in the 21st century is not lagging behind the rapid changes in the world of trade?

  • Second, how can we ensure that the WTO principles are respected? Today the dispute settlement system is a central pillar of the WTO, which aims to preserve the rights and obligations of WTO members, and ensure that the rules are enforceable. What will happen to the WTO's dispute settlement system, including the crush of new cases which are now being filed? What should be done to maintain the core strength of the multilateral trading system in the future?

Tackling these and many other questions will require flexible and open approaches from the WTO members.  Good outcomes that can emerge from the current ferment with good will, pragmatism and creativity.

WTO Members are finding ways to work together even in these testing times. The new Joint Initiatives in trade are a case in point. These are ongoing discussions on new issues such as E-commerce; micro, small and medium enterprises; domestic regulation of services,  investment facilitation and gender and trade. Discussions on established trade topics are also continuing in existing WTO bodies.

One of the brightest areas of the multilateral trading system, and one in which I am involved, is the accession of new Members to the WTO.    Right now, there are 22 countries pursuing accession to the WTO, including Belarus.  These countries look forward obtaining the benefits of deeper integration into the world trading system, gaining domestic economic growth through increased trade opportunities.  For some countries that are conflict-affected – such as Sudan, Somalia, South Sudan, Syria and East Timor, increased economic well-being through joining the WTO holds the promise of stability and peace.  This was also true for the last two countries to accede – Afghanistan and Liberia.  Serbia, The Bahamas and Uzbekistan have also reactivated their accession processes.

Belarus is accelerating its accession process.  This is why I am here. There is intensive work within your government and with other governments to move forward on this country joining the WTO.

Governments pursue WTO Membership for a variety of reasons.  Membership in the Organization sends a clear signal to investors about a country's commitment to an open economy, which encourages the inflow of foreign investment and technological know-how.  By committing to a maximum level of tariff protection and eliminating quotas on imports, as required by the WTO, countries create a predictable and transparent framework which improves the business environment and promotes good governance.  Similarly, the establishment of simplified rules on licensing, registration, and customs clearance can have a very positive effect on business.

President Lukashenka has been quoted recently saying that he wants Belarus to be "open to the world, pursue an open policy, and be predictable". Well, this is what the WTO is all about.

Becoming a WTO Member is not an easy process.  For most, a benefit is engaging in extensive domestic reforms in order to qualify for membership.  It also requires active negotiations between WTO Members and the acceding government.  The negotiation process is what determines the specific terms of entry of a country to the WTO.   In fact, since Belarus filed its initial letter of application, some 36 economies - big and small - have gone through this often challenging process, and have emerged as active Members of the Organization.  

So, what are the timelines that Belarus should be looking at?

  • The WTO's 12th Ministerial Conference in June 2020 in Astana, the capital of Kazakhstan, provides a natural target for concluding the accession negotiations of Belarus. This will be the first WTO Ministerial Conference hosted by a recently-acceded WTO Member, as Kazakhstan came into the WTO in 2015. In addition, the host is also a regional partner from the Eurasian Economic Union. Belarus may benefit from goodwill from all sides in support of the conclusion of its accession.
  • For this target to be met, Belarus has approximately 12 to 13 months – until the beginning of 2020 – (i) to close all substantive issues raised in its accession Working Party; and (ii) to conclude the remaining bilateral negotiations on market access issues with interested WTO Members.

Belarus has been very active in its preparations to become a WTO member and the path forward has been identified:

  • Belarus has a platform from which to negotiate its accession.  As a member of the Eurasian Economic Union Belarus has the WTO accession packages of the Russian Federation and Kazakhstan – which are already WTO Members – as clear examples for engaging in negotiations for its terms of entry to the WTO. This is particularly relevant to commitments in the areas falling under the competence of the Eurasian Economic Union.
  • By virtue of its membership in the Union, Belarus is already in fact applying a wide range of WTO disciplines. In many ways, the choice to join the WTO has already been made with Belarus' decision to join the EAEU Agreement.  Four out of five members of the Eurasian Economic Union are already Members of the WTO (the Russian Federation, Kazakhstan, Armenia, and the Kyrgyz Republic). It makes little sense for Belarus to remain on the outside while discussions that affect its economy are taking place in the WTO.

Having said that, keep in mind, that there will be a moment in time when Belarus can have the advantage of your support and commitment to contribute to its membership in the WTO. For that you don’t have to be a negotiator.  Regardless of what role you may have at that moment -- in public service or in the private sector -- your contribution will count.

In future years, it will be your generation which will shape this world.  The true value of education the knowledge and skills acquired, can empower you to help create the world you want to live in. 

The future is in your hands!


Footnotes

  1. Day of Affirmation Address, University of Capetown, Capetown, South Africa, June 6, 1966.  If he were speaking today, he would not have confined himself to expressing himself using the masculine gender.  I am sure that his choice of words at the time reflected the current mode of expression, not his belief in any differentiation by gender. Back to text
  2. https://tradingeconomics.com/china/stock-market. Back to text
  3. The Financial Times estimates that between 1993 and 2015 — a heyday of globalisation — the proportion of the world’s population living in extreme poverty almost halved. International trade has helped to pull billions of people into the global middle class and turned once poverty-stricken countries into wealthy nations. Back to text
  4. Walter Block. Back to text
  5. Typically defined as those born from the mid-1990s to the mid-2000s. Back to text

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