Doctor Grigore Belostecinic, President of the Academy of Economic Studies,
Staff and students of the Academy of Economic Studies,
Ladies and Gentlemen
Buna di-mi-nea-ta (good morning). It is my pleasure to be here with you today.
I have the good fortune to be involved in the work of the World Trade Organization, the WTO, at a critical time in its relatively short life. The system faces challenges some of which are very well known and some that are less public. Populism is on the rise in many countries. Trade is blamed for the consequences of other forces, such as technological change, and inadequate adjustment policies. The U.S. and China are engaging in a trade war. The U.S. President clearly states that he is dissatisfied with the WTO, the world’s trading rules as they now stand and as they are administered. Maintaining economic integration in Europe, given Brexit, and until recently in North America, was and is challenging. Bilateral rather than multilateral agreements are said by some to be easier to reach and even more desirable. The legitimacy and effectiveness of the current multilateral trading system, its rules and institutions, are being questioned, not by all, but by voices significant enough that they must be heard and answered.
Before one becomes too pessimistic, I would like to stress that nearly all world trade, which for merchandise exceeds $11 trillion, continues to flow every bit as freely as it did since the WTO was established 23 years ago, building on the foundation of 1947 GATT. This is due to the WTO rules holding for most trade.
Despite the recitation of a litany of challenges, I am optimistic that there are good outcomes that will emerge from the current ferment. I acknowledge, along with Chinese Premier Zhou En-Lai when asked about what effect the French Revolution had, he allegedly responded, “it is too early to say”. We do not know how all this will turn out in the world of trade, but there is reason to believe that the system can be brought to a better place.
The starting point is that all WTO members profess that they agree on the importance of the multilateral trading system. Sustainable trade relations require fundamental rules like any other system. The alternative is chaos. Even a Member which has recently been critical of the WTO has admitted that if the WTO did not exist, it would have to be created.
Today we live in a globalized world. Economic decisions that are taken in one part of the world can make a lasting impact on the other side of the world. As students studying economics, you know how interlinked and interdependent economies are. No country regardless of its economic size and economic capacity can afford to be isolated from the global economic system and rules, or it will simply stagnate.
The world is not always what we would hope it to be. Relations among all countries are not always harmonious - not in geopolitical terms, and not in economic terms. International relations (known in various universities as “political science”, and in my college, simply as “government”) is the study of how to manage the interface between and among sovereigns, generally countries, but in Europe, also the European Union in its interactions with others.
What is needed daily and over longer perods of time is a way to manage problems and to find solutions. The broad term for this process is “governance” but this term suggests supra-national sovereignty, and as there is no global sovereign, sovereignty is lodged at a much more local level. Therefore other means are needed for management of economic relations. Optimally the framework for international cooperation is created through international agreements.
We are fortunate to have inherited a post World War II international economic order that has fostered economic growth, increased incomes in all countries and laid the basis for an era of general peace, and continues to do so.
The World Trade Organization was established 23 years ago replacing the General Agreement on Tariffs and Trade (GATT). The GATT was founded in 1948 together with the Bretton Woods institutions known as the World Bank and the International Monetary Fund, to provide an international economic order for reconstructing and developing the world economy. Out of the destruction of that great war, much of the world community came together to establish rules and disciplines that provide the world today with the current multilateral economic system. The desire for peace and security drove the creation of today’s global economic system that continues to function today.
Since WTO was created, its membership has expanded to 164 members, and covers over 98% of global trade. The Republic of Moldova applied to become a WTO member in 1993 shortly after its independence and after seven years and seven months of negotiations, Moldova became the 142nd member of the WTO in 2001. The WTO accession and membership is a stepping stone to global integration. It provides Moldovan business with an opportunity to gain access to the worlds markets and products, for the benefit of its people, as has been the case for many countries which have successfully completed the accession process.
Today conflict-affected countries for example Afghanistan and Liberia, the last two to join the WTO, and others such as Somalia, South Sudan and Sudan seek to join. They do so because economic growth through domestic reform and integration into the world economy, is seen by each as a vitally important path to better lives for its peoples, providing greater stability, and a better chance at maintaining peace.
Trade negotiators, unless they are from a country seeking to enter the WTO or representing a new member, do not on a daily basis cite or perhaps even think of these fundamental values that form the foundation of the multilateral trading system, At senior political levels, the multiilateral trading system was said, when the subject came up, to be vitally important, but this basic truth did not necessarily show up in policy initiatives and positions taken in Geneva. Often more mundane matters occupied the vast majority of attention of those who worked on trade – whether chickens should be dipped in a chlorine solution to kill off salmonella, or hormones should be fed to beef, or whether tariffs should be lowered on environmental goods or be at zero for an increasing number of information technology products. For trade ministers, regional integration, such as was involved in the Trans Pacific Partnership or bilateral agreements such as the EU-Canada Free Trade Agreement, were at the top of the list of concerns.
This was true of business as well. The world trading system seemed either good enough or was just too difficult to improve, so the WTO was for the most part taken for granted, and until recently largely ignored by most of the members and by stakeholders. At least that is my impression of how matters stood.
Following the Second World War there were eight great “rounds” of trade negotiations. The last round that was concluded successfully was launched in Punta del Este, Uruguay in September 1986 with the 20 agreements finally being signed at Marrakesh in April 1994. When I was in government, I lived in Geneva for a while to represent the United States during the 7th round of negotiations, the Tokyo Round. More recently an attempt was made at a ninth round, called the Doha Development Agenda, initiated in Qatar in 2001, in the shadow of the New York attack of 9-11. It has not yielded a package of agreements.
When I taught a course a few years ago at the Monterey (California) Institute of International Relations, I conducted a simulation of multilateral trade negotiations,the DDA. The students chose countries to represent. The students from China enthusiastically chose to be the United States delegation, and did a great job. I consulted with current senior trade negotiators so that the instructions that I issued from respective governments to their student delegations were an accurate reflection of countries’ positions. The instructions were mutually exclusive - that is, there was no way that any agreement could emerge. This reflected then current reality. I then played the role of a hypothetically all-powerful WTO Director General and forced the student delegates to exceed their instructions, and we successfully concluded the Doha Development Round.
The lesson in this is that to reach international agreements, difficult compromises have to be made. Countries’ interests differ. Negotiations reach a positive result for all if there is willingness to do a bit more for the sake of maintaining and improving the multilateral trading system – to make a net contribution.
What I will suggest today is that we perform a thought experiment here and now, of how we can construct an improved international trading system. I will provide the questions and you can reflect on the answers. Time permitting we can discuss some of your possible outcomes, but you can take the issues back as an informal assignment to be worked on later, either in class or individually. This is a pertinent simulation because WTO members are as we speak actually engaged in this same exercise to one extent or another, in informal groupings and in capitals.
Start with the following premise, which has guided world trade for over 70 years – multilateral rules are potentially more important to the world than all other trade agreements because in principle all countries should be able to trade equally. This was the vision of Franklin Roosevelt and Winston Churchill meeting off the coast of Newfoundland in August of 1941, agreed to as to the shape that they wished to see the world take once the global war was over.
Every social or economic system, whether it is a social club, a church, a stock exchange, an NGO (non-governmental organization), a city, a country, or an international organization requires management. In the case of these organizations and also a world trade organization, it needs to have three basic elements: a way to make rules, a way to administer them including knowing whether they are being complied with, and a means of settling disputes.
Governance falls logically into three functions – a legislative function to make rules, an executive function to organize the monitoring of their implementation and a quasi-judicial function to settle disputes.
Now you can decide how to create the ideal or at least a Moldovan Academy of Economic Studies new and improved WTO: To do so, these questions are some that have to be answered: what body or bodies should make the rules, how are they to be adopted, how is compliance to be monitored, and how are differences to be resolved?
We start with 164 diverse economies, How should they agree to new rules? Are they to be applicable to all members in varying degrees due to differences in capabilities and circumstances? Do the Members decide on new rules by unanimity, some other form of consensus, or by voting? The world keeps evolving. How do the rules stay current? What is the balance to be struck between member’s autonomy and the interests of their trading partners? What are the bounds for promoting an industry or agriculture, through protection or subsidy or other measures? What reactions are available if one country’s measures adversely affect the industry, service or agriculture of another?
How can the 164 members have equal knowledge of the conditions under which trade takes place? How can transparency be assured?
What is the best internal structure of the organization? How should the work be organized – to monitor, to initiate new ideas, to conduct analyses? Can the members organize to be more effective? What is the best use of a secretariat?
How are disputes to be settled? How can the legitimacy of dispute settlement be assured, as legitimacy is essential if outcomes are to be accepted and acted upon? Resolving trade disputes is one of the core activities of the WTO. When a member government believes another member government is acting inconsistently with its obligations under a WTO agreement, the complainant government can ask for a dispute settlement. Over 500 disputes have been brought to the WTO and over 350 rulings have been issued since the establishment of the WTO. Dispute settlement is designed to preserve the global trading order which is essential to the health of the global economy.
You have an advantage in grappling with these questions in that if you watch the daily press about trade, you will see many articles in the coming months, starting this week with some news from Ottawa, about WTO members who are wrestling with aspects of these subjects and you can grade WTO members on the quality and timeliness of their efforts.
After your graduation, you will all take up your professions. Some of you will shape domestic policies here at home, some of you will pursue careers abroad, many of you will work in the private sector, in business or in a civil society organization. You will perform different jobs but whether it is in your community, your country, your region, or for the planet, you can make a positive contribution. At this university, you will be given tools to deal with the challenges you will meet, and you will hone those tools through years of experience. Wherever you serve, you may, and I hope will, have a chance to shape reality for the better.
Much in the world of trade will change going forward, largely due to the emergence of new technologies. Trade will move in different channels and consist of different goods, services and products of the mind. As Jack Ma, Executive Chairman of China's Alibaba Group, said at the WTO Public Forum early this month: "We cannot stop technology. The only thing you can do is to embrace it." In this context, it is essential that the WTO adapts to future changes in the world trade.
As a WTO member, Moldova has shown strong commitment to the multilateral trading system and adherence to WTO core principles. It has joined the Government Procurement Agreement in 2016, which can improve public procurement practices. In 2016, Moldova also ratified the Trade Facilitation Agreement and so far, has already implemented approximately half of the commitments. It is hosting WTO events such as the regional workshop on Government Procurement this week. These are important actions which further strengthen the multilateral trading system.
The future evolution of the multilateral trading system is in your generation's hands. It is the primary obligation of each generation to seek to leave the world in better condition than it was when it received it. I can assure you that there will be much left for your generation to accomplish.
The future is not written yet. You and your generation have been given the privilege and responsibility of holding the pen.
I am sure that the WTO can and will be maintained and improved, despite the challenges that it will undoubtedly encounter. Perhaps some of you will take on these challenges.