DEPUTY DIRECTOR-GENERAL ALAN WM. WOLFF

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I thank WITA for this opportunity to speak to you today on the challenges that the world of trade faces now and America’s place in the world trading system.

President Biden told us in his Inaugural Address that  “It’s time for boldness, for there is so much to do.” He said: “This is certain, I promise you: We will be judged, you and I, by how we resolve these cascading crises of our era.”

I believe that the  WTO will also be judged by this same standard — how well it deals with the crises of our time. 

The WTO must demonstrate soon and visibly that it can deliver on subjects relevant to all those who engage in international trade or are affected by it — which is pretty much everyone.  This is a political challenge that must be taken seriously.  There has to be more than just talk.  It is not enough for government leaders to say that they favor multilateralism and then fail to invest enough to attain results.  

Within these last three weeks there is cause for renewed optimism that the WTO can measure up to the tasks ahead. The new Administration in Washington has restored multilateral cooperation to its place as an essential tenet of U.S. international economic policy.  The importance of this for the ability of the WTO to move forward cannot be overstated.  Second, the selection of a new Director-General for the WTO is being met with enormous enthusiasm among our Members and the Secretariat staff. It is also a welcome relief for myself and my three colleagues, the Deputies-Director General who have stood in, in an acting capacity, for these past five months.

What will the new Director-General and the 164 Members of the WTO face when this new chapter begins?

There is no shortage of current crises —  the pandemic’s threat to health and the global economy, the serious need for economic recovery, the undeniable effects of climate change — all of these together with stubborn and debilitating income inequality. At the same time, the changes brought about by technology are being felt in the digital realm as well as the mechanical, with the phase-out of the internal combustion engine envisaged in the palpably near future even as computer chips have become an indispensable part of automobiles. These are all momentous challenges.

Fortunately, within each of these great challenges lie major opportunities — a time of “peril and possibility,” as President Biden put it.  Without much thinking about it, we rely on the world trading system to lessen the adverse impacts of these crises — moving vaccines, medicines and other medical supplies across borders, moving food from areas of plenty to areas of deficit to relieve hunger, spreading the benefits of technology to peoples around the world with fewer unnecessary encumbrances and costs, and creating new opportunities for a higher standard of living.  The WTO and its predecessor, the GATT, over the last three-quarters of a century have done much to transform the world we live in — overwhelmingly to our benefit.  Now, the trading system needs an update.  It needs to be more responsive, more supple, more fit for purpose, to meet current challenges. 

What should the centerpieces be of the WTO Agenda going forward?

I suggest ten:

  • FIRST: WTO Members must not fail to address Trade and Health
    • When it comes to health, the peoples of the world cannot successfully isolate themselves from each other.  Millions have died around the world from the pandemic, almost half a million in the United States.  The rate of infection worldwide is measured in the hundreds of thousands a day, with a total of over 100 million.  The solution can only be global. The longer the pandemic continues to rage in any part of the world, the greater the risk of dangerous new viral mutations. New research shows that even if the world’s richest countries are able to vaccinate their way to herd immunity, they will face major economic pain unless and until developing countries are able do the same.(1) Countries can be islands. Modern economies cannot.
    • Trade in essential goods and services must flow freely and safely irrespective of borders. Trade has played an invaluable role in the efforts to fight COVID-19.  Even as global trade plummeted in the first half of 2020, cross-border trade soared in products such as personal protective equipment, pulse oximeters, ventilators, and hand sanitizer. Trade in textile face masks grew more than six-fold. Without trade, production volumes would have been lower — and even when domestic supply became available, costs would be higher for urgently needed supplies.
    • The world trading system can and should be improved to deal with this and future pandemics.  Action is overdue.
      • The utmost caution should be exercised in considering export restrictions on vaccines.  The head of the World Health Organization has warned of “vaccine nationalism.”  He is talking about a trade issue. Trading nations should be earnestly discussing at the WTO how the trading system can best meet demand for vaccines. 
      • Existing WTO agreements offer a clear path forward for bolstering the trading system’s contribution to public health:
        • The coverage of the Pharmaceutical Agreement (providing for duty-free treatment for medicines), with all major producing countries a part of it, should be immediately considered.  Coverage of other health-related products should also be addressed.
        • The overdue review of the Information Technology Agreement can occur in the coming months with pandemic-related medical equipment included.
  • SECOND: WTO Members must not fail to address Trade and Economic Recovery.
    • Living fully up to WTO commitments would be a start toward reviving the world economy. The trading system which brought shared prosperity to the world over these last seven decades is not irrelevant to giving a needed boost to the world economy now.  President Biden said in his inaugural address, the United States must lead “not by the example of its power but by the power of its example”.  This is equally important for all major trading countries.
    • Trade restrictive measures should be rolled back.
    • Trade finance must be restored. Here the WTO can contribute with its convening power, bringing together the international financial institutions and major banks as it did a decade ago to deal with the same issue during the financial crisis.
  • THIRD: WTO Members must not fail to address Trade and the Environment.
    • The stewardship of this planet by the nations of this world has been worse than inadequate. Trade can be an important part of the solution. There should be no divisions within the membership on the need to act now.  
    • Trade can lower the cost of decarbonizing the world's economies.
    • WTO Members can conclude negotiations on an Environmental Goods Agreement and begin negotiations on an Environmental Services Agreement.
    • Co-operation will be necessary as countries move to raise the cost of emitting greenhouse gases, with many considering carbon border tax adjustments to prevent carbon leakage.  The alternative to co-operation would be bitter conflict and protracted policy uncertainty. The WTO has an important role to play to deliver the better of these two choices.
  • FOURTH: WTO Members must not fail to address trade in the Global Digital Economy.
    • Change driven by technology is and always will be an irresistible force. It can bring enormous benefits for all. A system designed for the industrial age needs to be updated to provide for this new digital environment where e-commerce must continue to flourish. None should be excluded from the benefits, not workers, not farmers, not those who innovate.  Global e-commerce has the potential of being transformative in creating new opportunities and inclusiveness, given the right rules.  A successful outcome in the Joint Statement Initiative on e-commerce must be a high priority.
  • FIFTH: WTO Members must not fail to provide trade with a Level Playing Field.  
    • Market forces not government intervention must determine competitive outcomes in the market. This fundamental principle of the world trading system is not at odds with countries having needed policy space.  Nor does it dictate the organization of a national economy.  In the absence of this principle being fully understood and applied, the current trading system cannot function as intended.
    • Additional disciplines on subsidies are essential.  All governments with the means to do so have intervened massively in their economies to ease the economic pain resulting from the pandemic. They should recognize that they have a common interest in coordinating the exit from these policies to minimize distortions.
  • SIXTH: WTO Members must not fail to address the central role of trade as a driver of Economic Development
    • It is in the best interests of all WTO Members that developing countries rise to a level of full participants in the rights and obligations of the world trading system
    • The sum of all actions taken in the WTO is to promote the economic development of all of its Members.
    • Enhanced efforts at implementation of the Trade Facilitation Agreement is one path forward.
  • SEVENTH: WTO Members must not fail to make Agricultural Trade less distorted.  This is in the best interests of all.
    • Putting into place better rules on domestic support is an objective welcomed by all Members but largely for some other country than their own.  That must change.
    • The farmer’s basic right to participate fully in the benefits of the digital revolution must be recognized and made real.
  • EIGHTH: WTO Members must not fail to address Trade and Peace.
    • Sustaining peace was a major motivation for the founders of the multilateral trading system.  In the shadow of the last world war, they engaged in a process of building peace through interdependence and prosperity.
    • A core aim for many countries which are in the process of acceding to the WTO today is the need to be integrated into the world economy, to bring about economic growth, stability, and a better chance at maintaining and achieving peace.  They wish to be guided through the reforms needed to join the WTO. 
    • In poor countries with a history of civil conflict, higher per capita income growth is correlated with a lower risk of a resumption of hostilities. Countries that join the WTO typically see a significant increase in economic growth. For Sudan, South Sudan, Timor-Leste, Ethiopia, Iraq, Comoros, Bosnia and Herzegovina, Somalia and Serbia, integration into the world economy offers brighter prospects for development, stability, and sustained peace. 
  • NINTH: WTO Members must restore Balance to the world trading system
    • The 1995 founding of the WTO was a negotiated outcome to which each original signatory subscribed.  It was, by common agreement, balanced at that time.  It is appropriate to ask whether the expectations were met. 
    • The world has changed dramatically in the intervening years.  The impact of global value chains has to be examined.  Unraveling the commercial interrelationships in the world economy is not an option. 
    • WTO rules and levels of obligation need to be re-examined to deal with the realities of the current state of the world.
    • The WTO rights and obligations must be flexible enough to meet both current and foreseeable needs.  
  • TENTH: WTO Members must not fail to address the Governance of the trading system.  
    • WTO agreements are distinguishable from all other trade agreements in that they have always been comprised of enforceable obligations, with the full respect for domestic sovereignty.  
    • Dispute settlement needs to have its outcomes be binding once again upon the litigants in any given case. An updated system with a working appellate stage needs to regain legitimacy in the eyes of all parties who litigate or may litigate.  
    • Means must be found to restore the legislative function, so that global trading rules can be updated and made binding upon all those who choose to be bound.  Serious deliberation needs to occur and solutions found.  Hostage-taking must become a thing of the past.  None of the challenges I have addressed today can be met absent success in breathing new life into the rule-making function of the WTO.  A start in the right direction is to conclude within the next few months the only active negotiation in the WTO at present with a fully multilateral mandate, to rein in fisheries subsidies, and to move the Joint Statement Initiatives, particularly on e-commerce to a positive conclusion.
    • The WTO Director-General and the professional proactive secretariat that she leads must be given a clear mandate to serve as an effective executive for the Members
      • The WTO Secretariat should assure transparency and become the primary source of trade data that Members need in order to make better-informed policy
      • It should engage in active monitoring of trade policies and measures, informing Members of potential problems with current practices and anticipating future challenges
      • The Director-General should use the convening power of her office to bridge differences, making proposals where needed and driving toward positive agreed outcomes
      • The Secretariat should dedicate resources to strategic foresight and have a policy planning office.  It must be prepared to meet challenges seen and not yet seen

These ten challenges are all very large.  Some would say, “Think small. What is realistic, what is manageable?  Judged by the experience of recent years, after all, what is really achievable in terms of an agenda?”, they say.  But I would ask what can be left out?  Is climate change not worthy of attention because there is now a pandemic?  Is creating a work program for agriculture impossible because of ongoing negotiations on fisheries subsidies?  Does protecting fish from subsidized vessels mean we must neglect marine plastics pollution?  Are early harvests impossible for some longer-term subjects because they deprive a later package of agreements of balancing issues?

I recognize the need to put some wins on the board, and that a beginning has to be made. This should not prevent making a serious beginning to respond to all the challenges  demanding trade solutions.  It is a time to launch inquiries, to table proposals, to engage.  

We should be careful not to overstate that which divides the Members of the WTO, whether geopolitical or addressing the need to better address development.  We should see not only obstacles to progress but paths forward.  The WTO will cease to be fully relevant unless it addresses today's problems.

The need for US leadership.

Turning to the role of the United States

The creation of the multilateral trading system was very largely an American project. The United States worked with its allies to build a better world.  It succeeded beyond imagination.  But to move forward, there is now more than one indispensable WTO Member. For most issues, five or six of the largest economies (counting the EU as one), can create a path to meeting current challenges.  None alone can guarantee it, each alone can prevent solutions from being reached.  Although the system now has more than one or two key players, there cannot be a fully functioning multilateral trading system without the full and active participation of the United States, not now, not for the foreseeable future. 

America in the world trading system

The new U.S. administration has announced that it will be leaning towards international cooperation, that it favors multilateralism.  It has said that it seeks more responsiveness to the needs of workers.  Katherine Tai, USTR-designate said in a keynote address on January 12, US trade policy must “benefit regular Americans, communities and workers.”  This starts, she added, with the recognition that Americans are not only consumers but producers and wage-earners. 

Current Gallup polling data show that vastly more Americans say that foreign trade is more of an opportunity for economic growth through increased U.S. exports than a threat to the economy from foreign imports, by 79% to 18%.  This wide positive margin is particularly remarkable in light of the economic harm done by the pandemic, with accompanying high unemployment.

This public enthusiasm for trade is not reflected in the domestic politics of trade.  Treasury Secretary Janet Yellen noted during her confirmation hearing that even before the pandemic, Americans were living in a “K-shaped economy, one where wealth built upon wealth, while working families fell farther and farther behind.”(2) Over the past forty years, incomes for the bottom 60% of American households have stagnated compared to those in the top quintile, and especially at the very top. Intergenerational social mobility has suffered. In a K-shaped economy, where large numbers of regular Americans, communities and workers are being left behind, trade will always be an easy target for political blame, even when undeserved.

Inequalities in wealth and income have risen much more sharply in the U.S. than in Western Europe or Canada. This suggests that domestic policies — social safety nets, taxation, active labour market policies, antitrust, collective bargaining — play a more important role than international trade rules in shaping outcomes for ordinary households.

To close the political gap on trade, the benefits of trade have to be felt by individuals, here and abroad.  Domestic policies and trade policies need to complement each other, and work together in ways that support the economic dynamism and productivity fundamental to Americans’ future prosperity.  American and all other workers, whether in manufacturing, services, or agriculture deserve to be assured that fairness will be provided, that opportunities will exist to compete in international markets, that trade will help mitigate disasters (as it did with medical supplies during the first wave of the pandemic last year).  They need to know that where there are harms from trade, and from wider economic changes, they will be dealt with effectively, with policies to put a floor underneath their risks and expand their opportunities.  Domestic policies are the primary driver of income inequality in all countries, but the rules of the global trading system can contribute to positive solutions. 

Those in this conference are well-placed to explain to the public and to governments the realities of trade, its needs, and how the trading system can be improved.  It will not happen as well or as quickly without your effort.

Thank you.

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