17 March 1998
The Coming Challenge: Global Sustainable Development for the 21st
Address in Geneva at the WTO's Symposium entitled Strengthening Complementarities: Trade, Environment and Sustainable Development.
I am also indebted to the Netherlands, the European Union, Norway, Denmark, Japan, Canada and Australia for their financial contribution to this Symposium. My thanks also to the International Centre For Trade and Sustainable Development for their financial and administrative support. We have been extremely fortunate in attracting experts from developmental, environmental and business organizations, and I am pleased that so many leading figures from developing and developed countries alike have travelled here to Geneva to exchange views on this issue.
It is fitting that we are meeting in this room, the new General Council Room of the WTO, for it is here that the trade agenda of the future will begin to take shape. The relationship between trade and the environment will form an important backdrop to this process - and for this reason I look forward over the next two days to an open and constructive dialogue. I know that there will be differences of opinion. But I also know that we have gathered here today because we share the same conviction - that by working together we can better reach our shared goal on sustainable development.
Ladies and Gentlemen. As we approach the close of this century, one of the major challenges of the next is already clear - how to balance the needs of the planet with the need to bring billions of people into the global economy. As recently as a decade ago, these would have been seen by many as incompatible goals. The environmental debate was heavily influenced by "limits of growth" theories, and many viewed the globalization of trade and investment as one of the major threats to the planet. At the same time, many in business and government saw the environmental agenda as a brake on economic growth and a barrier to broader development worldwide. But in recent years there have been positive signs that this ideological divide is fortunately narrowing. Instead a new consensus is emerging that trade liberalization and environmental protection are not only compatible goals - they must be two sides of the same strategy to achieve sustainable development on a global scale.
Today I want to make three broad points about the way forward. First, that trade liberalization is a powerful ally of sustainable development - and that we both have an interest in renewing and revitalizing our collaboration in the Committee on Trade and the Environment. Second, that a sustainable environment is equally critical to the future of the world economy - and that the solution to global environmental challenges lies with reaching global environmental agreements. Nothing in the WTO stands in the way of such agreements. On the contrary, the WTO has every interest in building an effective bridge to the environmental agenda, not least because without a coherent strategy, it is both the global trading system and the global environment which will suffer. Which leads to my third point - that globalization is pushing all of us to develop an international architecture to manage the linkages not only between trade and the environment, but among all the other policies which now spill across borders and jurisdictions. How we shape this architecture will go a long way to determining how we confront the challenges as well as the opportunities of this new global age.
The relationship between open trade and sustainable development was first acknowledged in the pioneering work of the Brundtland Commission, and later in the 1992 Rio Declaration. Both make the fundamental point that trade liberalization is a powerful engine of economic growth, and that growth is vital to creating conditions which favour advancing environmental protection and building sustainable development. It has been estimated, for instance, that the completion of the Uruguay Round is bringing US$ 500 billion each year to the global economy - resources which are indispensable to reducing world poverty and under-development, long recognized as the single most potent source of environmental degradation.
Trade liberalization also has an important role to play in getting global price mechanisms right as a prerequisite to getting global policies right. Pricing failures are a major underlying cause of environmental degradation. Study after study has shown how market access restrictions, domestic support policies, and export subsidies have not only suppressed the development potential of many countries. They have also led to distorted prices and serious environmental spill-overs - to the point where scarce resources are not merely over-utilized, but in some cases literally exhausted.
We made progress in the Uruguay Round. But there is much more we can do. We must ensure that our Uruguay Round commitments are fully implemented. We must continue focusing on the tariff escalation and numerous tariff peaks that remain - especially if we want to relieve pressure on developing countries to specialise only in natural resource exploitation or environmentally sensitive activities. And we can look towards negotiating tighter subsidy disciplines. Agriculture, fisheries, energy - all are sectors where greater market disciplines could have a positive effect on the environment. All of these issues have been the subject of extensive discussions and work in the CTE - but clearly much more remains to be done.
There is another, equally important, dimension to sustainable development - the idea that continued economic growth and development in our interconnected world depends more than ever before on the health and sustainability of the global eco-system. None of us is immune to the reality of climate change, deforestation, holes in the ozone layer or contaminated freshwater. None of us has the luxury any longer of ignoring the economic - as well as the environmental - threat that a fast-deteriorating eco-system poses for our fragile planet. For business and governments alike, the notion that we cannot afford the cost of protecting the environment is giving way to the realization that we cannot afford not to protect it.
Trade liberalization can - and must - be a critical ally of sustainable development. But freer markets alone will not solve all of the complex environmental and social issues we face in today's interdependent world. Freer investment is not a recipe for restoring the stratospheric ozone. Lower tariffs in themselves will not halt the destruction of our marine resources. The broader solution to environmental and other challenges lies in reaching a global consensus in each of these areas. Reaching enforceable global agreements and standards. And building the kind of global institutions needed to manage them. It lies, in other words, with developing global rules to address global needs - as we have done over fifty years with the trading system.
The weight of the WTO should be used wherever possible to support the work of other multilateral fora. Let me cite two examples. The Committee on Trade and Environment, in its report to the WTO's first Ministerial Conference in Singapore, noted that the most appropriate means of addressing shared environmental problems is through shared solutions. The approximately 185 Multilateral Environmental Agreements - or MEAs - represent the best means of tackling global environmental problems. And the record is there to prove it. In recent years, the ozone layer depletion has shown encouraging signs of being repaired, thanks to the remarkable achievements of the Montreal Protocol. This agreement, and several others, such as CITES and the Basel Convention, are working because governments have found that working together brings more results than working alone. Several of these agreements also contain trade measures, and despite concerns from some in the environmental community, no legal dispute has ever arisen between the WTO and a MEA on this count.
Another example is the consensus reached at the WTO's Ministerial Conference in Singapore on the vexed issue of labour standards. Positions on either side of this issue were very strongly held. But after months of careful preparation in Geneva, and five days of intense debate in Singapore, we emerged from the Conference with a clear and strong consensus - a consensus first, that members were committed to the observance of core labour standards, internationally agreed; second, that the ILO was the relevant body where the issue of labour standards should be addressed; third, that such standards are promoted by growth and development, fostered by trade liberalization; and fourth, that labour standards should in no way be used for protectionist purposes or to put into question the comparative advantage of countries. The fact that the ILO is now making important strides in these areas demonstrates, not only that consensus on the most difficult issues is possible, but that consensus is absolutely critical to real and lasting progress.
I cite these examples to emphasize two points: that multilateral approaches in the environmental and social fields are working. And that nothing in the WTO stands in the way of the international community pursuing shared goals in other international agreements. Subject to the basic requirement of non-discrimination, WTO rules place no constraint on the policy choices available to a country to protect its own environment or health standards against damage either from domestic production or from the consumption of domestically produced or imported products. Governments can use any type of trade restriction, including import and export quotas and prohibitions, or the imposition of taxes or other charges at the border, for the purpose of environmental protection or resource conservation within their jurisdiction. As a case in point, for the past five years 10 percent or more of all product standards notified under the WTO Agreement on Technical Barriers to Trade are environment-related. This is an indication of the importance of domestic environmental standards and regulations. Not one of these measures have ever been challenged in the WTO itself.
Of course, there are more difficult issues that arise in the trade and environment debate - issues which revolve around the sovereign right of governments to establish domestic production process standards or methods. But this debate again underlies the pressing need to reach targeted multilateral solutions to these specific issues. Here too WTO rules need not stand in the way. Such solutions might, for example, involve financial transfers or inducements to burden-sharing, as has been done successfully with the Multilateral Fund of the Montreal Protocol or the triennial budget under the Global Environmental Facility. And they might include provisions for monitoring compliance and other follow-up action. As long as the agreement in question is genuinely multilateral in the sense of being consensus-based among a large group of countries, the WTO has little to say about the use of such measures.
I repeat, no conflict has so far arisen between a MEA and WTO rules. Nevertheless we must be vigilant and look ahead - not just to avoid potential conflicts down the road, but to refute those who claim - without substance so far - that the global trade and environmental agendas must ultimately clash. The key point is that MEAs and the WTO both represent different bodies of law. We need to establish a framework to define the relationship between MEAs and the WTO - all the time ensuring that the trade and environmental agendas are mutually supportive. Policy coordination between trade and environment officials nationally - as well as internationally - will play an important role in ensuring that WTO members are able to respect the commitments they have made in the WTO and MEAs, and in reducing the possibility of legal inconsistencies arising. In the context of the consideration of the inclusion of specifically agreed-upon trade provisions in MEAs, mutual respect should be paid to technical and policy expertise in both the trade and environmental areas.
But there is another important implication of this argument. If the problem is the environment, then our goal must be to develop global policies which address the environment - and not trade. Asking the WTO to solve issues which are not central to its work - especially when these are issues which governments have failed to address satisfactorily in other contexts - is not just a recipe for failure. It could do untold harm to the trading system itself - with all the collateral effects this would have for a sustainable global economy.
There is a basic flaw in the assumption that a consensus on environmental objectives which eludes countries in environmental fora can somehow be reached less painlessly by the same countries in the WTO. The WTO is a consensus-based organization - and all major decisions are reached on the basis of mutual agreement. A country which has not been persuaded to join a consensus to resolve an environmental problem through a MEA can hardly be expected to join a consensus in the WTO to change the trade rules in ways that would allow it to be punished. The reality is probably just the opposite.
There is another important consideration. The WTO is not - and has no intention of becoming - a supranational body with extraterritorial powers. It is not a world policeman that can force compliance upon unwilling governments. WTO rules are freely negotiated by sovereign governments within a consensus-based system. Equally important, the WTO's rules are non-discriminatory, meaning that all countries are guaranteed equal rights within the system - irrespective of their size and power. Let me be clear about this. No country can be obliged to accept rules and disciplines its has not explicitly agreed to. No country is forced to accept WTO dispute rulings - though if a country fails to implement a WTO ruling, it may have to grant benefits to its trading partners in other areas.
The irony is that some would now undermine these basic principles of international cooperation in the name of larger global objectives. Indeed, one paradoxical result of the current search for global solutions to environmental, social and other issues is growing pressure in some quarters for unilateral trade measures. But whose environmental standards, cultural traditions, political systems represent a universal norm? Which one of these values and standards should be imposed on other countries? And do we really want the WTO to play the judge, jury and police of our environmental, social and ethical values? Not only are we asking the trading system to perform a role for which it was never intended. Worse, this is the surest way of poisoning the spirit of international consensus and cooperation that we so desperately need to begin addressing the broader challenges of the next century.
By stressing the need for multilateral agreements on environmental or other issues, I am not arguing that this is someone else's problem - that these issues are of no concern or relevance to the WTO. What I am arguing is that the best way to tackle global environmental problems is through global environmental policies and institutions. That major initiatives like the Kyoto Protocol or the Singapore agreement on Labour Standards demonstrates that multilateralism can work. And that MEAs which seek to reform basic economic activities such as greenhouse gas emissions can - and are - being reached.
I am also suggesting that we would be making a profound mistake to pretend that the WTO offers some kind of short cut to global environmental or social policy. Unilateralism will not convince any country of the validity of the values which another asserts. Nor will trade sanctions serve as a wake up call for public opinion around the world. This approach could in fact be seen as a sign of weakness not strength. It could reflect a basic lack of confidence that one's rights or values can be freely shared by others.
As we mark the fiftieth anniversary of the multilateral system this year, we need to look to the future as well as to the past. The Cold War is over. The divisions between North and South have blurred. Today we have the opportunity to complete the construction of a universal trading system, bringing together industrial, developing and transition economies within the same agreed rules and disciplines. Seizing this opportunity will be a vital contribution not only to a prosperous future, but a sustainable and secure future as well. But we cannot for a moment believe that yesterday's accomplishments are a sufficient guarantee of tomorrow's successes. The millions in our global village who are still impoverished, the thinning of the stratosphere above our planet, the shrinking forests and polluted rivers that scar our landscapes - these challenges cast a long shadow over our successes at the close of the century, creating a mixed picture of darkness and light.
Nor is time on our side. If the globalization of our economy is moving literally with the speed of the Internet, the global environmental challenges we face are unfolding no less rapidly and will have at least as profound an impact on our collective future. We need solutions now - not in some hypothetical future. And solutions begin with recognizing that shared problems - whether they be monetary instability or the prospect of climate change - are too large to be solved by single approaches or single governments acting alone. Greater global coherence in policy-making is not only a logical but a necessary next step in this age of interdependence. The blurring of policies, as well as borders, clearly underlines the need for progress on the broadest possible front, not in a fragmented or piecemeal way. It underlines, in other words, the need for a global architecture to oversee a new kind of global system.
Recently in Washington I heard Bob Strauss, the former US Trade Representative, comment on how the trade agenda has expanded beyond what seemed possible at the time of the Tokyo Round. In a similar light, I would urge you not to believe that global environment rules and institutions are unattainable. The reality of today's global economy and of economic interdependence means that we must expand, not shrink, the horizons of international cooperation through the means appropriate to each issue - and not just in the environmental arena, but in many other areas as well. The progress of the WTO over the last half century is proof of what has been accomplished internationally over the last fifty years through cooperation and consensus, and what can be achieved in the future. That is why today's dialogue is so vitally important. That is also why I value your input and your advice. And it is why we need collective action and cooperation, not only by national governments, but by the many international organizations and NGOs represented in this room today. For this reason I wish you a most successful and productive Symposium.