India, 11 January 2001
The multilateral trading system: Where are we headed?
Hyderabad, January 2001
Ten years ago, India's computer industry had sales of $150 million. This financial year, its exports are set to reach $6 billion13% of India's total exports. Hyderabad is now known as Cyberabad. Soon Indian companies such as Infosys, Wipro and Satyam could be household names around the world.
This outstanding success shows how information technology and open trade together offer new opportunities for people to better their lives. Thanks to strong political leadership, economic liberalisation, and the inherent entrepreneurial skills of Indian businesspeople, India's economy is now growing at over 7% a year. As trade barriers have fallen, trade has become a more prominent part of this success story. This is powerful evidence that globalisation has the potential to lift more people out of poverty more quickly than at any time in human history.
But let us be clear about the scale of the challenge ahead. There are more than a billion people in India. The software industry employs a mere 340,000 of them. The Indian software programmers that work for US companies using the Internet are the exception, not the rule. Many people in developing countries can scarcely read, let alone use the Internet. Most of those who are literate do not have access to the net. In India, there is one Internet host for every 55,000 people. In the United States, there is one for every seven people. Clearly, it is a major challenge to make sure developing countries are not left behind in the Internet economy.
To prevent the digital divide between North and South becoming a chasm, developing countries need at least four things. One is skilled workers. India has plenty of them: it accounts for a third of the world's software engineers. Two more are access to computer technology at world prices and efficient, low-cost telecoms. Here the WTO can help. Its Information Technology Agreement eliminated import duties on a range of computer hardware and its Basic Telecoms agreement supports the liberalisation of telecoms services. More still needs to be done. The final requirement for success in the digital age is free access to rich-country markets. Rich-country markets are reasonably open, but obstacles remain, for instance, for Indian software engineers who want temporary visas to work in America or Europe.
India has a huge interest in freer trade in the IT sector. It is one powerful reason why India should be fighting for a new round of negotiations at the WTO. Throw in the prospect of freer trade in agriculture and cuts in industrial tariffs, and the case becomes all the more compelling. The Tinbergen Institute estimates that the annual gains to India from a new round could top $11 billion, raising India's national income by 4.4%.
A strong push for a new round from India could be decisive. We are approaching a critical juncture at the WTO. Over the past year we have successfully rebuilt confidence in the WTO. We have purged the bad blood that poisoned relations among member governments and we have demonstrated to the outside world that the WTO can function effectively and fairly. But I would have to say we are approaching the limit of what we can achieve outside a new round.
Let me run through last year's achievements. First, we welcomed six new members: Jordan, Georgia, Albania, Croatia, Oman and Lithuania. While a few thousand protested in the streets of Seattle, Washington, London or Prague, 24 million people joined the WTO last year. It is a dramatic referendum in support of rules-based, multilateral trade liberalisation. And it brings us ever closer to being a truly World Trade Organisation. Many more countries should soon be joining. China, Chinese Taipei, Armenia, Moldova and Vanuatu, for instance. Others, like Russia and Ukraine, are also in the queue.
Second, we worked through an important package to help the world's poorest countries reap greater benefits from the world trading system. 27 richer countries made improved market-access offers. We increased technical assistance. And we are co-operating more closely with other international organisations that promote development. The Integrated Framework, a plan for inter-agency co-operation on trade-related technical assistance to the least-developed countries, has been reinvented and rejuvenated. We expect it will deliver solid results early in the current year.
Third, we made progress on involving all our 140 members in our work. This included the development of special initiatives to facilitate the full participation of smaller missions and non-resident members in all aspects of our activities. We ran a second Geneva Week to update non-resident members on our work. We continued to set up Internet reference centres in member countries to keep members better informed of our work. We lent our support to a major meeting of African trade ministers and officials in Gabon, Libreville to assist them to play a fuller role at the WTO. We are also continuously working to be more open and accountable, and we have recently revamped our website.
Fourth, we established a mechanism for addressing developing countries' concerns arising from the implementation of their Uruguay Round commitments. We achieved some modest but significant results at our special General Council in December. This process will continue.
Last but not least, we launched negotiations on agriculture and services, which together account for two-thirds of the world economy. So far, they have gone remarkably well. We have probably made as much progress as we would have done within the context of a wider round. In agriculture, where the aim is to reduce protection and support, many countries and groups have submitted negotiating proposals. In services, which covers everything from tourism to telecoms and finance to computing, the aim is to expand the service agreement's country and sector coverage and remove restrictions on market access and national treatment. There is a great deal of interest from members, although negotiations on market access in specific sectors have not really started. No government is obliged to liberalise, or make commitments. But most now realise that an efficient service sector is essential if the rest of the economy is to thrive and that by making commitments, they will attract valuable foreign investment and know-how.
The negotiations on agriculture and services will pause for stock-taking in March. This pause could become a deadlock. Several countries have stated that they will not negotiate meaningfully on liberalising agriculture unless they can open new markets for their exporters in other sectors at the same time. We need trade-offs that only a wider negotiating agenda can best provide.
A similar logic applies to our implementation review. Modest progress has been achieved. India has been a leader in these negotiations. But it is na´ve to believe that all of developing countries' difficulties in implementing the Uruguay Round agreements, as well as its perceived iniquities, can be dealt with in isolation. More substantial reforms can best be achieved through new negotiations. I have always believed that we can do more for the most people through a new round. If the present system is unsatisfactory, if the status quo is not good enough, then in capitals and in Geneva we must get to work and advance on many fronts to provide as much comfort and space as possible to our owners, the governments.
We urgently need a new impetus to broaden the negotiating agenda. America's long boom is drawing to a close, with potentially worrying consequences for the world economy. Further trade negotiations are an insurance policy against pleas for protection when economies turn down. The use of anti-dumping and countervailing duties is soaring, threatening the gains from past liberalisation. Producer support estimates for agriculture are rising again, according to the OECD. And there is a growing danger that the increase in bilateral and plurilateral trade deals could come to be seen as a substitute for, rather than a complement to, multilateral liberalisation and a non-discriminatory set of rules to govern international trade. A continued absence of multilateral liberalisation will encourage the big players to act unilaterally and carve up markets through preferential trade agreements. The rule of law could gradually give way to the law of the jungle.
Further trade liberalisation should not be a hard sell. The gains to the world economy from the Uruguay Round alone come to over $240 billion a year. That's not a bad return on the $75 million that governments contribute each year to the WTO's budget. The Tinbergen Institute estimates that developing countries would gain $155 billion a year from further trade liberalisation. That is over three times the $43 billion they get annually in overseas aid.
Yet the freer-trade coalition is apathetic and fragmented. We need to mobilise it and unite it. Launching a new round will not happen by default. It will only happen if sustained pressure on governments produces the political will needed to adopt more flexible positions in sensitive areas. Narrow interests must be examined in the context of pursuing the greater good. Everyonethe US, the EU and developing countrieshas to realise that they have a shared interest in strengthening the WTO system.
India could play a pivotal role, both in its own right and as an example to other developing countries. We can debate endlessly in Geneva about the perceived injustices and imbalances of previous trade agreements. But while we do, we are doing nothing to prevent even greater injustices in future. Who can afford to miss out on the opportunities of the Internet age? Not India. Not any country.
To build a strong global community of the future, we urgently need progress on all fronts. This will require India's leadership. The developing world looked to India for leadership in the past. Now the whole world recognises India's unique position economically and politically. We need your advice, leadership and enthusiasm if we are to advance on all fronts and achieve the sort of progress needed in this new year.