Friday 8 June 2001
Promoting openness, fairness and predictability in international trade for the benefit of humanity
Inter-Parliamentary Union meeting on international trade
It is a great pleasure to be here today. The current WTO drive to better relate with parliamentarians reflects my personal experience and beliefs. I have been a parliamentarian for most of my professional life and I believe strongly in its institutions. Early in my term, I suggested to the IPU that we should have a meeting on the WTO for parliamentarians. My staff have worked closely with the IPU Secretariat to prepare this event. I want to congratulate you all for making this first-ever global parliamentary meeting on international trade a reality. I respect the IPU — politicians without borders.
You have before you an agenda with some of the most critical and difficult issues facing the multilateral trading system. It is my hope that this meeting will further discussion and thinking on how we tackle these issues. Let me contribute some of my thoughts to the discussion.
Globalization is not new. It is not a policy. It is a process that has been going on since the beginning of time. Some historians claim that trade is now at about the same level as it was at the turn of the century. Certainly there was a greater movement of people across borders 100 years ago than today. What is different? Overall, globalization has accelerated. And the information and technological explosion has ensured people are aware of the increased pace of globalization and are aware as well of its implications. That is a good thing.
We live in an age where voters and consumers want more information and control, greater accountability and greater ownership. They want to know what their governments are doing not just nationally but also internationally. Globally, we are now more prosperous and relations between states are more peaceful than ever before in world history. Yet, many people feel alienated from power and ownership. Their feelings of anxiety have been made more stark by the process of globalization.
It is a positive development that voters and consumers want more information and control, greater accountability and greater ownership. The WTO is above all an intergovernmental organization. Intergovernmental organizations are owned and accountable to the people through their governments. The WTO is no exception. Our agreements are negotiated by Ambassadors and Ministers who represent their governments. We operate by consensus and every member government, therefore, has veto power. Openness, fairness and predictability are at the heart of the multilateral trading system. Ministers hold us accountable every two years at a Ministerial Conference. Governments are in turn accountable to parliaments who are responsible for passing legislation because our agreements must be ratified by legislators. Elected parliamentarians are the measurable and accountable representatives of civil society. Parliamentarians have a vital role to play in bringing international organizations and people closer together and holding us and governments accountable. Parliamentarians need to engage in the critical global issues and be perceived by the public to be doing so. If you do not, then I fear others who do not have the same legitimacy most certainly will!
Many people, especially those who have just recently won their political independence, express to me their concerns about the WTO. They suggest that the principles at stake are their political and economic sovereignty, thus their independence. Some in the media even repeat the outrageous statement that we override Parliaments, that trade is a new form of colonialism, and that we are the servants of multinationals. Let me explain the reality which is quite different.
Governments recognize the need for international and regional responses to problems we have in common. No single nation alone can combat Aids, clean the environment, run a tax system and manage airlines without the cooperation of others. In response, we have established institutions and treaties such as the UN, ILO, WTO, World Bank, and the Law of the Sea. But there has not been a corresponding dedication of political resources, time, finance and focus to hold us more accountable to our owner Governments.
I come from a small country. I have always believed that our sovereignty is enhanced by international agreements and structures. Otherwise, it is left to the biggest and most powerful.
As a citizen of a former colony, I know that we are all victims of history. The old colonial days meant special privileges for the powerful. They sought privilege in banking, airline routes, ownership of certain industries and convenient access to Government purchasing whether it be the railways or the military. Not all of this was sinister or bad. It is natural to deal more easily with those with whom you have historic ties of culture and commerce. However, this can end up with comfortable market dominance of commerce at best, privilege at worst. My argument today is that a multilateral system, far from being the new colonialism, opens up the privileged positions of the powerful to transparency and competition. In open societies, the powerful elite have to try harder, to get business, to provide better service, to offer better deals. Governments and people have more choice. Small countries can use the WTO rules and disputes system as equals under the law. It is about good governance as well as good business and better use of precious tax payer resources.
Therefore, in my view, the multilateral system which is owned by governments is not a new form of colonialism. It is, in fact, the final nail in the coffin of imperial and domestic privilege.
Imperialism and colonialism was the curse of centuries. This was followed, often in optimistic reaction, by the cruellest hoax of the last century – Marxist economics. Its failures are manifest. No one seriously considers this an option any longer. However, the Cold War did give sad and terrible leverage to many countries. This was misused by all sides. Debts mounted and resources were diverted as this grim game of chess was played out.
It is beginning to dawn on some that the only game in town, where the poorest have leverage, where there is no security council, where nations have equal rights under the law, is the WTO. It is far from perfect. How, for example, can 30 non-resident nations have equal rights of participation? Yet we are steadily improving the position and participation of non-resident WTO members in our work in Geneva. And we are helping the more modest Missions in Geneva participate actively in our activities. They have power and now know how to use it. That is why development will be one of the central issues of a new round and why no new round will ever conclude without the approval of all, because all our decisions must be made by consensus.
However, all power is limited. Our process is about mutual obligations. Power without responsibility does not work. This is true of great nations and modest nations. If people cannot get satisfaction and progress in a multinational negotiation, they will seek progress elsewhere in bilateral and regional arrangements. Such arrangements can be helpful, but if they are seen as a substitute then our most vulnerable members will suffer the most. History should haunt us. We were created out of the terrible lessons of great depression and war to help prevent the rise of hostile trading blocks.
Multilateralism and the international institutions created after the end of the Second World War have served us well. An old friend of mine, Martin Wolf, recently wrote: "The multilateral trading system at the beginning of the 21st century is the most remarkable achievement in institutionalized economic cooperation there has ever been". I agree and can I recommend his essay on globalization that we have published in the WTO Parliamentary Handbook. A glance at history tells us that the past 50 years of trade liberalization are incomparably better than the protectionist nightmare of the 1930s. Indeed, the last 50 years has seen unparalleled prosperity and growth and more has been done to address poverty in these last 50 years than the previous 500. Since 1960, child death rates have halved in developing countries; malnutrition rates have declined by 33 percent; and the proportion of school children who do not go to school has dropped from around half to a quarter. Further, the number of rural families without access to safe water has fallen from nine tenths to one quarter. Much more needs to be done and trade is only one part of the "cocktail" of policies necessary to achieve improved living standards. Good governance, debt relief, investment in education, health and infrastructure are also vital.
Experience shows, and studies confirm, that countries that are more open to trade grow faster than those that are not, and so have less poverty, better jobs, better hospitals, and better schools. That is why over the past 15 years, developing country after developing country has unilaterally made liberalization the keystone of its economic policies. The multilateral trading system proved its worth again only a few years ago when it helped keep markets open in the wake of the financial crisis that started in Asia and then spread to some other regions, thus helping to prevent a global recession.
This sort of success is bound to attract attention. But there are other reasons as well for the heightened interest in the WTO. Current trade rules affect the lives of everyone on this planet. It is the only set of binding international instruments and rules already in place to control trade in the global economy. WTO agreements ensure that the trading interests of large and small countries are equally respected. As well, we have a binding dispute settlement mechanism that is truly unique among the international institutions. Our membership has increased dramatically and the composition has changed so that among our 140 members, four out of five are from the developing world. Developing countries are far more visible in the WTO and are pursuing their interests actively.
The challenge is how to continue to use the WTO's particularly advanced instrument of international cooperation for the benefit of people everywhere. The multilateral trading system is at the very heart of this debate. That is not surprising. International trade is an important cross border issue. Even more so nowadays, trade policy touches on sensitive issues like the environment and food safety, which are becoming the very stuff of politics in the post-Cold War era.
Let me say a little about our current work programme and preparations for the Fourth Ministerial Conference. In November, Qatar will host the next WTO Ministerial Conference. Our aim is to launch a new round of multilateral trade negotiations. It is a big challenge but prospects are encouraging. There are several reasons why we need a new WTO round.
For me, the development argument for a round is one of the most compelling. 1.2 billion people are living on less than $1 a day. Another 1.6 billion are living on less than $2 a day. It is a tragedy that while our planet is blessed with sufficient resources to feed its 6 billion people, many are going hungry and many are living in the misery that poverty breeds. Just when so many nations have adopted democracy as the only valid revolutionary idea, these injustices, this poverty, is in itself a time-bomb against the heart of liberty. In some places, failure to advance economically is a threat to their democratic process. The first responsibility lies with governments in these poor countries. Development requires peace. It requires good governance and sound economic policies. It requires adequate investment in education and health care. It requires protection of human rights and gender equality. But poverty in all its forms is also the greatest challenge to the international community and we will be judged by our response to our most vulnerable members.
Poor countries need to grow their way out of poverty. Trade is the key engine for growth but currently products of developing countries face many obstacles in entering the markets of rich countries. For example, the 49 least developed countries, representing 10.5 per cent of the world population, have less than 1 per cent of world exports. Open markets can play an important role in lifting billions of people out of abject poverty. We have made progress on market access for LDCs. Thirty countries have made offers. However, a new round would lock in this progress and advance the gift of opportunity which is all that market access is.
The economic argument for a new WTO round is equally compelling. Cutting by a third barriers to trade in agriculture, manufacturing and services would boost the world economy by $613 billion, according to one study from Michigan University. That is equivalent to adding an economy the size of Canada to the world economy. Doing away with all trade barriers would boost the world economy by nearly $1.9 trillion, or the equivalent of 2 Chinas. Of course, these are only estimates. Reasonable people can quibble about the exact size of the gains from a new round. But the basic message from study after study is clear: a new round brings huge benefits to all parts of the globe.
One thing I have learnt at the WTO is that standing still means going backwards. I will be politically incorrect. It is a good thing that living standards and jobs in each country are based on the purchasing capacity of others. Just because big countries want something, that doesn't automatically mean they are wrong. We all need a growing Japan, a robust US economy and a stronger growing Europe. They are the great importers. They account for 61 per cent of world imports. Their imports create jobs for us. But if they are not consuming then everyone suffers.
The building blocks of a new round are almost in place. Negotiations in Geneva on liberalizing trade in agriculture and services are entering their second year. Progress so far has been good. But we urgently need to broaden the negotiating agenda beyond agriculture and services. Why? We need a wider agenda because it creates political trade-offs. Take agriculture. The European Union and Japan have stated that they are willing to negotiate meaningfully on reducing agricultural protection. Yet agricultural liberalization is extremely sensitive politically. There is a much greater chance of reducing agricultural support in Europe and Japan if other countries are willing to make concessions in areas where Europe and Japan have demands.
A similar logic applies to implementation-related issues. Some developing countries have concerns about the burden of implementing their Uruguay-Round commitments and its perceived inequities. Modest progress has been made in addressing some of these concerns. But there is now a growing recognition that further efforts relating to past agreements require new negotiations. Instead of being a stumbling block, implementation could thus become yet another building block of a new round.
Another potential building block is manufacturing, which has been at the heart of every previous round. There are still many damaging trade barriers in manufacturing. Most of their burden falls on developing countries. In one World Bank study, it estimated that barriers to manufacturing exports account for around 70% of the total export barriers faced by developing countries and that 75% of the gains from further manufacturing liberalization would go to developing countries. Clearly, then, manufacturing has to be at the heart of a new round if it is truly to benefit developing countries.
Between now and July, we at the WTO shall make every effort to hammer out an agenda for a new round so Ministers can put the final touches to it in Qatar in November. We need always to keep in mind that this is about launching a round – not concluding a round. The agenda has to be broad enough to have something in it for everyone, but must exclude issues that are inappropriate or where compromise is impossible. It has to be detailed enough to be meaningful, but not so detailed that it becomes a pre-negotiation. We are in the hands of our owners, the Members, whether we achieve this.
There are many positive signs. The European Union has repeatedly been calling for a round. The new US administration has also made a new trade round a priority. The transatlantic relationship, which is key, also seems to be improving. Developing countries too are being more realistic. Many of them have abandoned their previous opposition to a new round. They increasingly recognise that dwelling on the perceived injustices of the past does nothing to prevent even greater injustices in future. They increasingly say that the greatest threat to their economies is not globalization, but marginalization. Let me add that any new round can only start and conclude if it addresses the real concerns and ambitions of developing countries. All of this is good. But all WTO Members still need to find the courage to go the final mile. It is all too easy to pay lip-service to the need for a new round without showing the necessary flexibility. It is all too easy to lose sight of the overwhelming national good in the defence of narrow, special interests. And it is all too easy to allow the WTO to cop the blame for national failings and to fail to explain, and explain again, the case for trade liberalization to voters.
There are risks in not launching a round. The world economy is looking vulnerable. According to the just released WTO Annual Report 2001, the world economy is retreating from the high growth path seen last year, dimming the prospects for world trade in 2001. The volume of world merchandise trade is expected to grow by 7%, a marked reduction from the estimated 12% in 2000. The US economy, motor for the world economy, is stuttering. A recession in America could export trouble to the rest of the world. An upsurge in protectionism could make things much worse. The virtuous circle of trade liberalization and economic growth could all too easily become a vicious spiral of protectionism and stagnation.
Failure to launch a new round this year could also jeopardise the multilateral trading system itself. A global rules-based system based on non-discrimination could give way to a patchwork of discriminatory regional deals and even potentially hostile blocs, combined with aggressive unilateralism by the big guys. Everyone would lose from this. But the biggest losers would be the poor and the weak. It need not come to that. The precariousness of the world economy provides an opportunity as well as a threat. The prospect of stagnant, or even shrinking, domestic markets increases the lure of new, foreign ones. This can help muster an export lobby powerful enough to overcome the entrenched interests opposing freer trade.
My concluding comments are simple and often repeated. Don't take the benefits of the WTO for granted. Don't assume that the world trading system will look after itself. Don't fight yesterday's battles and neglect tomorrow's opportunities. The world needs the WTO. All institutions are imperfect and each can be improved. The GATT, now the WTO, is over 50 years old. It is correct that we review our work and debate our future direction. We need to improve constantly on what we have already. For me, one important challenge is to reconnect the WTO with people. Some of this is up to the WTO Secretariat. I hold regular meetings with parliamentarians. I make a point of testifying before parliamentary committees as often as possible. I am glad that we have established good contact with the Inter-Parliamentary Union and other parliamentary organizations and assemblies in an attempt to inform and involve.
But most of the job remains with governments and parliaments. This meeting is an important opportunity for members of parliament to commence bridging the gap between the institutions like the WTO, which you own and fund, and the people. You have the responsibility in your respective parliaments to act as a relay between the government and the people, and to provide the necessary political oversight. To do this, parliamentarians and legislators need to know about the institutions they own. Parliamentary select committees should aggressively scrutinize the WTO and other international organizations. We need this. It is healthy. The IPU, as the international organization of parliaments world-wide, can help provide a comprehensive and cohesive parliamentary response to the challenges of international governance. I welcome this debate and the greater scrutiny it implies. You have my support. We at the WTO have plenty to be proud of. I believe that your involvement can help us promote greater openness, fairness, balance and predictability in international trade.
Can I suggest that we should assemble more often and that all the multilateral institutions that you have created, that you own, could do with your assistance and scrutiny. I would like to see a regular week put aside in Geneva with parliamentarians and NGOs to work with all the agencies and institutions. Parliaments, trade unions and Chambers of Commerce have unique contributions to make. Your deliberations should help us all achieve greater coherence between institutions, iron out difficulties of jurisdiction and therefore enable us to be more precise in delivery of our mandates, and thus better serve you and your owners, the people.