Globalisation: the impact of the Doha Development Agenda on the free market process
U.S. Chamber of Commerce, Florida, US.
I can sum up my message today in a few words: Globalisation works. And it isn't going away. Lester Thurow puts it bluntly, in The Future of Capitalism: “As we watch, the world's topography alters”. But complex and contentious questions remain as to how we can best manage its consequences. We have to ensure that the inescapable impact of Global change does not fall unfairly upon those countries and individuals still struggling with entrenched poverty and political instability.
I don't need to tell anyone in this room that the free market works. While freedom and capitalism are under threat — from disaffected terrorists to anti-globalist extremists — they remain the only valid socio-economic systems world-wide since the collapse of the Soviet Bloc. Democracy is now the only true revolutionary option. The real challenge for all of us – corporates, institutions, and wider civil society n the more developed countries of the world – is to help transform today's recipients of international aid, into the free citizens and consumers of an ever-more interconnected world. The poor are the customers of the future.
I've been involved in multi-lateral trade issues since the start of the Uruguay Round of the WTO's predecessor, the General Agreement on Tariffs and Trade. I also took part in one of the pioneering national economic experiments in recent history, the New Zealand Labour government's comprehensive dismantling of protectionist barriers in the 1980s. I have now had the opportunity of leading the WTO at a pivotal point in the evolution of world trade. This has seen us rebound from the Setback in Seattle in 1999, to the successful launch of a new Trade Round centered around the Doha Development Agenda, in Qatar last year. These experiences have reinforced my belief in the merits of the free trading system, fairly managed through a democratic, inclusive, member-driven process.
Globalization isn't a new concept — it's been around since before Britain ruled the waves — and waived the rules. What is new, is the extent to which information flows have exploded. You all know this, because you now have to deal with the consequences for your businesses not just quarterly or annually, but daily, hourly and sometimes by the minute. The world is a much smaller, and vastly more transparent and democratic place, than when Tulip futures peaked in Amsterdam in the 17th century.
For major corporates, doing business these days is like standing in a virtual window, without a shutter. Some observers complain about the world being taken over by brands. What is a brand? It’s a reputation. Which is what makes multinational companies so vulnerable to pressure from aggressive NGOs and public opinion. We have moved from a century of coercion to a new millennium of persuasion. Good corporate ethics make good business sense.
This new world still contains all too many examples of the myriad tensions, problems and conflicts that have been such a debilitating feature of the past century. However, it is also a much better place. The world is, according to any number of independent indices, a much better place to live in.
What are the most important issues for people across the globe? Life expectancy, hunger and poverty reduction. Access to clean drinking water, democracy, a better living environment. And on almost every useful measurement of the human condition, we have seen the greatest advances in the history of our species during the last half century, according to data collected by the UNDP and other agencies. There is still much to protest about, and injustice is still rampant. But overall, in the words of the Beatles song, “it’s getting better all the time”.
In 1900, average life expectancy was 30, today it is 67.
On average, developing countries have increased their food intake from 2,463 to 2,663 calories per person over the past decade — an increase of 8%.
In 1970, 35% of all people in developing countries were starving. In 1996, the figure had fallen to 18% and the UN expects the figure will have fallen to 12% by 2010.
Between 1990-1999, adult illiteracy rates in low-income countries for males aged 15 and above decreased from 35%-29%; and for females aged 15 and above, the figure decreased from 56%-48%.
While only 30% of people in the developing world had access to clean drinking water in 1970, today about 80% have.
Sulfur emissions responsible for acid rain have declined in both the US and the EU countries. In the US, lead concentration has dropped more than 97% since 1977. The US EPA estimates that about 22,000 deaths are avoided every year because of the dramatic decline in lead concentration level.
Some of the Great Lakes were considered dead 30 years ago and rivers sometimes caught fire. Today, people can swim and fish in them.
None of this is to suggest that we should be happy with the current state of the world. But, as a recent IMF paper points out, in trade-opening East Asian countries — the New Globalizers — the number of people in absolute poverty declined by over 120 million between 1993 and 1998. On the evidence to date, Globalisation has been good for an increasing number of people.
The commercial community and political leaders need to stand firm, talk and speak out strongly, and not be intimidated by self-serving lobby and special interest groups. Freedom works, and as it grows, so do people’s living standards. Twenty years ago, Eastern Europe was still stifled by the iron fist of the communists. In South Africa, South America and most of Central America, colonels or command economies destroyed freedom, hope and growth.
Many of these countries are free at last. But this freedom is fragile. And many of their leaders tell me that, without growth — in which trade and open markets play a key role — they fear for their nations’ future. This is not text-book theory, it’s fact; Transparency International, UNDP, World Bank facts and figures show that the more open the economy, the freer the people, the higher their living standards, the better their labour and environmental outputs. The more closed the economy, the more corrupt the practices.
The problems lie in managing what is, by its nature, an ever-evolving process. Harvard Business School's Juan Enriquez, in As the Future Catches You, observes that 50 years ago, three-quarters of the flags, borders, anthems and moneys represented at the UN today, simply did not exist. And this ever-increasing number of stakeholders in the international arena, inevitably adds to the complexity of conducting multi-lateral relationships — as we learned to our cost in Seattle in 1999.
The Seattle Summit – my coming-out party as Director-General – drew global headlines, most of them bad. We saw veteran participants in this process writing off any chance of a new Trade Round being launched for a decade. The WTO is the only set of international instruments already in place to control trade in the global economy, with binding rules to settle disputes. I believed a second failure would have fatally weakened the WTO.
Big powers, big business and multi-lateral agencies, are easy targets. The irony is that some observers clearly still do not understand that the WTO's continuing efforts to reduce trade barriers are not controlled by the executive fiat of a few powerful nations. Rather, our effectiveness is governed solely by the ability and willingness of a diverse and frequently polarised membership to forge a working consensus. And our Members run the gamut from economic superpowers to the poorest LDCs, all of whom have a voice and the power of veto.
The Seattle meeting was widely portrayed as a success for the anti-Globalisation movement. It also reflected Internet-linked NGOs' ability to influence the debate on the future direction of global trade and corporate responsibility. The WTO has increasingly reached out to all sections of civil society. But we must remain resolute in condemning violent protest as a substitute for dialogue, and demand the transparency and accountability of those who demand it of us.
However, Seattle drove home some hard lessons for us. We had to admit that the basis for an agreement had simply not been laid down. We resolved not to repeat the same mistakes in preparing for the Ministerial meeting in Doha. And we succeeded: that meeting launched a new and substantive Round of negotiations — the first since the GATT round more than decade ago.
Several elements were key to our strategy. Firstly, we started early and focused on restoring confidence after Seattle. Perhaps most significant, was a decision to put Development at the core of the WTO's activities. Our measures included specific initiatives to help least-developed countries, a substantive reassessment of technical cooperation and capacity-building activities, and a separate mechanism to deal with implementation-related issues. We also created a dedicated process aimed at ensuring greater transparency, inclusiveness and more effective participation of all Members.
Coherence was core: we wanted to build closer cooperation with other international agencies, such as the World Bank and the International Monetary Fund, to ensure consistency and coordination of development policies.
2000 also marked the launch of the mandated negotiations on agriculture and services, a crucial component in any new Trade Round. Combined, these account for more than two-thirds of the world's economic output and employment.
Due to the importance attached to these issues, high priority was given throughout the preparations to finding an early breakthrough for Doha.
I gave close attention to building momentum for a positive outcome. During the two-year period between the conferences, I travelled over 625,000 kilometres, visiting 182 cities and meeting with more than 300 Ministers. The message I kept hammering was the need both for active political involvement to allow for the necessary flexibility in negotiating mandates, and for close, continuous follow-up by Ministers to ensure that this boost in political momentum carried through into action in Geneva and ultimately at Doha.
At Doha, the differences between Members in some areas remained large, and it was only right at the end of the Conference that consensus was achieved. Tribute here is due to our hosts the Qatari Government, his Highness the Emir and especially Minister Kamal, whose skills were deployed to great effect.
The issues facing Ministers at Doha were essentially the same as those they failed to resolve in 1999. The major lesson learned from Seattle was the need to strengthen the process of consensus-building consultation that is at the heart of the WTO's charter. We have successfully launched a new three-year Trade Round, with the Doha Development Agenda at its core.
I'll briefly outline the details of what we achieved and I'd be happy to answer any of your specific questions afterwards.
In agriculture, developing countries stand to gain substantial commercial benefits under the negotiating mandate. Currently, rich countries pay out $1 billion a day to their farmers in agricultural subsidies; that is more than four times all development assistance going to poor nations, according to the OECD. Negotiations will open markets, and reduce “with a view to phasing out, all forms of export subsidies” and trade-distorting domestic farm support.
In services, liberalization could mean gains of between 1.6% of GDP (for India) to 4.2 % of GDP (for Thailand) if tariff equivalents of protection were cut by one-third in all countries, according to the World Bank. Telecommunications, finance, transport and business services have many links to the rest of the economy and raise the productivity of many sectors. Negotiations will liberalize the entry of foreign services in as many domestic sectors as governments choose and make it easier to employ foreign workers.
Market access for industrial goods is another immediate priority for developing countries. The negotiating mandate focuses on reducing or eliminating tariff peaks and escalation, in particular on products of export interest to developing countries, as well as on non-tariff barriers.
The commitment on the environment, is focused on the relationship between existing WTO rules and the trade obligations in multi-lateral environmental agreements, and on the reduction or elimination of tariff and non-tariff barriers to environmental goods and services.
On the contentious issue of drugs patents and public health, a separate Ministerial Declaration states that the WTO's Trade-related Intellectual Property, or TRIPS Agreement, does not and should not prevent members from taking measures to protect public health. It should be interpreted and implemented in a manner “supportive of WTO members' right to protect public health and, in particular, to promote access to medicines for all”.
We were also very pleased at Doha to finally complete the accession formalities for China and Chinese Taipei. Since Seattle, about a quarter of the world's total population — i.e. some 1.5 billion people – have joined the WTO. On my watch we have also welcomed the entry of Lithuania and Moldova, Jordan, Oman, Georgia, Croatia and Albania. Another 28 countries are currently negotiating their terms of membership, perhaps most significantly Russia, which we hope may secure accession within the next 18 months. The WTO's multilateral trading system is now near-universal, covering more than 97% of total global trade.
Obviously, for many members of this chamber, China's entry is of major significance, culminating a two-decade process of market reform by the Beijing leadership, which offers enormous potential benefits for international companies. After implementing all its commitments, China's average bound-tariff level will decrease to 15% for agricultural products, and to 8.9% for industrial goods. In Chinese Taipei, tariffs will fall an average of just over 4% for industrial goods and to an average of just under 13% for agricultural items.
We've got a lot to do to make sure our Fifth Ministerial Conference, in Mexico in 2003 is a success and that the new Trade Round negotiations are concluded within the three-year timeframe agreed by Ministers in Doha.
I have set a number of objectives. These include:
Reorganization: I have restructured the Secretariat to reflect Doha's work priorities. New resources have also been directed towards mandated negotiations and work programmes, technical cooperation and capacity-building, accessions, coherence and outreach. Efficiency gains and cost savings are being introduced, and our budget has been increased to take account of the additional demands. In addition, Members are also delivering on their promise through specially targeted extra-budgetary resources, such as the Doha Development Agenda Global Trust Fund, to provide secure and predictable resources to build capacity.
Development: The Doha Development Agenda recognises that technical assistance and capacity-building are essential to help developing and LDCs to implement WTO rules and obligations, to prepare for effective participation in the work of the WTO, and thus to benefit from the open, rules-based multilateral trading system.
I'd like to pay tribute here to the US, which has always been enormously supportive on these technical issues.
Coherence: As mentioned, there are a multiplicity of international agencies and donor government instruments available for trade-related assistance and there is a pressing need for better coordination. I believe the WTO Secretariat can become a useful “clearing-house” for information for WTO-related technical assistance. Our aim here, obviously, is to prevent wasteful use of donor resources.
In terms of reaching out to Civil Society, I think we need to be more creative. I established a Group of Advisors last year, comprising some of the world's most authoritative and distinguished experts on the multilateral trading system, to help the Organization think creatively about its challenges. A number of useful ideas are already emerging.
So, we have made a good start on the WTO’s Doha Development Agenda – we have a new budget, a venue, a negotiating structure, chair-people of negotiating committees, in place within three months of the Doha launch. All of that took several years after the launch of the Uruguay round.
Tomorrow, I will be attending a meeting of agency heads in Washington, hosted by Jim Wolfensohn of the World Bank, to advance the WTO secretariat's good work on the Integrated Framework, which brings together all the agencies to discuss LDCs.
On the 27th, also in Washington, there will be a meeting under the umbrella of the Inter-American Development Bank of all the Trade and, hopefully, Finance Ministers of the Americas and the Caribbean to discuss capacity-building and how resources can be most effectively deployed. In preparatory meetings with the IDB, we suggested that representatives of other regional banks and the secretariat of the New Partnership for African Development (NEPAD) also be invited as observers. This will save time because we think the “model” of cooperation, shaped to new needs, that could come out of the Washington meeting will be an appropriate one to take to other regions and development banks. We also hope to have a meeting in Geneva of all the regional banks and stakeholders in April.
This has been an outstanding year for the WTO, perhaps the most significant in our brief history. We have concluded, in Doha, a successful Ministerial Conference that has, as US Trade Representative Bob Zoellick noted “removed the stain of Seattle”.
In the Doha Development Round we can lift living standards by more open markets, but there are also other important good governance issues on the table.
An investment regime is a development and good governance issue; a transparent government procurement regime is a development and good governance issue; a trade competition regime is a development and good governance issue; a trade facilitation regime is a development and good governance issue. The Asia Pacific Economic Cooperation Forum estimates that trade facilitation programs could generate additional GDP growth of 0.25% in the Pacific region – almost double the gains that would be generated by tariff reduction. That is why I’m seized with such a sense of urgency. We do not have day to lose or a dollar to waste.
The path to Doha was a rocky one. Although I believe the road to Mexico will be smoother because of the last few months work, I do not under-estimate the difficulties of what remains to be resolved. But I strongly believe that concluding a new Round is vitally important. According to the World Bank, complete liberalization of merchandise trade and elimination of subsidies could add US$1.5 trillion to developing country incomes. And reshaping the world's trading system and reducing barriers to trade in goods could reduce the number of poor in developing countries by 300 million by 2015 and boost global income by as much as $2.8 trillion over the next decade.
I don't need to remind this audience of the importance of what is at stake. More than 22 million American jobs depend on trade. Jobs in globally engaged companies pay 7 to 13% more than other positions. This Chamber has been a consistent supporter of the WTO's efforts. You know that it is the 99% of US merchandise exporters, which are small and medium-sized firms, who are the major beneficiaries of increased international trade and investment, not the huge corporations, which are so often the target of activists. You know that 96% of the world's consumers live outside the US, and that the more prosperous they become, the better it is for your business. I note and welcome the Chamber's statement that the US must be fully engaged in the world, and that international trade and investment represent its most positive and promising means of engagement.
We are making solid progress: according to the IMF, over the past two decades, the growth of world trade has averaged 6% annually, twice as fast as world output. My plea to you today is not to allow the negative forces fighting against Globalisation and market liberalisation to triumph. Now, as never before, is the time for corporate courage. You, I, we, have a profound responsibility to marshal our forces to encourage and build institutions so that freedoms continue to grow globally. Only then will we have our world without walls, where people can enjoy the better life held out by those pioneers who promised a different world. We must and we will succeed.