Thank you for inviting me to join you to discuss international trade. Before answering your questions, and in the light of the turbulent developments of the past few days, I would like to make some introductory comments on the following two subjects:
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The role of the WTO in regulating the international economy; and
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the state of play in the Doha Round negotiations.
The role of the WTO in regulating the
international economy
In order to situate the role played by the WTO in regulating the
international economy, let us for the moment compare it with financial
and environmental regulation.
As far as finance is concerned, the events of the past year have, to put
it mildly, highlighted the absence of effective international
regulation. By that I mean the absence of a system of standards that
would bind the countries that had negotiated and accepted them to
multilateral obligations governing their domestic and international
conduct. The current financial crisis stems from a lack of financial
regulation in the United States, where the authorities did not want or
did not manage to contain the creativity of those involved in the loan
market within an effective prudential framework. There are, of course,
forums in which to address such matters. I am not referring to the IMF,
whose operational responsibilities are currently limited to matters
involving balance of payments or exchange, but rather the bodies which
gravitate around the Bank for International Settlements (BIS) in Basel,
including the Financial Stability Forum established in 1998.
However, in the absence of any substantive agreement between those
advocating truly mandatory rules and those preferring to rely on the
self regulation of financial operators, the discussions held in these
fragmented forums have only led to minimum standards, while the
provisions already in force involve the sovereign nation States — more
often than not concerned exclusively with their own particular interests
— only very indirectly.
In brief, there has been no political consensus on a regulation
objective, let alone on the scope or the instruments of such regulation,
the forum in which legally binding instruments would be negotiated or
who would be responsible for supervising their implementation.
With regard to the environment, another area just as vital for global
regulation, the situation is different. When examining the critical
issue of greenhouse gas emissions, and in particular CO2, we
see that the laws of physics, which are better-established than those of
the economy, have led to collective awareness which in 1992, in Rio,
gave rise to both the Kyoto Protocol and the post-Kyoto negotiations
currently being held under the auspices of the United Nations
Intergovernmental Panel on Climate Change. In this case, discussion does
not revolve around the need for international regulation, which is
something everyone accepts, or the competent authority, but focuses on
how efforts are to be shared among the nation States and on the binding
instruments required to ensure compliance with the negotiated
objectives. If agreement was reached in this respect, the only thing
left to do would be to tie these obligations in with other international
obligation systems, in particular that of the WTO. The multilateral
environmental agreements currently in force, which may include measures
affecting international trade, show that such co-existence is possible;
perhaps we will return to this issue during our discussion.
When it comes to environmental matters, there is therefore a
willingness, political energy (thus far absent in relation to finance)
and negotiating and monitoring forums (the secretariats of the various
agreements), and negotiations concern each parties' commitments in the
face of a common objective, particularly those of the developed and
developing countries, which clearly have different “contribution”
capacities.
Compared with these two examples, the WTO represents a mature, tested
and sophisticated regulatory system.
Mature, given that it is over 60 years since its Members, having learnt
from the disastrous protectionist experiences of the 1930s, accepted, at
what was then the GATT, to subscribe to international trade disciplines
that determine the multilateral limits to their sovereignty in this
area.
Tested, because these rules were regularly updated throughout the eight
rounds of negotiations between 1947 and 1994 — the ninth round, the Doha
Round, has been under way for almost seven years now — and because the
value of the system has been confirmed by its growing number of Members,
which has risen from 23 at the outset to 153 today.
Sophisticated, because the system comprises:
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An agreement on its underlying principle: the negotiated and gradual opening up of trade works better than its impromptu or underhand closure;
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rules in the form of agreements, covering numerous aspects of international trade in goods and services;
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surveillance mechanisms within technical bodies made up of Members;
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a binding dispute settlement mechanism, the first of its kind in international law; and
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a number of specific provisions aimed at compensating for the disadvantages experienced by developing countries.
For these reasons, the WTO is often seen as a
cornerstone of international economic regulation by both its supporters
and its critics. Its supporters point to the importance of the global
public asset represented by a system that submits its participants to
common rules that are all the more valuable as globalization creates
commercial interdependence, which is a factor for growth, development,
and poverty reduction and could be seriously damaged by protectionist
tendencies. Supporters often cite as an example the contrast between the
crisis of 1929 and the crises in Asia at the end of the 1990s which were
resolved, by and large, by keeping international markets open, thus
enabling the countries affected to emerge rapidly from recession.
The WTO's critics see in the consummate nature of the system the
dominance of the principle of opening up trade, when, in their view,
other areas, such as social standards, require international regulation
efforts that are just as vigorous. Despite certain shortcomings in the
WTO system, and in a moment I will turn to the current negotiations, the
fact is that it provides the real economy, the everyday economy, with a
collective insurance policy against the disorder caused by unilateral
actions, whether open or disguised; a guarantee of security for
transactions in times of crisis, henceforth an element of resilience
that is vital to the running of a globalized world. In short, a global
insurance policy for a global real economy. This is why it is extremely
important to continue with the Doha Round amidst the turmoil currently
affecting the world of finance, but which might just hit the world
economy tomorrow, so that the WTO can continue to act as a “shock
absorber”.
The state of play in the Doha Round negotiations
A round of WTO negotiations should be seen as a long journey, an
itinerary featuring dungeons and dragons, a cross between the Odyssey
and the Quest for the Holy Grail, which can only end when all the
travellers have completed all the stages.
I will not go through the list of the 20 issues under negotiation, which
I have transmitted to the secretariat of your Committee. One thing is
certain: there will be no final agreement on any issue until there is
consensus on all the issues. This has not stopped the negotiations from
progressing in fits and starts and through accumulation for almost seven
years. An elephantine gestation period, you might say! One consistent
with the size of the giant that is to be delivered, I would reply!
One decisive stage in concluding the Round was almost completed last
July in Geneva, and yet the ministers present stopped just short of an
agreement, even though a number of key obstacles had been removed in the
space of a few days. They came unstuck over the precise definition of
the parameters of a clause intended to protect the developing countries
from import surges that could pose a threat to their agricultural
production systems. This clause brought two parties up against each
other: the United States, on behalf of exporters of agricultural raw
materials, and India, on behalf of subsistence farmers.
Since July, the ministers' experts have resumed their work in an attempt
to reach an agreement before the end of the year on the issues left
unfinalized following the July negotiations: in agriculture, the famous
special safeguard clause, and certain other issues, including American
and European cotton subsidies; as far as industrial goods are concerned,
several technical points also remain undecided, notably the list of
sectors in which the reduction of customs duties would go beyond the
general formula applicable to products as a whole.
Despite this worrying setback, the outline of the final Doha Round
package is now clear enough to be able to assess its economic, political
and systemic significance.
On the economic front, the results would mean a 50 per cent reduction in
the industrial or agricultural customs duties currently imposed —
two-thirds of these in developed countries and one third in emerging
economies, with the poorest countries remaining exempt. This would
involve an implementation period of five years for developed countries
and ten years for developing countries. The higher these customs duties
are, the greater the measure's impact on trade would be. Estimating the
impact of additional openings in services is a more complex matter.
For the European Union, this would mean a reduction of around US$20
billion in export taxes and a US$5 billion saving in agriculture and
agri-foods over a five to ten year period.
With regard to agricultural subsidies, disciplines on the type of
government support described at the WTO as “international trade
distorting” — in the case of the European Union, around a quarter of its
total support — would be considerably reinforced, as requested by the
developing countries. The current ceilings would be lowered by 70 to 80
per cent. As for export subsidies, these would be banned once and for
all.
Other issues are yet to be finalized, despite there being progress,
which continues to be uneven depending on the issue, in respect of
anti-dumping regulations, fisheries subsidies, customs procedures and
certain aspects of intellectual property protection, to name but a few
examples.
From the political point of view, the key aspect of the outcome of the
negotiations is the readjustment of WTO rules, as demanded by the
developing countries which feel that the legacy of the eight previous
rounds bears the mark of past power relationships that hamper their
integration into international trade, hence their growth, and therefore
the reduction of poverty in areas where they have since acquired
comparative advantages in respect of industrial goods, agriculture or
services.
Given the weight they have progressively acquired around the negotiating
table, the developing countries consider the WTO to be the most
appropriate forum in which to negotiate the redistribution of the
geo-economic, and thus geo-political, playing cards which they struggle
to obtain in other forums such as the United Nations Security Council or
the Bretton Woods bodies. To put it simply, times have changed and the
United States, the European Union, Canada and Japan no longer lay down
the law at the GATT or the WTO, and the Doha Round must, in this regard,
be considered a precursor to a system of more equitable rules, where
emerging economies (China, India, Brazil, South Africa, Indonesia, etc.)
must stand ready to assume their share of responsibility.
The third and final aspect of this Round, the systemic aspect, brings me back to my starting point: concluding the Doha Round is, certainly, all about reaping the economic benefits of a new generation of market openings, equitably distributed in accordance with the contributory capacity of the participants. But it is also, and above all under the current circumstances, about consolidating one of the few regulatory systems which are effective at the international level. Failing to conclude the Round, on the other hand, would weaken a public asset that has been built up with as much patience as pain over more than half a century, and has brought transparency, predictability and stability, all of which are needed by our globalized planet to limit the danger in many other areas, including, as is clear today, the world of finance.
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