Mr Lamberts, Rector Magnificus
Minister Heemskerk
Mr Esser
Ladies and gentlemen

Let me start by thanking the Erasmus University, and the Economic Faculty Association of Rotterdam, for having invited me to the World Leaders Cycle to share with you my assessment of recent global economic developments and how they relate to the multilateral trading system.

Erasmus of Rotterdam, the great XV century humanist, faced many interrogations, whether on religion, on literature or on the society of his time. He tried to answer them by remaining faithful to the principle of freedom of intellect and literary expression. This must be a source of inspiration for all of us as we strive to find answers to today's challenges.

Today we are experiencing what is, by any measure, the worst economic crisis in generations and the first global crisis in the history of mankind. The degree of global economic integration, and the globalized nature of business, are what make this crisis unique, if I may use this word. It has affected every sector of the global economy and every economy on this planet. Of course, it is affecting countries differently, with the weakest among us, bearing the full brunt of this fall-out.

From a trade perspective, the crisis has had a profound impact on overall global trade flows in a number of specific ways.

This crisis is threatening to undo the impressive economic growth achieved by a majority of developing countries in recent years. Unless immediate recovery plans are put in place, we will miss many of the UN Millennium Development Goals targets.

Furthermore, this crisis threatens to erode people's faith in international trade as a vector of growth and economic development.

The WTO forecasts a contraction in trade of around 10 per cent in volume terms for 2009, the worst such decline since the Second World War. The key driver behind this fall in trade volumes is the overall reduction in aggregate demand across all major economies which, in turn, is hurting developing countries in particular because of their high dependency rates on exports to developed- country markets.

To make the situation worse, trade finance, which oils the wheels of international trade, is drying up and thereby contributing to the contraction in trade flows.

We are witnessing increased instances of countries raising their tariffs on certain imports, instituting new non-tariff measures and initiating anti-dumping actions. We are also seeing bail-out packages and other rescue measures being adopted to help specific industries. The rationale behind these measures is to favour domestic goods and service suppliers at the expense of imports. Many of these measures fall within WTO rules and so far they have not triggered a tit-for-tat chain retaliation. But it is clear that these measures have a chilling effect on trade flows in general.

At this juncture, it is still not clear what lies ahead. We are seeing some green shoots here and there, but we still do not know whether we are at the bottom of this recession, and how long it will take to recover.

One thing is clear though, that is the depth and scope of the crisis will be determined by the capacity of individual countries to undertake a global commitment for joint action to re-inject confidence in our economic system. We have to act in concert to exit the crisis.

So what can be done in the face of these challenges?

This crisis emanated from insufficient financial regulation, which in turn led to a lack of confidence in the financial system being able to perform its function of oiling the economy. The key, therefore, is to restore confidence in the soundness of our financial system. Determining the magnitude of the difficulties faced by our banks and thoroughly cleaning them are therefore priority steps to restoring confidence.

Secondly, the crisis is now impacting on our social fabrics. It is affecting workers who are losing their jobs; immigrants who can no longer send remittances back home; youngsters who are having enormous difficulties entering the job market. In the current circumstances, it is essential that countries develop social safety nets which help to stabilise our societies and prevent social unrest. In sum, we need to take care of the people.

Thirdly, we need to get ready for the post-crisis period. When this crisis is over, we need to be able to restore growth and put people back to work. We should therefore use this opportunity to undertake the necessary structural reforms which will allow us to become stronger. As someone said recently, one should never put a good crisis to waste.

Trade and the multilateral trading system have a role to play in this.

In the current circumstances, we should resist isolationist pressures and keep trade open. At the recent G20 summit in London, world leaders undertook to resist taking protectionist measures. To help them in this endeavour, they requested the WTO to survey and monitor trade-related measures taken by countries as a response to this crisis. Like the canary in the mine, the WTO report will tell them if they are keeping isolationist pressures at bay.

One country's imports are another country's exports. Protectionism by one country will inevitably lead to similar measures being taken by another country. And before long it would be too late to stop a spiralling down of tit-for-tat retaliation. We already saw this happen in the '30s with the ensuing disastrous consequences.

While it is very clear that, at this juncture, keeping trade open is the best policy response, it is equally critical that we continue opening trade.

One immediate action which countries can take to mitigate the impact of this crisis is to conclude the WTO Doha Development Round negotiations as soon as possible. The Doha Round is by far the best insurance policy countries have at their immediate disposal against the threat of protectionism. If countries were to raise their tariffs to their current bound ceilings, applied tariffs would double. A recent study has estimated that this would lead to a decrease in world welfare of $500 billion.

The fact is that, with what is currently on the table in the Doha negotiations, these tariff ceilings would be more than halved. The same applies to developed countries' subsidies to the agriculture sector. By significantly reducing these trade-distorting subsidies, we would generate substantial opportunities for developing countries, and thereby unlock the full potential trade has to promote development.

This would come in addition to the further opening of trade in services, to the reduction of fishery subsidies which contribute to the depletion of our oceans and to the new rules for cutting customs red tape. On the latter, Rotterdam, being the largest port in Europe, is well placed to assess the value of such a multilateral agreement !

The Doha Round is therefore the lowest hanging global stimulus package available. This is of particular interest for developing countries that cannot afford to dole out huge financial stimulus packages to their domestic operators.

But beyond these economic gains, by concluding the Doha Round, countries will be restoring confidence in the multilateral trading system at this moment of crisis. They would be injecting stability and predictability for economic operators.

We should also focus on ensuring availability and affordability of trade finance, particularly to developing countries' exporters and importers. The WTO is working with a number of partners, regional development banks, the World Bank, Ex-Im banks and private financial institutions to mobilise increased trade-finance resources. The G20 London summit's commitment to make $250 million available over two years for trade finance is a positive development. We now need to carefully monitor the situation on the ground to ensure that there is sufficient finance to oil the wheels of trade.

Keeping trade open and continuing to open trade are essential ingredients to exit the crisis. But for many developing countries this is not enough. In order to fully reap the benefits of an open trading system, poorer countries need an accompanying package of Aid for Trade to address their supply-side constraints and boost competitiveness.

I have spent the morning at the Centre for Promotion of Imports from Developing Countries (CBI). This is an agency that provides practical support to exporters from developing countries to access the Dutch market. The CBI is a good example of what a targeted and focused intervention can do for developing countries. The reality today is that developing countries face a myriad of infrastructural and regulatory bottlenecks that undermine their capacity to benefit from trading opportunities.

Since 2005, the WTO has been working with multilateral development agencies including the World Bank, IMF, UNDP, Regional Development Banks and with bilateral donors, chief among them the Netherlands, to mobilize resources for Aid for Trade. Between 2005 and 2007 global Aid for Trade flows increased by around 20 per cent.

We are in the midst of the biggest global economic crisis ever. All countries are feeling the pain. And it is precisely now that we need to ensure that aid pledges are kept; that promises are met, so that the weakest countries have the means to weather the storm. Failure to provide this critical support would deepen the impact of the crisis on them and would unravel their recent efforts to grow and to foster development.

Ladies and gentlemen, let me close with the words of Erasmus, and I quote: “That you are patriotic will be praised by many and easily forgiven by everyone; but in my opinion it is wiser to treat men and things as though we held this world the common fatherland of all.”

Because we hold this world as our common fatherland, maintaining an open, fair and transparent global trading system must be at the heart of our global recovery plan.

Thank you very much for your attention.