WTO NEWS: SPEECHES — DG PASCAL LAMY

“Trade in Services and Economic Recovery: Tuning the instruments of growth”


> Pascal Lamy’s speeches

  

Let me start by thanking the Coalition of Service Industries and its partners for organising this gathering. At the Services Summit last year I told you a story of a crisis and a casualty. Today, the casualty, which was trade, is back on its feet.

Global trade on the recovery

The WTO estimates the volume of world merchandise trade to be up by 13.5% in 2010, up strongly from the same period last year. Services trade, which was resilient throughout the crisis, is contributing to this positive trend. US exports of commercial services have been rising since November last year and for June 2010 was 11 per cent higher than at the same time last year.

Foreign direct investment, through which much of services trade is conducted, has also rebounded. This is good news as foreign direct investment has the dual role of creating opportunities in new markets, as well as bringing capital and know-how. Ingredients that are so vital for growth.

We are seeing light at the end of a long and very dark tunnel. But for this light to be brighter, we need to sustain the emerging recovery, and for that the economy needs to grow. It is only through growth that jobs will be created. Trade expands the size of the economic pie by creating new opportunities and not by exerting greater strains on national budgets.

True, trade opening can cause resources and employment to shift to the most productive industries. No people should be left behind. Adequate domestic policies should be put in place.

In the US, the service sector accounts for more than 75 per cent of the economy. According to the US Bureau of Labour Statistics, in 2009 90 million people were employed in a service sector industry, compared to 19 million in the goods sector. It is a dynamic and efficient sector whose fortunes are closely linked to the international marketplace and trade. Opening new trade opportunities in services makes sense for growth and it makes sense for job creation.

Back to basics: Why the GATS matters ?

In terms of the recovery, trade in services will continue to play a key role.

When you look at the latest personal computer, laptop or mobile phone, you are looking at a wealth of services. Services underpin every part of the production process, from research and development, design, engineering, financing, transportation, distribution and marketing. Without services, there would be little value-added and innovation. And I would not be too surprised if pretty soon someone will invent an iphone for concluding the Doha Round !

“Trade in services” is not “trade” in the conventional sense of a product being transacted across a border. It represents the whole range of international economic transactions, including those involving the movement of companies and people, both as suppliers and consumers of services.

In this larger picture, the WTO agreement on services — the GATS [General Agreement on Trade in Services] — plays a catalytic role in bringing economies closer together and in unleashing their productive potential. Even though governments can initiate reforms of services unilaterally, the GATS is the only multilateral instrument that we have for binding these reforms and for resolving disputes. Utilising this framework, governments can do three things — reform, regulate and liberalize. These are not mutually exclusive but complementary actions. Often in order for reforms in a sector to be effective, new regulatory frameworks are required and the GATS recognises the important role of regulation.

Greater openness to trade in services can also contribute to the fight against climate change and the protection of the environment. It can also contribute to greater energy efficiency. These are just some of the “emerging sectors” which deserve the attention of negotiators.

Strengthening the GATS foundation in the Doha Round is therefore critical to keeping economies on the path towards global recovery. Even though regional and bilateral trade agreements increasingly include services, binding commitments under the GATS remain the best way to give credibility to reform and to support the international opening of services. There is no substitute for commitments underpinned by multilateral agreements.

Doha Development Agenda: A symphony for growth

Those of you who are keen followers of the trading system will have noticed that I sounded a different beat at the end of July. I sensed that we have a “new dynamic emerging” and that the various sections of the orchestra in Geneva are not only tuning their instruments but slowly starting to play from the same music sheet.

It is not often that the Doha negotiations are likened to a symphony, but there are indeed many similarities. As you know a conventional symphony has a four movement structure. In the classical style, the movements are usually in the order of fast, slow, dance-like, fast. Sometimes, a booming score interrupts the harmony and in more modern variations discordant notes jar the ear, but all parts when heard as a whole are linked.

The Doha Development Agenda may well be an unusual symphony and further fine tuning and harmony is certainly still required. But when all principal sections of the orchestra, from agriculture, industrial products, services, trade facilitation, fishery subsidies, come together, the performance will certainly have been worth the wait.

In the classical configuration, a symphony ends with the same allegro or sonata which it began with. As you know, the services negotiations preceded the launch of the Doha Round and if we keep to that score, it will feature prominently at the end.

At the moment a number of bilateral contacts as well as small groups are rehearsing to bring concordance to the sounds that we are starting to hear. We should give space and time for this “new dynamic” to mature. All of these inputs will have to feed into the multilateral process and help bring the engagement to an equal music. And somewhere around end October should be a good time to evaluate our progress.

The services negotiations

Overall the services negotiations have progressed as well as can be expected given the impasse on a few other remaining issues. That being said, important milestones were registered with the 2008 Signalling Conference, which showed that members were willing and able to move forward in this area when the right conditions were in place. For further progress to be made in services, we need the other parts of the negotiations to move too. In fact all these elements need to be woven together so that the contours of the final market access package can appear.

More specifically on the services market access negotiations, recently we have seen some new thinking in finding new and more creative negotiating configurations. This ideas should now be actively pursued if we are to make progress.

In fact a lot has happened since the services negotiations were launched in 2000. Many countries have unilaterally opened services sectors to competition, and have ensured that proper regulations are in place. With now quite some years of experience, it may be the right time to bind this opening in the WTO. This would ensure greater predictability and security, the value of which has been proven in the recent crisis. Getting there implies each delegation has full knowledge of existing market opening in each of your economies.

And as I have said above, there are many emerging sectors which are now essential to help countries combat climate change, preserve the environment or ensure greater energy efficiency. Or to adjust to the changing patterns of world trade with global production chains triggered by the dissemination of information technologies. Some of these sectors are now even part of bilateral trade agreements discussions. Should we not think of opening up these sectors in the on-going Doha negotiations?

Adding these suggestions would result in binding existing market access, plus new openings, in particular in some emerging sectors. Could this be considered as a minimum level of ambition for the Doha Round? Up to members to decide. But in my view, such a broadly defined course of action would greatly help you all mobilise the forces behind more stable, predictable and available services.

We should also continue the negotiations on the draft text for a waiver in favour of least-developed members. One which will give members the possibility to extend preferences to services and service suppliers from LDCs [least-developed countries].

We should also move forward on the rule-making front, as well as in the areas of emergency safeguards, subsidies, and government procurement.

On all of these fronts, aspirations expressed in 2000 may not be identical to those currently on the table. The world of business and regulation has changed, and strategic objectives may need to evolve as well. There is no point in fighting battles that have already been won or in refusing to concede points that are no longer meaningful. I am keenly aware that trade negotiations can only progress as quickly or as far as the political realities will allow. But as in any negotiation, all actors must come with a mindset to give and take.

Ladies and gentlemen,

We may not be able to make a prediction on when the economy will fully regain its confident stride, but we can be sure that trade, especially with the conclusion of the DDA [Doha Development Agenda], can only hasten the pace of recovery. And when that recovery is fully on its way, it will be those economies that have competitive and well regulated services sectors that will stand to gain the most. The time to invest in the future is now.

Thank you for your attention.

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