WTO NEWS: SPEECHES DG PASCAL LAMY
Washington, United States, 17 February 2006
“The Doha Development Agenda: Sweet Dreams or Slip Slidin’Away?”
International Institute of Economics
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Dear Fred,
Ladies and gentlemen,
It is a pleasure to be back in the US to share with you some thoughts on
the meanders of the Doha Development Agenda (DDA) negotiations. And what
better place to do this than in the good hands of Fred Bergsten, who was
recently ranked one of the ten people who can change your life. So,
Fred, anything you can do to change my life by making sure these
negotiations unfold in time would just be great!
In coming to Washington, I could not help but remember that the
multilateral trading system, which has contributed so much to the
tremendous expansion of the global economy since its inception in the
late 1940s, has its roots here in this country.
It was here that the People of the United States gave the US Congress
the authority to regulate commerce with foreign nations. And it is
precisely an ambitious treaty to regulate multilateral trade what brings
us today. It is interesting to note that this same authority is today
determining the calendar of our negotiations which will need to conclude
by the end of 2006 to allow the US Administration to act within the
current US fast track authority.
America's trade policymakers believed then that a rules-based,
non-discriminatory multilateral trading system was indispensable for
sustainable growth and development, prosperity, peace and global
security has stood the test of time. In the last two decades, the growth
in world trade has consistently outpaced that of world production
confirming the interdependence of countries and the growing importance
of trade to countries, such as China, European countries, Japan and even
the United States. Today the US accounts for around a quarter of world
trade and is a world leader in trade in goods and services. It therefore
has a lot at stake in a healthy multilateral trading system.
The multilateral trading system could not have achieved these impressive
results without American leadership. The system is at its best when
America engages and leads. I am encouraged by the commitment of the
United States to continue its leadership role at this critical juncture.
Everywhere I go I know I have to make my case and explain to politicians
why countries should invest political capital and resources in the
multilateral trading system. The WTO has become a scapegoat for many; in
industrial countries, it is blamed for the stagnation of wages and the
loss of jobs to developing countries, while in developing countries, it
is accused of promoting liberalization for the benefit of multinational
companies. If either assertion were true, then the WTO would have very
good friends in either the developed world or in the developing world.
Yet it appears that is not the case. As we say in trade negotiations,
whenever an agreement manages to draw criticism from all countries, it
means that it is a good agreement. I am certain this applies to the WTO.
The US has a lot at stake at the WTO. We all do. Our organization
provides a clear, transparent and predictable environment in which trade
can flourish. It provides perhaps the most modern system for resolving
international disputes. No longer does the law of the jungle prevail in
international commercial disputes. For a country such as the US, with
such a huge economic interdependence with the rest of the world,
stability is crucial.
Now countries have a unique opportunity to adapt the rules that govern
the multilateral trading system by adapting them to the realities of the
21 century. This is a crucial reason why we must bring the DDA to a
successful conclusion.
But where are we today? Are we on the verge of a collapse of the
multilateral trading system as many academics have written recently? are
we witnessing the end of and era and taking a sharp bend into
bilateralism? Are we moving closer to a “cheap round”? Or are we just
witnessing the normal positioning that takes place prior to the last lap
in the race?
Many of you are perplexed by these questions and we know they are the
subject of many bets. If I had to, today I would go for a triple bet:
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First, a “cheap round” is not an option. Even if we were just to keep what we have on the table today we would have gone beyond what was done in the Uruguay Round 10 years ago, well beyond, in fact. In agriculture alone the elimination of export subsidies and the reductions in domestic subsidies already on the table go much further than any previous round. The technology to cut tariffs on industrial or agricultural products would yield results higher than in previous rounds and the commitments on trade facilitation have the potential to boost trade more than any previous administrative commitments. And these are just a few examples of what is on the table already. And I am not saying that we should settle for this. We should aim higher and maintain the ambition that took us where we are today.
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Second, even if the round would not yield everything we want, the WTO is much more than the Round; it comprises a vast body of laws and regulations which we will have to continue to apply. And it has a dispute settlement which will continue to ensure that the rules of the game are respected. True, the judiciary part of the WTO is gaining weight over the legislative, and for many of us this is problematic. But it is up to the legislator, that is, all WTO members to address this potential problem by updating the WTO rules book. Furthermore, the WTO will continue to act as custodian of the multilateral trade laws.
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Third, there is plenty of bilateral activity around the world but frankly, you are well placed to know that very few of the so-called free trade agreements are really about freeing trade or creating new trading opportunities. And I still have to see a bilateral agreement that disciplines agricultural or fishery subsidies. Nor is business very encouraged by the proliferation of spaghetti bowls of rules of origin, certificates or standards.
So, is it “Sweet Dreams” or “Slip Slidin’Away? The only way we can be
sure it is the former is if we collectively “Walk the Line”.
Since the beginning of the year Geneva is again working full speed
ahead. Building on the modest success in Hong Kong, members are
discussing with each other again and for the first time they are testing
numbers, comparing notes, exploring hypothesis and drafting language. In
sum, working to narrow the gaps that still exist in many of the areas
and in particular on agriculture and industrial products.
And let me also tell you the widest shared secret in Geneva: all key
players know they will have to move. The EU knows it will have to move
on agriculture market access, the US knows it will have to move on
agriculture domestic support and emerging countries like Brazil, India
or South Africa know they will have to move on industrial tariffs and
services. And the good thing is that all of them have said they will
move “in concert”. All this makes me believe we could soon start to see
the shape of a final deal.
Agriculture
Let me start with agriculture. Although it accounts for less than
10 per cent of world trade, it holds the key to unblocking and
revitalizing the negotiations and ensuring substantive progress across
the board. Why? Surely because 70% of the world poor live in rural areas and that negotiators when launching these talks agreed to
frontload development. Not easy, of course, not the least because at the
WTO one could say that there are two schools of thought on how the
agriculture sector should be treated. Some countries believe that the
agricultural sector is no different from other sectors of world trade
and should be subjected to disciplines applied in these sectors,
including the prohibition of subsidies to farmers. Others believe that
agriculture is a distinct sector which governments should be able to
support for a variety of reasons, including preserving family farming or
the environment. The EU and the US find themselves in the second
category. But even in this second group, civil society and tax payers
are questioning policies that may preserve agriculture protection at the
expense of other countries, in particular poor developing countries.
Also, public opinion seems to be in favour of support for the
preservation of rural life or the environment, or support for those
small farmers with less comparative advantages, rather than lavish
government spending that benefits a handful of large farmers or farming
companies. In short, what the public points out to — perhaps without
knowing — is a good, non-trade distorting farm policy.
This issue is at the heart of the discussions that I hear taking place
in this country around the new Farm Bill. I am certainly not in a
position to provide any advice on how the US should shape the new Farm
Bill. This should be discussed by the US for the US sake. But its is
understandable that farmers in the US are demanding stability, security,
predictability for their activities and for the government subsidies
they receive, which has been subject to a number of WTO disputes lately,
including the one on cotton which still has to be fully implemented. It
is therefore clear that a new Farm Bill that is WTO water tight and
passes the test of WTO consistency will bring the necessary stability
for American farmers and ranchers. A stable Farm Bill which is WTO
consistent is surely in the interest of the United States. And given the
experience and shrewdness of US negotiators, I would fully expect them
to try to trade this against concessions in this or other areas in the
WTO.
One example is domestic subsidies, where the US has already secured in
the negotiation that the reduction in trade distorting subsidies will be
bigger for the EU than for the US, thus providing for a more level
playing field between the two. Agreement was also reached on phasing out
all forms of export subsidies by 2013, with a substantial part of such
reduction to be made by 2010. On market access, all members reaffirmed
the objective of achieving substantial cuts in tariffs with specific
protection for fragile developing countries.
We can now build on the elements to achieve an ambitious result in
agriculture, but the road ahead is still full of potholes. There are
still divergences in Members' positions on three key issues. In the area
of market access, the US, G-20 and the Cairns Group would like to see
substantial results. They regard the EU's offer to reduce tariffs by
between 35 and 60 per cent as inadequate. They want developed countries
to be able to designate only a limited per cent of their tariff lines as
sensitive products, as opposed to the 8 per cent suggested by the EU. It
is clear that the EU and the G-10 are on the frontline on this issue and
that they will have to move. In the area of domestic subsidies, while
welcoming the proposal tabled by the US in October 2005, many Members
have noted that its content on the blue box and de minimis support are
timid and need to be improved. These members are concerned about the
possibility that the US may be able to continue using trade distorting
subsidies, such as counter cyclical payments which have already been
declared inconsistent with WTO rules in the cotton case, by simply
shifting them to a different “box”. It is also clear therefore that if
the negotiations are to progress, the US will have to move on domestic
support, including on cotton, where a number of African countries have
taken the lead. On export competition — now that export subsidies are on
their way out, the focus is on disciplines on food aid, where the US has
reservations against the EU's proposal that they should be in grant form
only, on state trading enterprises and on export credits.
With a sense of determination and purpose, it should be possible to
resolve these differences and pave the way for the conclusion of the DDA
negotiations by the end of this year. Needless to say, a substantial
result in agriculture would benefit not only the US and the EU, but many
countries, particularly developing countries which can, in turn, use
their increased export earnings to import goods and services needed in
their development process from the US and other developed countries.
Industrial products
Another key area in these talks is slashing tariffs on industrial
products (NAMA in our jargon), around 90% of world merchandise trade.
For the first time we have agreed to reduce industrial tariffs according
to a formula applying greater cuts to higher tariffs, which all
specialists will tell you is a much more powerful technology to reduce
tariffs than averages or request and offer, which were used in previous
rounds. We have also agreed that there would be parallelism between the
level of ambition in the agriculture and NAMA negotiations.
Being the world number two exporter, the US has very high ambition in
the NAMA negotiations, including substantially improved market access in
large emerging developing countries. It wants increased market access
for products in which US exporters have interest, particularly in the
twenty-three leading markets identified by the National Association of
Manufacturers.
The US stands to gain from an ambitious result in the NAMA negotiations.
While the markets in developed countries have matured to some extent,
those in developing countries, such as China, India and Brazil are
expanding at a very fast pace. Take US exports to China which have grown
tremendously since 2000, increasing by 28% in 2003 and 22% in 2004.
Given the relatively high level of tariffs of developing countries, a
substantial reduction of their tariffs should enable American companies
to increase their exports to these countries.
We now need to agree on numbers for cuts and for the limited exceptions
that developing country would be able to make. Discussions among members
to test numbers and run simulations are necessary to find a common
landing strip.
Services
As the largest exporter of services in the world, the US stands to reap
enormous benefits if WTO Members offer substantial access to their
markets. In Hong Kong we opened the way for plurilateral negotiations
among Members in a bid to improve the quality of offers and ensure new
market access opportunities for foreign service providers. We also
reaffirmed the right of governments to monitor and regulate foreign
service providers in order to ensure that they operate in accordance
with the policy objectives of a country.
A number of developing countries have conditioned access to their
markets on the degree of market opening for their agriculture products
and also the improvement by developed countries of their offers under
mode 4 — the temporary movement of professionals to deliver services
abroad. I stress temporary because this issue is often, and mistakenly,
mixed with immigration, including in this country.
I am sure that the US would continue to exercise leadership in the
services negotiations and get countries to make significant offers. It
need not be stressed that commitments under the GATS could help
countries to attract foreign direct investment into certain critical
sectors of their economies, including the telecommunications, financial
services and tourism sectors.
Rules (antidumping)
With respect to the negotiations on rules, to which I know the US attaches great importance, a detailed work programme has already been established. The US is keen on promoting greater transparency and due process in antidumping investigations. I also know the US is against tightening too much the rules in the anti-dumping agreement, believing that changes should not unduly restrict the right of countries to respond to unfair trading practices. While there are deep political sensitivities surrounding this issue, I believe that in the medium to long term, it would be in the interest of all countries to accept disciplines which ensure that anti-dumping duties are not abused or unduly imposed. Increasingly, many countries are making use of trade remedy instruments and it is important for the US to ensure that its market access is not negated through abuse of such instruments. A fact often overlooked is that the US has become one of the main targets of antidumping duties in markets where it exports. Since the entry into force of the WTO, there have been more than 150 antidumping investigations against US products, and more than 80 definitive measures adopted against US exports. It is clear that the US also has an offensive interest in this area. The US has also been a leading and effective advocate of the tighter disciplines on fisheries subsidies. It is important that this key environmental objective of the round advances over the coming weeks.
Development
Finally let's not forget that the Doha Round is a Development Round. I've said that repeatedly, but I've also stressed that the largest gains to developing countries will accrue from the market access negotiations in agriculture, industrial products and services. At Hong Kong, the US and other developed countries agreed to grant duty-free, quota-free access to LDC products falling under 97 per cent of their tariff lines. It is important that we now work on defining the specific products. To further demonstrate their commitment to the development dimension, Members also pledged to ensure a solid Aid for Trade package that would assist developing countries to build supply-side capacity enabling them to better benefit from the multilateral trading system.
Conclusion
It is clear from the above that there is a lot to be done if Members are
to conclude the Round by the end of this year. The workload is
formidable but doable, provided all members are ready to apply the
necessary political energy. The challenge is both technical and
political. It is about leadership, about compromises and countries
recognizing their common interest in success and the collective costs of
failure. As in other Rounds, US leadership is indispensable.
At the end of the day all countries stand to gain from a strengthened
multilateral trading system — both developed and developing countries
since trade is not a zero-sum game. The responsibility to make this
Round a success is a shared responsibility.
It may sound that a lot is requested from the US in this Round. But the
US stands to gain a lot from it too. The US is the world's richest
economy and the principal architect of the multilateral trading system.
It can not abandon its own creation. Power brings along
responsibilities, but also huge benefits for the US economy. Developing
countries are growing rapidly and their integration into the world
economy would create new market opportunities for American companies and
create high-paying jobs in the US which ensure its continued prosperity.
The WTO needs US' leadership and active participation in order to
strengthen the multilateral trading system for the benefit of all
countries.
This is why, following the conversations I have had in the last two
days, most of which in the Hill, I am confident that your
representatives and negotiators are ready to stay the course.
Thank you.