I wish to commend the World Bank President, Dr Jim Yong Kim, and his staff for the strategic document ‘A Common Vision for the World Bank Group’. This policy piece seeks to further define key goals for the Bank in ending extreme poverty (by decreasing the percentage of people living on less than USD 1.25 a day to 3% by 2030) and promoting shared prosperity. These are goals shared by the WTO and are central to the Doha Development Agenda negotiations.
To counteract the rising inequality between and within countries and regions, there will have to be increased growth to reach the poverty reduction target and reduce global unemployment. The recent economic crisis illustrated how quickly years of growth could be effectively wiped off the balance sheet. With some countries still struggling to effectively pull themselves out of the tail end of that crisis, there will be a need to pay greater attention to ensuring that a growth component is an integral part of national and global strategies going forward.
Central to this growth component is the role that trade can play. Keeping markets open at the beginning of the crisis ensured that the engines of global growth kept turning. Maintaining open markets minimized the impact of the crisis. Ensuring protectionist pressures were kept at bay in a period when, naturally, some markets were looking inward was in many respects just as critical to the recovery as growth strategies — and will remain important as we move forward in a scenario where the trade numbers for 2012 and the forecast for 2013 remain sobering at best.
In 2012, the volume of world merchandise trade grew by a comparatively low 2%, down from 5.2% in 2011. Developed economies recorded only a 1% increase in their exports while shipments from developing economies grew just 3.3%. We expect that for 2013 trade will also remain subdued, growing around 3.3%, well below the 20-year average.
The upcoming WTO Ministerial Conference in Bali in December can contribute towards this ‘global growth compact‘ by delivering a multilateral Agreement on Trade Facilitation. Effective and transparent trade facilitation will make importing and exporting easier, less costly and more efficient. It is an input into facilitating a better and more streamlined business environment. In a world increasingly defined by regional and global value chains, it provides an important step up the ladder for developing countries and the small and medium-sized enterprises (SMEs) within these countries to enter and benefit from insertion into these value chains. The World Bank has been an active and engaged partner on trade facilitation and will be a key ‘implementer’ of the agreement once it is realized.
A deal on trade facilitation, on some agriculture and development components of the Doha agenda can be ready for Bali. But for that to happen, negotiators must work faster and harder. But above all, they must be ready to exercise the necessary flexibility to deliver a deal. They need to walk the talk.
Today, we are starting to see changes in the DNA of international development assistance, which is suffering from the consolidation of public finances in some developed countries. The recently released figures from the OECD show that in total development aid from DAC [Development Assistance Committee] donors fell by 4% in real terms in 2012, following a 2% fall in 2011. The continuing financial crisis and euro zone turmoil has resulted in budget tightening and some shift in aid allocations away from the poorest countries towards middle-income countries. This also has implications for Aid for Trade — an agenda under which the WTO has worked very closely with many of you around this table, including the World Bank, regional development banks and UN agencies.
Preliminary figures on Aid for Trade for 2011 indicate that commitments for 2011 stand at USD 39 billion, down almost USD 6 billion compared with 2010, although still up by 56% on the 2002-05 baseline. The decline is concentrated in aid to economic infrastructure, with the decline primarily in Africa. It is important to highlight that these figures do not include trade-related assistance from South-South partners. These figures confirm that a recommitment to Aid for Trade is necessary and also that greater effort to bring non-traditional providers to development assistance into the fray, including the private sector, is required. The focus of the Fourth Global Review of Aid for Trade in July 2013 in Geneva will be on helping developing countries to better integrate into value chains and showcasing the excellent partnerships which exist between public and private sector actors. This greater focus on investment for trade will be a necessity in an environment of falling ODA [official development assistance].
One final issue I would like to address is that of trade finance. From the recent meeting of the WTO Expert Group on Trade Finance, it is clear that the situation in the markets has improved. However, there are continued difficulties country and sector-wise in SMEs in low-income countries, but also in medium and higher-income countries of Europe. This justifies the need for continued risk mitigation provided by multilateral development banks. I would finally note two important recent events: the operational start of the trade finance facilitation programme of the African Development Bank and the positive evaluation by the World Bank‘s Independent Evaluation Team of the IFC‘s global trade finance programmes. These are two important and welcome outcomes of a global effort by many of us here.
In closing, to deliver on the objectives of ending extreme poverty and promoting inclusive economic growth we need to first reaffirm commitment to our shared global compact: cooperation and collaboration through multilateralism. The WTO has been at the forefront of pushing for a growth agenda, especially in the post-2015 period, and will continue to work towards securing a more central role for trade and economic growth as the process unfolds.
As you are aware, this will be my final Development Committee Meeting as WTO Director-General. I wish to recognize the importance of the collaboration between the WTO and the World Bank and thank the President for his personal interest in the work of the WTO, including on Aid for Trade.
“Director-General's speech to the IMFC”
The world is indeed on a more stable axis than when we met this time last year and when we met at the Fall meetings in Tokyo. I would not contend that we are fully out of the crisis period but rather I would be cautiously optimistic that we are at its tail end. This necessitates that we focus on three areas, two of which have been identified for discussion at today’s session:
— one, supporting recovery by identifying and implementing the policies to anchor stability and growth;
— two, concretizing resilience by focusing on financial sector reform, job creation and inclusive growth; and
— three, reaffirming the role of multilateralism as we take stock of the lessons of the crisis period.
The recently released WTO figures for trade in 2012 and forecasts for trade in 2013 are sobering. The preliminary estimate of 2.0% growth for world trade in 2012 is 0.5 points below our most recent forecast of 2.5% from September 2012. The abrupt deceleration of trade in 2012 was attributed to slow growth in developed economies and recurring bouts of uncertainty over the future of the euro while narrowing output and high unemployment in developed countries reduced imports, leading to the lower pace of export growth in both developed and developing economies.
In 2012, the volume of world merchandise trade grew by a comparatively low 2.0%, down from 5.2% in 2011. Developed economies recorded only a 1% increase in their exports while shipments from developing economies grew just 3.3%. We expect that for 2013, trade will also remain subdued, with the volume of world merchandise trade growing by 3.3%, which remains well below the 20-year average.
In terms of the dollar value of world merchandise exports, 2012 saw a slight increase of two-tenths of 1 per cent (i.e. 0.2%), to US$ 18.3 trillion. This slower growth in the dollar value of world trade compared with trade in volume terms is explained by falling prices for traded goods, especially commodities. The value of world commercial services exports rose 2% in 2012, to US$ 4.3 trillion, with strong differences in growth rates across countries and regions.
The importance of trade as a driver of macroeconomic cycles cannot be emphasized enough in the current period. In 2012, intra-EU trade depressed total EU trade, itself accounting for one-third of global trade, and it has offset the expansion of trade in all other regions in the world. Accordingly, global trade growth fell behind global GDP growth. In 2013, the scenario is one in which EU trade stops exercising a recessionary impact on global trade and in which import demand from developing and emerging economies pulls exports from the rest of the world. As a result, global trade will grow somewhat faster than global GDP in 2013. That said, the patterns of growth which we have experienced since 2008 are likely to continue for the next five to ten years at three speeds: stable but flat growth in developed countries; increasing but not overtly impressive growth in emerging economies; and continued high growth in some developing countries, especially in the African continent.
These trade trends also reflect the tectonic changes in the global economy: South-South trade continues to be the fastest growing segment of world trade; China’s exports to the United States are expected in 2013 to outpace for the first time China’s exports to the European Union; intra-ASEAN trade now reaches two-thirds of total ASEAN trade against one-third during the Asian financial crisis 15 years ago - reflecting the fact that the ASEAN supply chain now works primarily for ASEAN consumers, not European or US consumers.
All of this points to a clear conclusion that the structural flaws in economies revealed by the economic crisis have not been fully addressed and repairing these fissures needs to be the priority for 2013.
As long as global economic weakness persists, there is the fear of protectionist pressure. The WTO will continue to monitor these trends for its members and for the G-20 but if we are to avert a move to more inward postures, all of our policy decisions must be attuned to restoring sustainable growth and the international community must recommit to multilateralism as the route to ensuring future stability.
This is especially true of the multilateral trading system. As WTO members prepare for the Ninth Ministerial Conference in Bali in December 2013, the focus should be on a package that can deliver growth to countries at all levels. A possible multilateral Agreement on Trade Facilitation is at the heart of a possible deliverable at Bali and the evidence confirms that this can be an important injection of growth, cost efficiency and transparency into the international system of trade rules and regulations.
Before I close, I would like to express thanks to the Managing Director of the IMF and the staff of the organization for the continued collaboration with the WTO on areas ranging from exchange rate policies and trade finance to Aid for Trade. As this is my last Spring meeting as WTO Director-General, I would also thank all of the Ministers and senior officials from countries represented here as well as the Heads and staff of the Multilateral Development Banks for their collaboration and cooperation during my tenure as Director-General. I hope that this relationship will continue under the leadership of my successor.