The International Economic Forum of the Americas

Dear Gil, distinguished mayor, ladies and gentlemen, I thank you for having invited me to participate in your work and for relieving me, for a few hours, from the Geneva grindstone to enjoy this refreshing exchange of ideas at the Conference of Montreal.

This morning's topic — Partnership and Global Prosperity — is an action plan in itself. In the globalized world of today, prosperity rests on partnership, be it between nation states, between regions, between cities, between companies, trade unions, civil society organizations or between international organizations. What was once true within national borders is now true at the planetary level.

This growing involvement of a steadily increasing number of categories of actors is striking when it comes to the multilateral trading system. Built up stone by stone over the past 50 years, this system is founded on the idea that prosperity depends on efficiency, stability, predictability, and equity in international trade: the efficiency of an international division of labour free from artificial protections — though this does not preclude a certain amount of legitimate protection; stability and predictability thanks to a set of rules, standards, and parameters that are regularly updated and whose effective implementation is guaranteed by a judicial mechanism that is unique in the archipelago of global governance; equity thanks to special and differential treatment for the most disadvantaged or least developed economies, and equity in the obligation assumed in 2001, at the beginning of the ongoing negotiations, to correct a number of flaws in the current system that penalize the developing countries in relation to the developed countries. Quite a handful, it is true! But that is precisely why the current negotiations are so complex and difficult.

Why are the negotiations so difficult ?

The Doha negotiations are more difficult than expected, but why? Some say it is because there is no business interest. Some say that it is because there is no media interest. Others say it is because of a lack of leadership or NGO opposition. The reason why the current negotiations are so difficult is, in my view, because this Round aims at a higher level of ambition than previous rounds, notably the Uruguay round. This Round is deeper, larger and fairer across the board. It therefore presents political complexities for all participants — and it will take some political courage to bridge the gaps that still remain among the key players.

This Round is deeper. It is deeper because the level of reductions on subsidies and import tariffs which are already on the table double those of the previous round. Developed countries are being asked to reduce their agriculture subsidies and open their markets to exports from other countries; some developing countries are being asked to reduce their import tariffs on industrial products both to developed as well as other developing countries.

We have moved from cutting tariffs according to averages — as we did in the Uruguay Round and which allowed countries to protect tariffs on specific products — to a general reduction formula which will cut high tariffs more and lower tariffs less. The end results should be impressive. For example, the highest agriculture tariffs will be down by 60%-70%, compared with a 36% average during the Uruguay Round.

On agriculture subsidies what is on the table today is already twice what was accepted in the Uruguay Round. There should be no more export subsidies by 2013, with a substantial part of them already gone by 2010.

In Services, 30-40 big players have engaged on a request and offer process to liberalize trade in a variety of sectors — from telecoms to distribution services, from financial to legal services, much broader than ever before.

This Round is larger. It is larger because we have included new issues in the WTO edifice such as trade facilitation. Trade facilitation is crucial for the business community, because it tackles day-to-day problems such as customs procedures, transit of goods and bureaucratic border requirements. A successful conclusion of the Trade Facilitation negotiations will make a significant contribution towards lowering transaction costs in trade of particular importance to many small-and-medium enterprises.

To illustrate this, consider the following example: in Denmark, an exporter needs 3 documents and two signatures to complete all shipping formalities. The entire process takes 5 days from start to finish. By contrast, in Burundi, it takes 11 documents, 17 visits to various offices, 29 signatures and 67 days on average for an exporter to have his goods moved from factory to ship. It is estimated that halving the cost of bureaucratic trade procedures could mean a saving of around 300 billion dollars a year.

We are also trying to bring in more clarity on regional trade agreements and their compatibility with the WTO. With the increasing number of RTAs which, although often easier to conclude, remain useless in addressing issues such as subsidies or dumping. It is therefore important to reinforce the WTO multilateral monitoring mechanism over these RTAs.

Trade and environment negotiations are also new; they will open markets to trade in environmental goods and services and will improve the coordination between WTO rules and multilateral environmental rules. These are not headline catchers but they are very important, as is the ground breaking negotiation on broad new environment related topics such a fisheries subsidies.

Deeper, larger and not least, this Round is fairer. Fairer because the current Round will not only remove obstacles to trade and improve the level playing field but will make the development dimension more central to the system.

It is agreed that developing countries will have to do less than developed countries.

In agriculture, specific flexibilities for developing countries will be available in the form of “special products” and “special safeguard mechanism”. There will also be flexibilities for developing countries to protect some sensitive sectors from industrial tariff cuts. There will be duty-free-quota-free market access for most products originating from LDCs. There will also be flexibilities for small and vulnerable economies, land-locked countries and recently-acceded members.

With the DDA, we are also putting in place an A4T package aimed at addressing developing-country bottlenecks. This initiative is an essential complement to help developing countries reap the benefits of the new trade opportunities offered by the Round. The Aid for Trade package for which I would welcome business involvement on top of the mobilization of public development assistance — and many of the protagonists of this exercise are with us, Mr. Kaberuka of the African Development Bank and Mr. Kuroda of the Asian development Bank — will also provide support towards adjustment costs that developing countries will incur as a result of further trade opening through the Round. It is important to note that, though we regard Aid for Trade as an important component of the final results of the Round, it will not be a substitute for an ambitious outcome of the Round.

As you can see, the current Round of Negotiations is much Deeper, Larger and Fairer than any previous Round.

Each one of these dimensions of the negotiation presents its own difficulties and complexities. When you combine all of them, the exercise becomes extremely difficult. If you add to this the fact that we are 150 Members of very different economic and social backgrounds and that all our decisions are taken by consensus, you see that our challenge is huge: we need a lot of help and a bit of luck!

Yet the offers currently on the table will still have to be improved, as all the negotiators well know. In order to allow for a successful conclusion of this round, these offers have to be topped up in the three main areas which President Lula of Brazil recently described as a the primary “triangle”:

• bigger cuts in tariffs on agricultural products — and here the EU, who has recently indicated a willingness to move, still has to submit a better offer;

• bigger cuts on agricultural subsidies — and here it is for the USA to submit a better offer of subsidies cuts;

• bigger cuts in tariffs on industrial products and in this sector it is for emerging developing countries — Brazil, India, China or South Africa to submit better offers, which they are presently considering.

This has to happen within weeks, not months, if we are to conclude this round by the end of 2006, because by 2007 the United States will most probably lose its authority to negotiate trade agreements. We have planned meetings in Geneva at the end of June to conclude modalities for agriculture and industrial products. This is doable but it will require political will and for this, I count on you all to convince your governments that market opening and better level playing field through increased disciplines, is the only way to reduce poverty and promote world prosperity.

Before concluding, I would like briefly to revert to agriculture, which is a particularly sensitive issue here in Quebec.

The intensity of the debate on agriculture at the WTO is attributable to the substantial disagreement that remains among Members on the relationship between the opening up of trade and agriculture. Some feel that the virtues of the international division of labour, which guarantees the best price for the consumer — the price of the most efficient producer — apply to food in the same way that they apply to socks, televisions, cars and coal, while others feel that agricultural production has its own specificities — what economists would call specific
“externalities” — relating to the environment, food security, animal welfare, etc, which justify significant departures from the rules of the market economy, including State budget support or border protection in order to isolate domestic products from world market price variations.

This controversy — with which the Canadians are familiar, since it is a chronic bone of contention between the east and the west of the country — is not going to be solved during the current round of negotiations any more than it has been solved in Canada.

In the circumstances, if the negotiations are to succeed, they will require an ideological armistice followed by measures to establish coexistence based on the following principles: distinction between trade-disrupting public support and other public support; elimination or substantial reduction of the former; and further opening up of agricultural markets — more moderate in the case of certain categories of sensitive products.

This is the structure that has progressively been put in place since 2001, particularly by the compromise of July 2004. And it is within this framework that we are currently working towards a compromise on the figures over the next few weeks. Canada stands to gain in terms of market access for its exports. It will gain from the reduction in the subsidies currently enjoyed by its competitors. And it will have to pay by accepting an increase in its imports and by reorganizing its State monopolies.

Conclusion

The consequences of a successful or unsuccessful Round are crucial for the business community.

It would be difficult to exaggerate the importance of this Round. With its huge potential for global growth. Open economies like Canada have much to gain from an equitable, rules-based world trading system. The WTO is the best forum for building such a system as it underpins our commercial relations with other economies, including our most important trading partners.

World trade is vital to Canada's current and future quality of life. The WTO needs fair and transparent players like Canada, and Canada needs all its trading partners, in addition to support of its business community. This is an authentic partnership.

You, the real trade stakeholders, Canadians and non-Canadians, you can reinforce your partnership to help us first, domestically in ensuring that your voice is heard and that your governments look at the big picture. You can also assist in promoting publicly, through popular and accessible media the benefits of the multilateral trade system.

As has often been said, the multilateral trading system (and market opening) benefits many people who tend to be silent while those negatively affected by increased market access tend to be more vocal and get more attention in the media. The pattern should be changed so that the overall benefits of increased market opening are better understood by ordinary people in your own country. This should also “reassure” those who fear the negative consequences of globalisation.

This is your part in the partnership between yourselves and the WTO!