WTO NEWS: SPEECHES — DG PASCAL LAMY

11 October 2006

Public opinion “more anxious” about effects of globalization — Lamy

Director-General Pascal Lamy, in a keynote speech to the 23rd Assembly of the International Federation of Pharmaceutical Manufacturers and Associations on 11 October 2006, said that “the public is holding their governments to account for the expectations that's globalization has raised on a much wider scale — that an increasingly wealthy and prosperous world should be making faster progress towards broadly-based economic development, reducing poverty, and achieving international social and environmental goals”. This is what he said:

Keynote speech by Pascal Lamy, Director General of the WTO
Dinner on the occasion of the 23rd Assembly of the IFPMA (International Federation of Pharmaceutical Manufacturers & Associations)

Good evening Ladies and gentlemen. I am glad to be here with you on the occasion of the twenty third annual meeting of the International Federation of Pharmaceutical Manufacturers & Associations. I am grateful to President Dr. Vasella for inviting me to speak tonight and to your Director-General, Mr. Harvey Bale, whose connections with the trade mafia have once more proved irreplacible.

Tonight, as WTO DG, I would like to share with you my views as to where we are generally in the current WTO negotiations, and where the WTO debate stands on the international scenery of globalization. And as WTO is very much about transparency, I will be happy to answer your questions at the end.

So what is happening exactly in the Doha Round of negotiations or to be more precise, why are things stalled?

Last July, after consulting with WTO member governments, I decided to suspend the negotiations temporarily to allow for a period of “time-out”. Negotiations jammed on agriculture as you may have read in the press. Why agriculture which represents less than 8 % of world trade can keep the entire Doha Round agenda off track? Because food production remains a very sensitive sector for rich and poor countries. And since the current Round is one of development and since more than 70% of the world poor live in rural areas, there is no way the DDA can continue if the existing agriculture bias in favour of rich countries is not properly addressed. I had to suspend the negotiations because the main WTO developed countries did not seem to be able to offer reduction in subsidies and market access tariffs that could satisfy developing countries, and because some developing countries' insistence that undefined flexibilities be maintained in their favour was unacceptable to some developed and developing countries.

Before we can go back to the negotiating table with real expectations of success, the major players who have the leadership role in this Round must each take a decisive step forward. When they do, they must bring with them the extra flexibility in their negotiating positions that will allow us to close the gap on the very substantial trade agreements that are now clearly within our reach.

They are aware of what is expected from them, and I know that serious political reflection is taking place in capitals on how the right bridges can be built. Like all trade negotiations, at the end of the day it will come down to bargaining over details — an additional point off trade distorting subsidy payments here or an additional point off tariff rates there — but our meeting in July proved we were not yet at that stage.

Concluding this Round is understandably difficult. It is the most ambitious attempt that governments have made to open trade multilaterally — because of its scope, especially in the hard core of agriculture, and because of the number of countries that are negotiating and that will share in the results. The Uruguay Round wrote the modern rule-book for the trading system, and the Doha Round is using it to open trade and lock-in reform on an unprecedented scale.

That puts the lie to anyone who claims this Round is not worth fighting for. The stakes are high. Large cuts in merchandise tariffs which would impact more remaining high tariffs that existing low tariffs, slashing domestic farm support and eliminating trade-distorting export subsidies will produce a very significant advance in market access way beyond the results of the Uruguay Round. Along with the other parts of the trade negotiations, notably in services, we will create a freer, fairer and more secure global economy for all to compete in.

I firmly believe that this result can be achieved. Negotiating positions are not far apart in technical and economic terms. But closing the gaps is proving to be a complex political deal for the WTO's member governments to put together, at the national level and with their negotiating partners. The last mile is the most politically difficult one.

One reason for that is the context in which this Round is taking place. Public opinion has become considerably more anxious about the effects of globalization. Economic success, which globalization has so conspicuously promoted in many parts of the world, is measured by more than higher rates of aggregate income growth. People are also concerned about who shares in that growth and how.

Naturally, these feelings are strongest at the national level where the impact of globalisation on economic life is most visible. Wound up with this today are anxieties that opening up borders brings with it loss of national identity and security. We must acknowledge, too, that the public is holding their governments to account for the expectations that globalisation has raised on a much wider scale — that an increasingly wealthy and prosperous world should be making faster progress towards broadly-based economic development, reducing poverty, particularly in its most extreme forms, and achieving international social and environmental goals.

The political management of trade opening and of the Doha Round has had to mature to cope with these shifts in sentiment to a more critical view of globalisation. The public is demanding more from the WTO as the central pillar of modern global economic governance, and looking to this Round to deliver on that.

Dealing with domestic concerns is at the top of the list for most political leaders, particularly dealing with the adjustment costs of trade expansion. That issue is not new to the management of trade negotiations, but this time it is particularly challenging. The Doha Round is levering out the most stubborn remnants of longstanding trade restrictive and distorting policies where resistance to change is strongest — especially farm support policies whether through high subsidies or through high tariff protection. Another incremental step towards eventual open trade will not be enough to bring the Round to a conclusion. Substantial change is needed, and although governments have already had five years since the Doha Round was launched to prepare public opinion for change of that magnitude, it seems clear that more political heavy-lifting is still needed to complete the job, particularly, but not only in Europe and North America.

Added to that is the need to satisfy domestic public opinion that adjustment is being shared fairly by other major players in the Round. We have seen concerns about outsourcing labour-intensive services debated in that context on both sides of the Atlantic during the course of these negotiations. The issue of global trade imbalances has also been taken up in similar terms.

Raising trade restrictions is surely not part of the answer in cases such as these, and I do not think frankly that anyone seriously believes it is. The damage that would create would be unthinkable. More often than not, the real cause is not trade at all, but instead failure to accompany trade expansion with other economic policies that will underwrite the beneficial impact of opening up to foreign competition. It is all too easy to allow the blame for lost jobs, economic insecurity and huge trade deficits to be placed, unchallenged, at the door of globalisation and as a result see public support for the Doha Round waning.

It is, of course, naïve to think that coping with trade-related adjustment is not a difficult political task. But nor is it reasonable to believe that specific interests can be shielded from participating in an overall win-win deal. Keeping the most sensitive trade issues off the negotiating table in Geneva is not a meaningful response to the challenges of globalization. Far from being the main driver of change — which lies in innovation and initiative — the WTO provides governments with a means of dealing with change in ways that make it easier to manage politically. Holding back from compromise in one or two areas only serves to block all other parts of the Round that are so clearly beneficial and that will attract wide political support — generating more income and jobs in sectors that are open for business on a global scale, and providing poor countries with the means of raising their income levels and standards of living to create a more humane and secure world for everyone.

All of those around the negotiating table face domestic adjustment issues and recognize that time must be provided to resolve them if they are to be managed successfully at the national level. This can be factored into the results of the Round. But to do that, we have to move beyond the question of whether more trade opening will take place at all, and focus on negotiating the details of how it can be equitably shared and when it can be phased in.

In the WTO's most vulnerable member countries — particularly the least-developed countries — adjustment costs along with capacity constraints and supply responses to globalization cannot be left to be taken care of through the national budget or by the private sector alone. We therefore have to build an effective international response to complement these countries efforts in opening trade. Managing public support for trade expansion in these countries means assisting people to benefit directly from it — training officials, strengthening institutions and building infrastructure that will help businesses grow, provide consumers with cheaper and better quality goods and services, and allow these countries to expand and diversify their trade.

That is why I advocated launching the debate on Aid For Trade also in the WTO agenda as well as substantially increasing the funding of Aid for Trade. This has an important political role to play to complement the trade negotiations, and additional development assistance can help these countries unlock their full trade and growth potential. Increasing Aid for Trade is not contingent on the Round, but its value and importance will be greatly increased if it is implemented in conjunction with substantial new market access opportunities and new rules that will facilitate their trade.

There is no hidden agenda here. The WTO's role is strictly one of advocacy on this issue, not managing or disbursing aid beyond our traditional activities in trade related technical assistance. We are therefore working closely with the main donors and the existing experts in the field — the Bretton Woods organisations, the regional development banks and the UN agencies.

The Doha Round must deliver trade and growth with strong development credentials if developing and least-developed countries are to believe that the deal is worth doing. This goes well beyond securing additional Aid for Trade — important though that is — to the heart of the negotiations, on market access in particular.

Countries such as Brazil , China and India have championed the Doha Development Agenda as the signature theme of this Round, and they are playing a central role in deciding how it will be concluded. We saw them succeed in using their influence to eliminate managed trade in textiles and clothing in the Uruguay Round. In the Doha Round their sights are set, above all, on agricultural protectionism. Their leverage is considerable. They represent the regions with the fastest growing economies in the world and they hold one of the most valuable prizes that this Round has to offer — improved access to their markets for goods and services.

I know personally that the political leaders of these countries understand well the role that opening up their economies to global competition is playing in fuelling their own economic success. There is no question of them rolling back that conviction, nor of them standing still where they are today. They each have ambitious, forward-looking programmes of trade opening and domestic economic reforms, and I am convinced that they are prepared to use that to make contributions to concluding the Doha Round that are commensurate with their growing importance in the global economy.

We must not forget that these countries hold strong views on how the global economy must evolve to reflect the fact that economic power and influence in the world has shifted towards developing countries since the end of the Uruguay Round. They believe deeply, as I do, that the Doha Round has the potential to produce a trading system for the future that will provide better and fairer trade and growth opportunities for developing countries. They also know that the WTO is the best insurance policy against domestic protectionist pressures.

With influence of that kind, of course, also comes responsibility. Although the front lines in this negotiation may seem today to be drawn by the main protagonists along a narrow, North-South axis of market access issues in agriculture, manufactured goods and services, the stakes are far broader than that. One of the most valuable results to be had from this Round is the flourishing of South-South trade, so that countries on a lower rung of the development ladder can trade their own way up to higher income levels and living standards. The advanced developing countries have a responsibility not only to champion the cause of the Doha Development Agenda, but also to help make it happen in practice by opening their markets to others who are currently poorer or less advanced economically than they are.

Cutting a multilateral deal to open up markets worldwide is the surest way that all countries can be certain their interests are represented at the negotiating table and given a fair opportunity to share in the benefits of globalisation. In contrast, cutting a large number of them out of a deal, by failing to complete the Doha Round or by focusing instead on bilateral and regional trade agreements with a favoured few, is a denial of our commitment to contribute to eliminating poverty in the world.

I am convinced that there is no acceptable alternative to completing the Doha Round — for the sake of the boost it will give to international trade and economic growth and to the key role that the WTO needs to continue playing in helping to manage globalisation and economic cooperation on a political level. We all recognize that continued trade opening and integration can produce truly remarkable rates of economic growth and help to spread prosperity worldwide. The multilateral process is the fairest in terms of its inclusiveness and its potential to deliver a well-balanced result. The WTO is based on the same principles of competitive markets, binding contracts, the rule of law and adequate public policies as those on which we have so successfully built the stability and security of our national economies and modern societies.

We must not allow the few straws that now stand between us and the successful conclusion of these trade negotiations to break the proverbial camel's back.

Finally, I would like to thank you and your governments for the continuous efforts to increase and improve access to cheap medicines, including the recent proposal by Switzerland and the United States to expand the membership of those Members willing to bring import tariff duties to zero on medicines. This type of measures can reduce the cost of healthcare through the substantial elimination or reduction of tariffs and specific non-tariff barriers affecting the trade in medicines. In fact, the Uruguay Round zero duty initiative for pharmaceutical and medicine products has been the most successful sectoral initiative: its coverage has increased and so has its membership. Together with the new WTO provision on access to medicine allowing for compulsory licenses by poor countries that do not have any manufacturing facilities, these initiatives can make an important difference in saving people's life or in ensuring that more people can afford minimum medical treatment. And providing the evidence that trade can work to improve health conditions which we know is essential to economic and social development.

I have always believed deeply in the need to offer more protection to weaker victims of globalization; and as diseases cross frontiers — in fact we now speak of the “sovereignty of disease” over that of States — our globalized world response must always remain ultimately focussed on human beings. And this is one of the reason why I have personally invested so much in the debate on access to medicines. And thanks to all of you, I hope we've made it possible now.

But the construction of a better world for all people requires that our efforts continue on all fronts, and the DDA is one of them, and a fundamental one. I urge you and your business colleagues in other industries and sectors, who have as big a stake as anyone in the future of the WTO and our sustainable development, to use your influence with political leaders to insist that they use this “time out” to line up solidly and single-mindedly behind us to reach an early agreement on the Doha Round. The sooner we can conclude it, the better for everyone involved.

Thank you