Ladies and Gentlemen,

I am pleased to be with all of you today, Members of the APEC Business Advisory Council (ABAC), and to share with you my views as to where we are in the on-going WTO negotiations. This morning, I joined the APEC Trade Ministers in a retreat to exchange views on how to resume the Doha negotiations as soon as possible. Ministers reiterated their political commitment to the multilateral system. All of them expressed a sense of urgency and joined in calling for a rapid restart of the negotiating engines in Geneva.

Of course, this morning’s Ministers’ gathering had another important point on the agenda: Vietnam’s accession to the WTO. I want to congratulate our friends and colleagues in Vietnam on their joining the world trade family. This is an important moment for the Organization. Vietnam’s WTO accession shows a firm political commitment of the Vietnamese government to integrate into the world economy. But it is also a collective recognition by the WTO Membership of Vietnam’s economic reform and policy changes which started 20 years ago with the Doi Moi policy. Vietnam is this region’s rising star.

Another APEC member, Russia, is also taking steps towards its accession to the World Trade Organisation. With progress on the bilateral front, including the news on the deal between Russia and the US, I very much hope that the Russian side will now devote much needed attention to the multilateral part of its accession process which is still lagging behind. It is the next phase of the negotiations, the multilateral one, on which we need to focus our energy in order to firmly anchor Russia into a rules-based multilateral trading system.

Coming back on the Doha negotiations, today I would like to brief you on three issues: first, why is the Round stalled. Second, what’s on the table now and why we should not forgo it. Third, how can the APEC business community contribute to advancing the negotiations.

 

Why is the Doha Round so difficult?

Last July, after consulting with WTO member governments, I proposed suspending the negotiations temporarily to give participants a “time-out” to reflect on and adjust their positions. Why can agriculture, which represents less than 8% of world trade, keep the entire Doha Round agenda off track? The answer is simple: because food production remains a very sensitive sector for both rich and poor countries. And since the current Round is a development one and since more than 70% of the world’s poor live in rural areas, there is no way the negotiations can succeed if the existing agriculture bias against developing countries is not properly addressed. This means an effective reduction in farm subsidies by rich WTO members as well as a reduction of agriculture tariffs providing for substantial improvements in market access. Obviously the reduction in tariffs should be modulated with the necessary flexibilities for developing countries. In July we could not reach agreement on these points because, on the one hand, what was offered in reduction in subsidies was not perceived as enough by developing countries, and because, on the other hand, the insistence on flexibilities which could negate the principle of market access, was unacceptable to some developed and developing countries.

For this negotiation to succeed, each one of the major players in this round must take a decisive step forward. When they do, they must bring with them the extra flexibility in their negotiating positions so that we can close the gap on the very substantial trade agreement that is now clearly within our reach. We have recently seen some signals of new flexibilities from key players. I do hope these will soon turn into concrete and specific numbers.

 

So what do we have on the table?

Concluding this Round is understandably difficult. It is the most ambitious attempt that governments have made to open trade multilaterally — because of its scope, not only in the hard core of agriculture, but also 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 reforms on an unprecedented scale.

There are over 20 negotiation areas in the Doha Round, let me examine just five of them which I see have an important impact on your activities. Compared with the results of Uruguay Round, no one should claim this Round is not worth the fight.

The Uruguay Round succeeded in creating the first comprehensive set of multilateral trade rules on agriculture, i.e. the WTO’s Agreement on Agriculture. It created a framework for disciplining agriculture subsidies and it initiated a process of market opening in agricultural trade. The Doha Round promises to build on the results of the Uruguay Round by going further in “levelling the playing field” in agricultural trade.

The Uruguay Round reduced the agricultural tariffs of developed countries by an average of 36%, and of developing countries by an average of 24%, except for those who chose to simply bind their tariffs. This time we have abandoned average reduction, which gave countries the option to pick and choose and left us with sky high tariffs on sensitive products, in favour of a banded formula which will cut higher tariffs more than lower tariffs. Furthermore, even conservative proposals on the table today go well beyond the tariff cuts achieved in the Uruguay Round.

The Uruguay Round saw a reduction of trade-distorting agriculture subsidies of rich countries by 20%. Today we are discussing cuts more than three times bigger. In the Uruguay Round, developed countries agreed to reduce their export subsidy spending by 21% whereas today we have already agreed to the complete elimination of this category of subsidies by 2013. The Doha Round would also strengthen and develop new disciplines for other forms of export support such as export credits, food aid and state trading enterprises.

In addition, in the Doha Round cotton will receive ambitious, expeditious and specific treatment with respect to all three pillars of the negotiations.

What about progress made on industrial products, which account for over 90% of global trade in goods? Put simply, we can describe progress in this area as “one formula, greater predictability and more cuts”.

The Uruguay Round delivered average cuts, meaning Members were free to select those products where tariffs would be cut and where not. This led to tariff peaks and tariff escalation, in particular on products of interest for developing countries such as textiles and clothing or footwear. In this Round, Members agree to cut tariffs according to one methodology, where high tariffs would be cut more than low tariffs. It remains a remarkable feat that close to two-thirds of the WTO Members will be applying the same formula, collectively accounting for approximately 97% of world imports of industrial products. Using this formula, developed countries will apply the tariff cuts on a line-by-line basis, with no exceptions, while limited flexibilities would be available for developing Members.

This Round will also bring greater transparency and predictability by increasing the number of tariffs which will be subject to a maximum ceiling, i.e. binding. In the Uruguay Round, the average binding coverage reached 73% for only 21 participating developing countries and 99% for developed countries. In the Doha Round, developed countries would achieve a 100% binding coverage. This 1% increase should not be underestimated, as the trade involved is significant in terms of value for at least three of these countries: Canada, Japan and the United States. For developing countries, the percentage will increase to approximately 99.7%.

 The Doha Round will also bring deeper cuts and squeeze water out of high bound rates. While the Uruguay Round set as an overall target a reduction of 33%, the actual reductions were well below this average, in particular for many developing countries. This Round holds the potential of significantly reducing the peaks that rich countries still apply to developing exports and cutting tariffs in developing countries, in particular with regard to South-South trade.

Let me now examine the situation regarding services. At the Hong Kong Ministerial Conference in 2005, Members agreed to map out collective aspirations at an unprecedented level of specificity. It was agreed to bind existing access conditions in cross-border trade, to undertake new commitments on enhanced foreign equity participation, to improve the flexibility on types of legal entities permitted and to improve the commitments on services’ professionals de-linked from commercial presence. WTO Members also agreed to a plurilateral approach of request-and-offer negotiations, to complement the bilateral approach. The plurilateral negotiations have provided the much needed focus on sectors of interest and on strategic partners (requesting and requested Members).

Core services sectors such as financial services, telecommunications and environmental services are due to produce tangible gains in the negotiations in terms of increased market access. The ground is therefore well prepared for a meaningful second round of revised offers, that had been scheduled for end-July 2006, and which will hopefully take place soon in the context of the overall resumption of the negotiations.

Another key deliverable of this negotiation is trade facilitation. The costs linked to moving goods through the borders increase domestic prices and restrict businesses from exporting abroad. One recent study cited by the World Bank in “Doing business 2007” estimates that each day a good is delayed in transit reduces trade by at least 1%. Another shows that reducing trade costs by 50% could increase global trade in manufacturing by up to 377 Billion US Dollars a year and triple the benefits for consumers from tariff reduction.

Today we are negotiating a completely new agreement on Trade Facilitation to make existing trade rules more suited to today’s world of modern business practices. How? by reducing transaction costs which will help to reduce prices for consumers and producers alike. By reducing transit costs. By facilitating the expansion of small and medium-sized businesses that cannot afford to deal with excessive bureaucracy and red tape. And finally, by helping governments to apply and conduct their border controls more effectively.

Trade facilitation is an area where APEC has showed leadership and commitment and I want to thank you for that. The ideas stemming from the APEC Working Group on Trade Facilitation and the link between measures on trade facilitation and technical assistance to your weaker members have provided inspiration in the multilateral talks.

These negotiations will also improve existing rules on anti-dumping and subsidies, by bringing more transparency and predictability. They will also create stronger disciplines on regional trade agreements. For the first time ever, we will also discipline fishery subsidies which contribute to the depletion of our ocean stocks. Worldwide, the global fishing fleet, including 24,400 large decked ships and well over 2 million smaller commercial craft, pull 80 million tons of fish or more from the oceans, or four times the 1950 total. Global fisheries subsidies are in part responsible for the massive overcapacity of the world’s fishing fleets. They are causing “too many fishermen to chase after too few fish” as has often been stated. At present, 75% of fish stocks are either fully exploited, or over-exploited, and annual global fisheries subsidies amount to approximately USD15 billion/year. A WTO agreement on fishery subsidies could thus contribute to redressing this situation.

After going through what’s on the table in areas of agriculture, industrial tariffs, services, trade facilitation and rules, not to mention many other issues which are part of the single undertaking, I believe that no one could argue that this Round is not worth fighting for. It is worth fighting for, and it deserves all our efforts to make it successful. The Doha Round is a once-in-a-generation opportunity for all the WTO Members, and would definitely bring tremendous commercial benefits and a better trade environment to the business community.

 

How can the APEC business community contribute?

Now, let me turn to my last point today, how the APEC business community can help conclude the Doha Round.

Today, the Asia Pacific region has, without any doubt, become the most vibrant region on this planet. APEC has 2.6 billion people, around 60% of world GDP and 50% of world trade. APEC economies do have a big stake in the success of the Doha Round.

I have three hopes for the APEC business community: First, lobby your respective governments and push for a successful conclusion of the Doha Round. As I have explained above, the business community will be a huge beneficiary of a successful outcome of the Round. You therefore have the responsibility to push your Governments and negotiators to show a more visible political engagement and to put greater flexibilities on the negotiating table. Second, help us explain the benefits of the Round to those who are not familiar with what this Round is all about. Your advocacy is crucial in raising the public awareness and support for trade opening on a global scale. We need to do that at a time when globalisation impacts greatly on our economic and social fabrics, creating sometimes legitimate anxieties in public opinion. Third, engage in the negotiations as much as you can, tell your negotiators about the difficulties, trade barriers and unfair treatment you have encountered in doing business. This world is changing rapidly, the way of doing trade is changing as well. Your advice or suggestions will be valuable to us on the direction of future rules making.

APEC 2006 has a good theme: “Towards a Dynamic Community for Sustainable Development and Prosperity”. I do hope the APEC business community could play a leading role in ensuring a transparent and predictable global business environment, building bridges over differences and advancing freer trade.

Finally, I would like to take the opportunity to thank ABAC’s continuous support of our work, calling for the early resumption and successful conclusion of the Doha Round negotiations. You correctly pointed out in the Report to the APEC Economic Leaders that “the DDA is a once-in-a-generation opportunity to make progress on trade liberalization and must end in a positive outcome for the world trading community”.

Your support to the WTO, on the Doha Round at this crucial moment is critical. I look forward to working closely with you in the coming months to achieve our shared objective. I count on your support.

Thank you.