WTO NEWS: SPEECHES DG PASCAL LAMY
The sails of the Viking Longships in the storm of globalization
Norwegian Confederation of Industries (NHO) Annual Conference, Oslo
Note: This is the speech approved by the Director-General for the NHO Annual Conference in Oslo on 4 January 2007. An integral version will soon be available on the NHO website (http://www.nho.no).
I am delighted to be here with you today on the occasion of this very special annual conference of the Confederation of Norwegian Industries. You have chosen globalisation and Norway's position in this world as the main topic of this meeting. And this comes as no surprise to anybody. Globalisation, and in particular its economic side, is part of the Norwegian DNA. Your ancestors, the Vikings, who incidentally also happen to be my own ancestors since I come from Normandy, opened new trade routes to lands to the north, to the west and to the east back in the IX century. The Viking longships were then initiating the first waves of trade expansion.
Today we are experiencing a new stage of globalisation: an accelerated expansion of market capitalism, like the one experienced in the 19th century with the industrial revolution. It is a fundamental transformation in our societies due to the recent technological revolution. Today, we can say that globalization and increased market opening have had very positive effects as well as some negative consequences.
Globalization has enabled individuals, corporations and nation-states to influence actions and events around the world — faster than ever before — and equally to derive benefits from them. It has the potential to expand freedom, democracy, innovation, and social and cultural exchanges while offering outstanding opportunities for dialogue and understanding.
But the global nature of an increasing number of worrisome phenomena — scarcity of energy resources, deterioration of the environment and natural disasters, the spread of pandemics, the growing interdependence of economies and financial markets, and migratory movements provoked by insecurity, poverty or political instability, are also products of globalization.
At the same time, there is a widening gap between global challenges and traditional ways of working out solutions via our traditional institutions.
Globalization is at the same time a reality and an on-going process that cannot be met by nation-states alone. We therefore need to contemplate new forms of governance at the global level to ensure that our growing interdependence evolves in a sustainable manner.
How can the interdependence of our world be better managed? In my view, four elements should guide us.
First of all, values. Values allow our feeling of belonging to a world community, embryonic as it may be, to coexist alongside national specificities. We must identify common values alongside common interests. And I think Norway is a good example of this pacific coexistence. Second, we need actors who have sufficient legitimacy to get public opinion interested in the debate, who are capable of taking responsibility for its outcome and who can be held accountable. Third, we need forums for transparent discussions and negotiations. Fourth, we need monitoring, surveillance and enforcement of States' actions performed in a legitimate manner.
I am not proposing an institutional revolution but, rather, a combination of global ambition with pragmatic suggestions. Building global governance is a gradual process, involving changes to long-standing practices, entrenched interests, cultural habits and social norms and values.
The example of international trade sheds light on both the opportunities and the difficulties of this global governance. Although international trade is not the only one, it is a very visible dimension of globalization; the WTO, as trade regulator, is definitely at the heart of global governance.
The WTO is a small governance system where we already have a few elements in place: we have a multilateral system that recognizes different values, including a consensus on the benefits resulting from market opening while respecting sustainable development. We also have other values such as the need to respect religious diversity or the right to protect the environment; In WTO it is now clearly recognized that in some circumstances non-trade values can supersede trade considerations.
The main mission of the WTO is to open markets and regulate world trade for the benefit of all people. To perform our task we use four main channels: first, we offer a forum where our Members negotiate international agreements which are then adopted; second, we have monitoring and surveillance mechanisms — including peer reviews — of Members' actions; third, we have a strong mechanism of adjudication and enforcement of Members' obligations; finally, we have a mandate to ensure coherence with some other international organizations.
The basic value underpinning the WTO is that market opening is good. The multilateral trading system helps to increase economic efficiency, and it can also help reduce corruption and bad government. Trade has played an increasing role in the world economy over past decades as illustrated by the fact that the growth of real trade exceeded that of world output. The ratio of world exports of goods and services to GDP rose from 13.5% in 1970 to 32% in 2005 and all major geographic regions recorded an excess of trade over output growth.
The impression has also arisen that in the multilateral trading system, the system has evolved to the disadvantage of a certain part of the WTO Membership, that comprising the developing countries. This bias would in the long run not be sustainable and it is therefore necessary to correct it if we want the multilateral trading system to thrive. And this bring me to the current Round of trade negotiations which we launched in 2001, and which bears the name Doha Development Agenda.
The challenge of market opening and globalisation for developing countries calls for enhanced international action. A fundamental aspect of the current Doha Round is to correct some of the remaining imbalances in the current trade rules in favour of developing countries and to improve rules that will provide all Members and, in particular, developing country Members, with authentic market opportunities.
A number of the substantive rules of the WTO do perpetuate some bias against developing countries. This is the case of the agriculture sector, which today holds the key to unlocking the rest of the Doha Agenda. How can agriculture, which represents less than 8 % of world trade keep the entire Doha Round agenda off track? Because food production remains a very sensitive sector for rich and poor countries alike. And since the current Round is one of development and since more than 70% of the world's 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. Reforming agriculture rules is necessary to ensure our sustainable development.
This is the reason why, in the Doha mandate, all WTO Members agreed in 2001 that “the long-term objective is to establish a fair and market-oriented trading system through a programme of fundamental reform encompassing strengthened rules and specific commitments on support and protection in order to correct and prevent restrictions and distortions in world agricultural markets”.
Similar bias exists with regard to the remaining tariff peaks and high tariffs applied by developed countries on sectors such as textiles and clothing, where a large number of developing countries have a comparative advantage. The new rules on market access for non-agricultural products (NAMA) would address these peaks to benefit exports from developing countries but this would also benefits exports from Norway to the rest of the world. These are just some of the examples.
Completing the Doha Round is therefore crucial for both developed and developing countries as a fundamental tool to control and harness globalisation and to ensure our sustainable development. Concluding it is understandably difficult. It is the most ambitious attempt that governments have made to open trade multilaterally — because of its scope, including on agriculture, and because of the number of countries that are negotiating and that will share in the results. The previous Round, the Uruguay Round wrote in 1994 the modern rule-book for the trading system, and the Doha Round is using it ten years later to open trade and lock-in reform on an unprecedented scale.
This Round is worth Norway fighting for. It offers the largest cuts ever on industrial tariffs, which represents a large part of Norwegian exports, through a combination of a powerful reduction formula and deeper cuts on selected sectors. It holds the promise of reformed antidumping procedures to enhance transparency and predictability. For the first time ever it tackles fishery subsidies which increase capacities and contribute to the depletion of our oceans. It goes deeper in opening services such as financial services, telecommunications, environmental services and a broad range of business services. This is a key sector given the important contribution of services to Norway's GDP — around 60% — and employment.
The on-going negotiations on trade facilitation can also be very beneficial to Norway's exporters. In a country like Norway, 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 South Asia, it takes 12 documents and 41 days on average for an exporter to have his goods moved from factory to ship. These time delays limit export potential and also have a limiting impact on the ability of many developing countries to diversify into time-sensitive products such as cut flowers or fruit. Finally, let me also mention another sector on which Norway has played a strategic role, the environment, where this Round could result in substantial cuts in tariffs and non-tariff barriers on environmental goods and services.
This leads me to agriculture, which I know is a sensitive topic in Norway, as it is in many other developed Members such as Japan, Switzerland, Iceland, the European Union or the USA. This Round aims to significantly reduce the trade-distorting domestic support that are extended to agriculture. In general, the most distorting forms of support are those that are directly linked to production, and which distort the market signals to farmers. They can encourage them to oversupply particular products, leading to massive surpluses and the depression of international prices. Having said this, I would not want you to be left with the impression that the WTO is somehow trying to curtail farmers' safety nets. Governments can continue to support their farmers. However, they must simply refrain from doing so in a manner that is linked to production. Decoupled income support to farmers, along with other governmental measures to promote food security, to protect the environment, to provide regional assistance are certainly allowed under the Agreement on Agriculture's “Green Box”.
The Doha Round also calls for a substantial improvement in market access for agriculture products, with the highest tariffs being cut the most. I know this is also a very sensitive area for Norway. Now, again, this area provides for a number of safety nets for farmers. It allows WTO Members to nominate, quote unquote, “Sensitive Products”. While these are products for which a substantial improvement in market access is also required, the Doha Round allows such access to take place through a softer approach than the general formula, through a combination of tariff cuts and quotas.
Let's go back to the Doha Round Negotiations before concluding. Many proposals have already been presented but clearly what is on the table today is not enough to lead us to success. All parties need to make a greater contribution, starting with agriculture. The United States has to accept cuts in its subsidies beyond its current offer. The EU and the G-10 (to which Norway alongside Japan, Switzerland and others) have to agree to greater cuts in agriculture tariffs beyond their current position. India and the G-33 countries also have to show flexibility. If we are to reach a result, all Members have to show flexibility. No one is being asked to undertake disproportionate commitments, and certainly flexibilities exist to cater for specificities. With an additional effort we can unlock agriculture which in turn will open the last stage of talks on the other topics.
Given Norway's large interests in this Round and the flexibilities available in the Doha agenda to accompany a genuine reform in agriculture, I believe that this Round is a win-win deal for Norway and that WTO remains a good compass to lead you through the current globalised waters.
Norway has a long tradition of caring about developing countries, and in particular the very poorest of them. You are a great contributor to the various WTO assistance programmes and I want today to thank you for that. Norway has always protected the multilateral and systemic value of the WTO and its sustainable development and in that regard I would like to command the work of Norway's current Ambassador to the WTO, Erick Glenne, Chairman of the General Council as well as the remarkable work of Ambassador Kare Bryn before him.
This leads me to Aid for Trade, which is also part of the Doha programme and which is also sponsored by Norway. Even if we open trade and modernise multilateral trade rules, many developing countries face severe capacity constraints which prevent them from being able to benefit from this. Furthermore adjustment costs for many of them are often simply too high. Aid for Trade aims at complementing the trade negotiations, by providing development assistance to help these countries unlock their full trade and growth potential.
I very much hope that all Norwegians consider the contribution that the WTO can make to ensuring that globalization works to the benefit of all peoples, and that you support the rapid conclusion of this Doha Round in 2007.
Although far from being a perfect model, — given its economic and political dimensions, the WTO is nevertheless a laboratory for harnessing globalization and contributing to the construction of a system of global governance for our sustainable development.
Today I am asking for your help to achieve this objective and this starts with the rapid conclusion of the Doha Round Agenda. I count on the Norwegian Longship's experience in sailing through the harsh Northern waters to steer the WTO boat of multilateral trade negotiations through the current storm of globalisation.
Thank you for your attention
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