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> Speeches of former WTO Directors-General
Welcome and good morning to you all. It is my
pleasure once again to present the WTO’s annual flagship publication,
the World Trade Report. This year’s report is entitled “Trade in a
Globalizing World”. It takes a hard look at trade, re-examining what we
know about the gains from trade and where they come from. The Report
sets the trade discussion in the wider context of globalization. It
reaffirms the significant contribution that globalization and trade have
made in bettering the lives of many millions of people around the world.
But it also recognizes that the benefits of greater integration and
inter-dependency have not reached everyone. There are those that are
excluded and left behind. Our capacity to remedy this — and extend the
reach of improved living standards more widely — is crucial to our
prospects, as a global community, for continuing to benefit from
specialization, exchange and growing prosperity.
This Report could not come at a better time in the context of what we
are striving to achieve here in the WTO. The Doha negotiations are in a
decisive phase. We should be clear. What Members achieve together next
week will be judged as an indicator of the international community’s
willingness and ability to share in the management of globalization in
an effective and equitable manner. In addition to the shared benefits in
prospect from a successful Doha Round — which are far from trivial in
themselves — a bigger question looms. It is simply this: what will fill
the void left by a broken multilateral negotiation of the dimensions and
centrality of the Doha Development Round? I am not suggesting that any
deal is better than no deal. But I am suggesting that on the basis of
what is on the table, an inability to come to a mutually beneficial and
substantive deal would be a dark signal indeed.
Globalization will not come to a halt. It is driven by technological
advance as much as by broader political changes, economic policies and
evolving business practices. But it can certainly be helped or hindered
in many ways. Trade has been a central element in the integration
process. Recent surveys on globalization in almost 50 developing and
developed countries show that large majorities of people continue to
believe that international trade benefits their countries. But
accompanying this belief are fears about the disruptions and downsides
of participating in the global economy, be it job loss, inequality or
increased marginalization.
The Report gathers the available evidence on these questions. It reminds
us that the gains from global integration outweigh their costs and trade
policy-makers convening here next week may take comfort in these
results. But the Report also underlines that increased international
competition creates winners and losers, even if nations as a whole gain,
and that policy-makers would be well advised not to leave these concerns
unattended. Clearly, we need to find a balance between open markets and
flanking policies. Much of what needs to be done is in the hands of
national governments. But international initiatives also play a role,
including in the WTO context, and I will come back to this point in a
moment.
Let me first elaborate on some of the key messages contained in the
Report that are usefully kept in mind.
First, the promised gains from trade have panned out in practice. I am
particularly encouraged by the amount of solid empirical support from
developing countries. These studies show that countries have specialized
in activities that they are comparatively good at and that this has
raised incomes. Both consumers and producers have benefited from a wider
choice of products and inputs at lower prices. Firms are operating at a
more efficient scale and industries have become more productive. Through
these and other channels, such as knowledge spillovers, trade has also
led to technological progress, as a key driver of economic growth
Second, some countries do not share as much in these gains as they could
and should. Much of this has to do with trade costs in the widest sense:
tariffs, non-tariff barriers, transportation, communication, insurance,
contracting, monitoring costs and so on. Overall, trade costs have come
down in the last half century for both policy-related reasons, such as
the reduction of trade barriers, and technological reasons, such as the
internet. This has allowed firms in a number of developing countries to
provide specialized inputs at various stages in the production process,
including by participating in services offshoring.
However, the decision where to offshore not only depends on traditional
factors, such as skills or wages. New sources of comparative advantage,
such as the institutional framework and the quality of infrastructure,
also play a role. Unfortunately, this has limited the involvement of
low-income countries in international supply chains, despite their
advantage in terms of labour. More needs to be done here. I hardly need
to add that the Aid for Trade initiative and other similar efforts can
make a vital contribution here.
Third, trade may make some worse off, even if it is beneficial overall,
or may not benefit everyone alike. In recent times, it has become more
difficult to identify those who lose. The story is not necessarily only
about low-skilled workers and import-competing sectors. A more nuanced
analysis is required. For example, medium-skilled workers carrying out
routine tasks that are easily standardized and digitalized may be
particularly susceptible to offshoring — and this independently of the
industry they are working in. At the same time, research shows that some
firms have successfully dealt with foreign competition in all sectors.
For laid-off workers this implies that there may be opportunities to
re-train and find a job within the same sector.
Policies to help displaced workers should be in place. Often, these are
part of social protection systems, since it is difficult to distinguish
among various reasons for structural change, such as trade and
technological developments. A number of countries have been quite
successful with general policies to protect workers, rather than
specific jobs. Trade-specific adjustment programmes may make sense if
such assistance can help sell nationally beneficial trade opening
policies or if general systems are lacking, as they notably and
understandably are in lower-income countries.
The poor are particularly vulnerable, since they may be unable to bridge
even short spells of unemployment. While trade has helped to reduce
poverty worldwide, some poor households have been negatively affected.
The relationship is complex, since trade affects growth, employment,
revenue, consumer prices and government spending. Recent household
studies are a big step forward in helping us understand the interplay of
these factors and their overall effect on incomes.
What some of these studies have also shown is that poor agricultural
producers in remote rural areas were unable to seize new market
opportunities due to high transport and other trade costs. For sure,
improvements in physical infrastructure and institutional reform fall
within the realm of responsibility of national governments. But this
also brings me back to the question of what can be done at the
multilateral level to exploit the full potential of international trade.
Much of what is immediately obvious in the WTO context concerns the Doha
Round. While better access and better rules help in many different ways,
and the Doha agenda goes well beyond the effort to reduce trade costs, I
confine myself here to brief remarks concerning the latter. The current
negotiations in agriculture, NAMA and services offer the possibility of
coordinated trade opening, where governments gain from both their own
reductions in trade costs and those of others. The negotiations on trade
facilitation address a wide set of trade costs, such as customs
formalities, that can represent formidable hurdles to trade, especially
for time-sensitive products. Finally, anything that can be done to
bolster supply capacity and trade-related infrastructure — a key focus
of Aid for Trade — whether within the framework of the WTO, or beyond,
is crucial in any effort to spread more widely the benefits of
globalization and trade.
Bearing in mind the lessons and insights of this Report — which bolsters
much that many of us have been inclined to believe — and with dark
clouds gathering on the economic horizon, I would like to end my remarks
by appealing to all interested parties in the Doha Round to join in
giving that vital push to propel the negotiations to a successful
outcome.
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