WTO NEWS: SPEECHES — DG ROBERTO AZEVÊDO

Remarks by Director-General Roberto Azevêdo


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Hello everyone,

I am very pleased to be here.

I would like to thank the National Confederation of Industry of Brazil for organising this event, and for this opportunity to interact with you.

Brazil has always been a very constructive voice in the trade debate.

Within that conversation, the private sector has always played a vital role. I want to continue that dialogue here today.

And we are meeting at a challenging time — in many aspects. For now, I will focus on the global economic scenario.

Economies everywhere are faced with a gloomy economic outlook, with downgraded forecasts pointing towards modest growth in 2016 and 2017.

Against this backdrop, governments are trying to deal with a range of challenges and deliver a return to strong growth.

And there is a sense of anxiety about the role of trade in supporting growth.

The WTO will shortly publish its annual trade forecasts. In the context of low global demand, it seems likely that we will see a continuation of the recent trend of modest trade expansion.

However, in Brazil — due to a range of factors — exporting seems to be turning into an option for many sectors, and trade can play a more positive role in the road back to growth. In fact, among adverse domestic economic conditions, trade can help bring good news to the Brazilian economy.

Especially at a time when the domestic market is retracting, a more favourable exchange rate for exports creates new options, new alternatives for the Brazilian entrepreneurs. In any case, it is worth remembering that participating in international trade should be part of a medium- to long term strategy, which does not only depend on immediate circumstances.

Therefore, I am very pleased that I have received, just this morning, Brazil’s instrument of acceptance of the WTO’s Trade Facilitation Agreement.

By taking on an international commitment in this area, Brazil will improve the conditions for its companies to join international markets. This creates an incentive for more Brazilian companies to include trade in their growth strategies.

 

TRADE FACILITATION AGREEMENT

Allow me to discuss this Agreement in more detail.

The Trade Facilitation Agreement, which was finalised in 2013, was the first multilateral agreement since the WTO was created two decades ago.

And it will make a big difference in improving Brazil’s integration into global trading flows.

I served as the Brazilian representative at the WTO for many years, and I know all too well the impact that high trade costs can have on Brazilian traders. They act as a break on the country’s competitiveness — thereby hitting jobs and growth.

This Agreement will help to deal with this problem.

Essentially, it is about simplifying and standardising customs procedures, reducing the time and cost of moving goods across borders.

We expect that, when fully implemented, the Agreement could reduce trade costs by an average of 14.5%.

For developing economies, this could mean a boost in exports of almost $730 billion per year. In total, it can increase global merchandise exports by up to 1 trillion dollars per year.

Brazil has already been making important reforms in this regard, like the Single Window system. I would like to commend the CNI for supporting this important work.

In addition, the Agreement can help Brazil’s integration into global chains of production.

In a globalised economy, very often products are not made in just one country — they are made in the world. A simple, everyday product will often contain components from every continent.

By making trade flows easier, the Trade Facilitation Agreement can help economies to integrate into these new patterns of production — and benefit from the boost in economic growth that they can bring.

In recent years, Brazil has been increasing its share of these global value chains. However, at the aggregate level, the country’s participation amounts to around 35% of total gross exports - whether because these exports use imported components, or whether because they will become components in other countries. However, this ratio is still lower than the average figure for other developing economies, which is around 48%.  Thus, there can be some opportunities in this area.

These are just some of the benefits that the Agreement will bring to companies around the world — and to Brazilian companies as well.

Brazil played a central role in the negotiations which secured this deal.

For example, Brazil was one of the advocates for a special section on perishable goods, making sure they are processed in an expedited manner so they do not spoil while waiting at the border. Brazil was also very active in the negotiations of the section on Customs’ cooperation, something very important to help avoid frauds at the border.

This is a good example of the way we work at the WTO, where all members have a seat at the table to raise the issues that matter most to them.

 

NAIROBI

The Trade Facilitation Agreement was finalised in 2013 — and it was a first for the organisation. But since then we have continued to deliver. We’re making it a habit.

In December last year, ministers from all WTO members met in Nairobi. Some very important outcomes were reached — and once again Brazil played a key role in the discussions.

Significantly, members agreed to eliminate agricultural export subsidies.

This was another big moment — it is the biggest reform of agricultural trade rules for 20 years.

Developing countries, including Brazil, have long demanded action on this issue. So it is a big victory for Brazil.

Countries have often resorted to export subsidies during economic crises — and recent history shows that once one country did so, others quickly followed suit.

When countries use these subsidies it means that farmers aren’t just competing with other farmers anymore — instead, a farmer in one country is competing with the financial might of another country’s treasury.

Therefore, eliminating this trade-distorting support will help to level the playing field in agriculture markets to the benefit of farmers and exporters in Brazil and other developing markets.

Meat, dairy products and sugar are concrete examples where export subsidies were being provided and are now being eliminated.

Eliminating these subsidies was actually a key target of the UN’s new Sustainable Development Goals — so it is a big achievement that we delivered this, just three months after the goals were agreed!

In addition, during the Nairobi meeting a group of WTO members struck a deal to expand the WTO’s Information Technology Agreement.

This deal will eliminate tariffs on 201 additional IT products, including latest generation semiconductors, GPS devices, advanced medical products and machine tools.

Trade in these products is worth around $1.3 trillion each year — that’s 10% of global trade. This is larger than global trade in automotive products, for example.

With this agreement, tariffs in these products will be reduced to zero — and legally locked-in at zero.

Significantly, the benefits of this deal will be available to all WTO members — including Brazil.

In simple terms, Brazil exports around $1 billion of IT products — and now, because of this deal, these products will have guaranteed duty-free access to 95% of world markets. That includes some sophisticated machinery and equipment, including medical appliances, but also products like parts of mobile phones and voice transmitting devices.

With these breakthroughs in mind, I think it’s fair to say that the WTO has delivered for Brazil in recent years.

 

FUTURE WORK

But the work does not end there. In fact, we’re only just getting started.

We need to implement these agreements in full, deliver their potential benefits in full — and look to deliver more outcomes in the future.

This is an ongoing effort.

For many years, global negotiations were delivering few concrete results.

This is one reason why countries have been turning to other initiatives, such as regional initiatives, to advance their economic interests.

These initiatives can help spread the benefits of trade, but they cannot replace the global trading system.

Many developing markets are excluded from many of these conversations. And many topics, like further reforms to trade in agriculture, can only be tackled globally.

This brings back the spotlight to the WTO, and to our capacity to negotiate.

The WTO is a unique organization. Our members cover 98% of global trade. It is the only organization dealing with trade rules at a global level.

So we must make as full a contribution as we can.

Especially after the positive results of Nairobi, members have started a discussion on how the WTO can do more, and faster.

All members are strongly committed to addressing the so-called Doha negotiating issues, such as agriculture (particularly domestic subsidies), market access for industrial goods and services.

However, they do not agree on how to tackle them.

And some members would like to start discussing other issues as well. A range of things have been suggested — including, for example, investment, e-commerce, small and medium-sized enterprises, just to name a few.

Clearly Brazil has a range of interests here. More than 90% of Brazilian companies are small and medium-sized enterprises — accounting for over 50% of jobs in the country.

The WTO could potentially take steps to help these businesses to grow, cutting the costs and removing the obstacles which make it difficult for them to start trading. 

That’s just an example.

The point is that there’s a big debate under way at the WTO in Geneva and in capital cities around the world about the future shape of global trade negotiations.

Brazil must continue to make its voice heard in this debate. It is an opportunity to make sure that the WTO keeps delivering for you.

 

CONCLUSION

Over recent months, I have been approached by many in the private sector who are very pleased with the outcomes that we have delivered, and excited at the prospect of what we may be able to do in future.

In the conversation that is shaping up, it is also important that the private sector make itself heard. Businesses play a key role in identifying problems and opportunities related to trade.

For the WTO trade negotiations to bring more positive results for the private sector and the country, it is key that you participate in the debate, reflect on your priorities, and help find solutions.  

Thus, I would like to hear your perspective, and answer any questions you may have.

Thank you.

 

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