Remarks by Director-General Roberto Azevêdo

Excellencies,
Ladies and gentlemen,

Good morning — I’m very pleased to be here today. I would like to thank the Inter-Pacific Bar Association for the kind invitation.

We are meeting at a challenging time for global trade.

Last week I announced the WTO’s new trade forecasts. In 2016 we expect global goods trade to grow at 2.8% in volume. This would make 2016 the fifth consecutive year of sub 3% growth. The most critical variable in the trade expansion equation is, of course, GDP growth. And as long as GDP growth remains subdued, the trade numbers are likely to follow a similar trend.

This is not unprecedented — we saw low trade growth in the early 1980s. And we expect to come out of this pattern of low growth in the coming years, with trade growth forecast to pick up to 3.6% in 2017.

But, nevertheless, it is a worrisome situation.

And while the level of trade growth has stayed fairly constant in recent years, it is interesting to note that its composition is changing.

A key driver of trade growth from 2011-2013 was import demand in Asia.

In the last two years this has shifted. Demand in the US and Europe is driving today’s modest growth, making up for slowdowns in Asia and elsewhere.

In fact, if Asia’s contribution to trade had matched its average of recent years, world trade would have grown 3.5% in 2015, rather than 2.8%.

And trade growth is not just a dry economic indicator, unrelated to the real world.

It matters because trade can act as a driver of broader economic growth and job creation. It certainly isn’t the only driver, but it is an essential component of any strategy for sustainable economic growth.

And so the gloomy picture I have painted so far leads us to the question: what can we do to respond? How can we get the engine of trade firing again?

We have the power to act.

Governments have pushed monetary and fiscal policies to the limit in recent years but there is still room to move on trade. A more activist approach here could help to stimulate global demand.

One step would be for governments to remove the trade restrictive measures that they have introduced in recent years. Only 25% of the restrictive measures that WTO members put in place since the 2008 financial crisis have been removed. So action here could make a big difference.

We can also put in force trade agreements we have reached recently. By implementing the Trade Facilitation Agreement alone we could add another US$ 1 trillion to global trade. Most of that as exports from developing countries - around US$ 730 billion.

Another step is, of course, striking new deals. And we are seeing a lot of activity on this front — both at the regional level, and through the World Trade Organization.

Sometimes these different tracks are talked about as if they were in conflict with each other — but this is not the case. These approaches do not require an "either/or" strategy. Quite the opposite.

While they have grown rapidly in recent years, bilateral and regional trade initiatives are not a new thing. Actually they pre-date the creation of the global trading system.

These different kinds of initiatives have long co-existed and complemented each other — and I have no doubt that they will continue to do so.

Today, virtually all WTO members are involved in at least one of these initiatives.

270 regional trade agreements — or RTAs — are in force and have been notified to the WTO.

Over a third of these RTAs involve the Asia-Pacific region.

Obvious most recent examples in the region would include the Trans-Pacific Partnership and the Regional Comprehensive Economic Partnership. And of course there are other important initiatives such as the Silk Road Economic Belt and the Maritime Silk Road, which attempt to build and develop linkages between several partners.

To take the example of the TPP, many of the 12 partners involved already have existing bilateral agreements with each other. The added advantage of this broader agreement is the potentially enormous market it creates. Instead of dealing with a number of different sets of rules or standards, the TPP could mean that trade takes place under similar conditions between all the countries involved.

As many other recent undertakings, the TPP is an example of deep integration through regional trade agreements. While earlier RTAs concentrated on only liberalizing tariffs, more recent RTAs have gone further.

Empirical evidence suggests that the deeper the RTA, the greater the potential for the development of production chains which span national borders.

WTO members in the Asia-Pacific region in particular have greatly benefited from these global value chains.

As production networks expand and regional and global value chains become more important, it becomes critical to more rapidly harmonize differences in legislation, rules and infrastructure, which impact international trade and investment.

This appears to be what we see occurring more and more in modern RTAs and other regional networks.

The silk-road economic belt, for instance, is rebuilding traditional links by concentrating on issues of connectivity such as improved infrastructure including road and rail links and port facilities. It will also try and better connect Asia with Europe, especially landlocked Central Asia and improve trade facilitation.

These are all important steps that need to be taken to free up international trade and facilitate greater integration in value chains.

But how does all of this regional activity fit within the global framework of the World Trade Organization?

The WTO has 162 members — and rising. Our rulebook covers 98% of global trade. So, by and large, RTAs operate within these rules.

Indeed, our analysis of regional agreements shows that they all have WTO DNA. And in the areas where they overlap with WTO rules we have found no obvious conflicts.

A bigger consideration is where such initiatives touch on areas that are not currently covered by the WTO. This creates a potential scenario where different RTAs deal with the same issue in different ways.

No-one would suggest that regional agreements should not venture into these areas. But I think conversations in the WTO could help us establish whether a multilateral approach is feasible or desirable. If so, we would have a much more balanced, harmonious and inclusive framework.

A healthy trading system requires progress and engagement at all levels. And we have to acknowledge that one reason for the proliferation of regional agreements over recent years was a lack of progress in striking trade agreements globally through the WTO.

I’m pleased to say that we are now changing this situation. The WTO has actually delivered an impressive amount over the last couple of years. 

I’ll come back to this in a moment, but it’s also important to note that a healthy trading system isn’t just about negotiating trade agreements — the WTO’s work extends far beyond negotiations. We also monitor trade policies, build trading capacity in developing and least-developed countries, and we have built one of the most effective dispute settlement systems in international law.

Indeed, although some RTAs have provisions on disputes, most of the dispute settlement mechanisms provided are rarely used. Meanwhile the level of activity in the WTO’s dispute settlement system is rising very rapidly. We have dealt with over 500 disputes in the WTO’s 21 year history. And of course most of the disputes brought to the WTO involve parties who are also themselves part of an RTA.

There is great value in this work. But let me come back to the progress we’ve been making in our negotiating work — as this is where we are focusing our discussion today.

As I say, the WTO has recorded a number of big breakthroughs in just two years.

At our Ministerial Meeting in Nairobi last December WTO members agreed to abolish agricultural export subsidies. This was the biggest reform of agricultural trade rules in the last 20 years.

There is much more to do in order to reduce distortions in the agricultural markets, but there’s no doubt that this is a major step forward.

In Nairobi, members also agreed a number of steps on food security and to support trade in least-developed countries.

And a group of WTO members struck a deal to expand the WTO’s Information Technology Agreement. This deal will eliminate tariffs on 201 new generation IT products — trade in which is worth around 1.3 trillion dollars. That’s bigger than the global automotive sector.

These achievements build on the success of our previous Ministerial Meeting, held in Bali in December 2013.

Important outcomes were achieved there, including the WTO Trade Facilitation Agreement.

By streamlining, simplifying and standardising customs procedures, this Agreement will dramatically cut the time and cost of moving goods across the border.

Studies show that when fully implemented, the Agreement could reduce trade costs of members by an average of 14.5%. This could increase global merchandise exports by up to 1 trillion dollars per year. And it could have a range of connected benefits — helping SMEs to trade, helping economies to diversify their exports, providing a better climate for investment, and helping countries to join global value chains.

These outcomes are economically very significant. And I think they illustrate the importance of pursuing different tracks in trade negotiations.

Some problems can only be solved globally. Eliminating agricultural export subsidies and acting on trade facilitation could only be achieved effectively at this level.

In the same way, it is only at the global level that we can successfully and comprehensively address topics such as domestic subsidies in agriculture and in the fishery industry.

In addition, it is at the global level that we need to take a considered view of the evolution of RTAs and of the trade negotiating agenda.

At the WTO’s Nairobi meeting, ministers instructed us to look at the systemic implications of RTAs, with a view to enhancing their transparency, and increasing our understanding of them. They also instructed us to consider how to bring our negotiating work forward, both regarding the pending Doha issues, but also any non-Doha issues.

So, besides finding solutions for the core issues we had been dealing with, we now also must consider what else we must look into more closely. Members are talking about electronic commerce, small and medium enterprises, facilitation of investments, and many other subjects that they would like to talk about.

Some of these issues are already being developed in RTAs so this is

also an opportunity to advance in a more coherent and inclusive way.

Clearly we must work to ensure that different trade initiatives complement one another.

But I think that all of the activity I’ve described today is a reason for optimism.

It shows a growing desire to use trade and trade agreements of all kinds to foster economic growth and development. 

Certainly at the WTO I am seeing a level of engagement and excitement about our work that surpasses anything I have seen for a long time.

So I invite all of you to participate in this very lively debate that is shaping the trade agenda for the next several years.

I look forward to our discussions this morning.

Thank you for listening.