WTO NEWS: SPEECHES — DG ROBERTO AZEVÊDO


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Remarks by DG Azevêdo

Ladies and gentlemen,

I am very pleased to be here in Copenhagen. Thank you for inviting me to join you today.

I think it’s fair to say that Denmark is a leader in global trade — a leading advocate, and a leading practitioner.

Building on the country’s history as a sea-faring nation, today almost 10% of global trade is transported by Danish shipping companies.

That’s a phenomenal market share — and it serves as a symbol of an economy and a country which is open and outward-looking. 

So it comes as no surprise that we are gathered here in Copenhagen to discuss global trade policy.

And, of course, the World Trade Organization is at the heart of this conversation.

Over the next few minutes I want to give you a sense of the state of play in international trade, the role of the WTO within that, and the challenges and opportunities that I see on the horizon.

I’m sure you’re all familiar with the WTO, but let me just say a word about our role.

The WTO is the only organization dealing with trade rules on a global level. At present we have 162 members, accounting for around 98% of global trade.

The organization monitors countries’ trade policies, helps to solve trade disputes between nations — preventing them from escalating into conflict — and helps developing countries to build their capacity to trade.

These tasks are essential to help maintain stability and predictability in the trading system. And this, in turn, is essential for trade to flow smoothly and for businesses around the world to grow and prosper.

In addition, the WTO also negotiates new trade rules — reforming the system so that it can adapt to meet countries’ needs in an evolving global economy.

For many years little progress was made in global trade talks. However, things have started to change at the WTO.  

In the last two and a half years, we have agreed a number of new trade deals, which have brought significant economic impacts.

Let me highlight some of these recent breakthroughs.

In 2013, WTO members delivered the Trade Facilitation Agreement.

By ensuring that goods can move across borders more quickly, more cheaply and with less red tape, this deal could boost global merchandise exports by up to 1 trillion dollars per annum. This would have a bigger impact than the elimination of all existing tariffs worldwide.

So the economic impact of this agreement will be significant. But it was also significant in terms of the history of global trade cooperation. It was actually the first global trade agreement since the WTO was created. And, inspired by that breakthrough, WTO members have gone on to deliver further successes.

At the end of 2015, our members agreed the biggest reform in global agriculture trade for 20 years when they struck a deal to abolish agricultural export subsidies.

Of course, there is much more to do in order to reduce distortions in agricultural markets, but this is a major step forward.

By eliminating these trade-distorting subsidies, this deal will help to level the playing field in agriculture markets to the benefit of farmers and exporters in developing and least-developed countries.

The European Union played a central role in this negotiation, both during the preparatory phase in Geneva and in the Nairobi Ministerial Conference, where the deal was concluded. 

There were some tough calls to make here, so I would like to thank Denmark — and the EU — for your support in making this happen. It’s a strong sign of your commitment to reform in the trading system and to development.

In fact, eliminating these subsidies was actually one element 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!

At the end of 2015, members also took important decisions to help least-developed countries integrate into trading flows, and agreed steps on issues such as cotton and food security.

And a group of members struck a deal to eliminate tariffs on a range of new generation information technology products. Trade in these products is worth around 1.3 trillion dollars each year. That’s bigger than global automotive trade, for example.

This was the WTO’s first tariff-cutting deal in 19 years. It will support lower prices — which will help many other sectors using IT products as inputs — and it will help create jobs.

This run of agreements is unprecedented for the organization. And as a result, people are beginning to sit up and take notice.

We are seeing a renewed interest in the work of the organization. This is clearly very positive — and we have to use this momentum to reenergize our work.

Alongside this, there has been a lot of focus over recent years on bilateral and regional trade initiatives — such as TTIP between the US and the EU.

But these kinds of agreement are not new. Actually, they have long coexisted with the WTO framework.

Such initiatives are positive and can deliver significant economic gains but, at the same time, there is no question that global agreements can deliver greater gains.

A complicated patchwork of overlapping trade regulations and standards is less efficient than global rules.

Complying with different rules in different jurisdictions can be challenging, and it can curtail opportunities for companies to join and operate in international markets.

And some big topics — like domestic subsidies in agriculture and fisheries — can only be dealt with in a satisfactory manner via a global approach.

Shared rules and enhanced market access in 162 countries is something no regional trade agreement can offer.

Therefore it is essential that we keep things moving forward at the global level as well. We need to have a healthy trading system, working well at all levels.

And why does this matter so much?

It matters because trade can act as a driver of GDP 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 right now, this is as important as ever.

Trade growth has been hit hard by low global demand as developed countries come only very slowly out of recession, and as emerging economies mature.

The volume of global trade grew 2.8% in 2015 and, unless GDP growth forecasts change, we expect it will remain at the same level in 2016.

That would make 2016 the fifth year in a row with global trade growth below 3%. This compares with the average since 1990 of over 5%.

So looking at the global picture, it is clear that we need to get trade moving again.

One obvious avenue is for governments to act on trade-restrictive measures among the G20 economies. The WTO has monitored the use of these measures since the crisis, and yesterday we published our most recent report on this issue.

The report highlights that G20 economies continue to introduce these trade-restrictive measures — and so the stockpile of trade restrictions continues to grow. In fact, since October last year, we have seen the highest monthly average of new measures since the crisis.

A rise in trade restrictions is the last thing the global economy needs today.

They could have a further chilling effect on trade flows, with knock-on effects for economic growth and job creation. If we are serious about addressing slow economic growth, then we need to get trade moving again, not put up barriers between economies.

The best safeguard we have against protectionism is a strong multilateral trading system. And of course more can be done to strengthen the system. There are significant issues to be tackled. For example …

Tariffs continue to inhibit trade, especially for the poorest. Some of the highest rates are found in sectors of particular interest to the least-developed countries.

Non-tariff measures and the lack of policy coordination create even larger hurdles. For example, trade costs in developing countries in 2010 were equivalent of a 219% import tariff. Cutting trade costs by just 1% supports a 3-4% increase in trade growth.

Restrictions in services also hinder potential for trade and investment growth, especially as services now account for 40% of world cross-border trade in value added terms, and FDI stocks account for above 60% of services trade.

In addition, if trade is to continue supporting growth, we need to respond to the evolving trade debate and the anti-trade rhetoric that is becoming commonplace.

We have to acknowledge that, in many constituencies, trade is not perceived so positively. We need to find ways to address those concerns.

First, we must rectify the perception that imports make jobs disappear. Actually, the vast majority of jobs are lost because of new technologies and increased productivity.

Second, we must recognize that while the benefits of trade are spread across the economy, the effects of increased competition can hit specific communities hard. We need to put more focus on the steps that governments can take to mitigate those impacts.

And we should remember the other side of the trade debate. In recent years, trade has helped to lift hundreds of millions of people out of poverty — in a way which you just don’t see in closed economies. In the end, this is something that benefits everyone.

Third, trade is sometimes seen as an economic activity that only favours the big companies.

This is obviously not true — however, it is true that trading internationally is much more costly and difficult for small enterprises. We need to respond to that — particularly as micro, small and medium sized-enterprises are huge job creators.

All these points indicate that we need to promote a well-informed debate. And it means showing that we can get trade moving again — for micro, small and large businesses alike — and across the globe.

And in fact, many of these issues are being reflected in the current debate at the WTO as well.

After our positive results, members have started a discussion on how the WTO can do more, and faster.

It is clear that all WTO members want to deliver on the so-called Doha negotiating issues, such as domestic subsidies in agriculture, and improved market access for agricultural produce, industrial goods and services.

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

Despite members’ differences, there are some important commonalities. For example, there is a strong desire to maintain development at the centre of our work.

In addition to these issues, some members have been suggesting other issues which they would like to discuss.

These include issues like investment facilitation, e-commerce, private standards, trade finance, and steps to support micro, small and medium sized-enterprises, to name just a few.

Members have not yet gone into detail on what they would like to discuss under those broad headings. In each case, we need a much greater degree of specificity than we have at present.

However, the debate is more open and dynamic than it has been for years. Members are engaged and increasingly active.

And I think that just as important as the topics, it is also important to consider the architecture of any potential future agreements.

The Trade Facilitation Agreement broke new ground on this front, giving a large degree of flexibility to members in terms of implementation.

Future negotiations will hinge on our ability to recognize fully the diversity of circumstances among the members. We also need to do more to help those who need assistance to implement commitments and improve their capacity to trade.

We could also look into the possibility of approaches that combine both multilateral (which is the preferred outcome) as well as plurilateral elements.

There is a range of such ideas — and the precise path we follow is down to the members. But I think the key factor will be flexibility — both in substance and in process.

So the conversation on the future of the WTO is well underway, and it could help to shape our negotiating work for the years to come.

Finally, while there are reasons to be concerned about protectionist trends and anti-trade sentiment, I think we also have reasons to be optimistic.

Actually countries are still delivering important trade agreements — and at the WTO we are seeing more engagement than ever.

With continued political will and engagement we can keep strengthening the global trading system for the benefit of all.

And I have no doubt that Denmark will remain an important partner on that journey.

Thank you.

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