Remarks by DG Azevêdo

Roberto Azevêdo’s speeches


Distinguished panelists,
Ladies and gentlemen,

Good morning.

Thank you very much for your kind invitation.

I am honoured to be in Finland at such a special moment, as you mark the centenary of your independence.

Of course, this is also a special year for the ICC Finland, as the organization marks its 90th anniversary.

The declaration of independence of 1917 stated that the people of Finland had “taken their fate in their own hands”.

You have done this in the most inspiring way — not by withdrawing from the world, but by opening up, engaging, and building strong partnerships, both regional and global.

There may have been challenges along the way, but I think that Finland’s vision has yielded very positive results.

Finland has built solid institutions and an open, innovative economy. As well as having some of the highest levels of education and gender equality, the country stands near the top of many international rankings, such as the World Bank’s ‘Doing Business’ report and the World Economic Forum’s ‘Competitiveness Index’.

This is all very encouraging and inspiring.

It is important to ensure that Finland remains on a positive track, and I think that trade will be a vital element here.

At the global level, trade is a vital source of jobs, growth and development.

It was a catalyst for reaching the Millennium Development Goal of cutting extreme poverty in half, and is a key part of the 2030 Agenda and of the new Sustainable Development Goals.

Here in Finland, trade has been an important economic driver. The country was a founding member of the World Trade Organization. It has been a member of the global system of trade rules for over 65 years.

Today around 28 per cent of Finland’s total employment, and 57 per cent of jobs in manufacturing, are linked to exports.

We must ensure that trade continues to play a positive role in Finland, especially at these testing times.

The financial crisis has hit the country, as it did the global economy. We are still feeling the after effects of that shock. The outlook for trade growth has weakened significantly and global flows of foreign direct investment have not returned to pre-crisis levels.

The final figure for trade growth in 2016 is likely to be around 1.7 per cent. This would mark the slowest pace since the financial crisis. For 2017, our studies suggest that trade will grow between 1.8 and 3.1 per cent. Of course this is largely due to the lacklustre performance of the global economy.

At the same time, we are seeing signs of distrust in global trade, and in multilateralism.

Many feel that globalization has benefitted some at the expense of others. In many cases, trade is being connected — wrongly I must note — with structural unemployment.

Trade can cause this kind of displacement, but the effect must not be overstated.

Technology, innovation, and higher productivity are having a much bigger impact on the structure of labour — accounting for around 80 per cent of job losses. But, like trade, technological progress is indispensable for sustained growth and development.

So the answer is not to reject these forces. We must embrace them and learn to adapt.

Erecting barriers and turning to protectionism would do nothing to address this situation. In fact, it would harm us all.

An OECD study showed that each dollar of increased protection leads to a drop of 66 cents in GDP.

And the most vulnerable are the ones who stand to lose the most.

A UCLA-Columbia study estimated that if borders were closed to trade, poorer consumers could see their spending power fall by 63 per cent.

In addition, unilateral measures can quickly escalate and lead to retaliation, in a disastrous domino effect. In the 1930s, for example, protectionism wiped out two thirds of global trade flows.

We should not repeat the mistakes of the past.

Indeed, the multilateral trading system was created in direct response to the bloody lessons of history.

The system represents the world’s best effort to ensure that trade can flow as freely and openly as possible, rooted in mutually-agreed laws and practices.

It relies on members operating within those rules, and holding each other to these commitments and to the same standards.

If there are disagreements, then we have ways to address them in a transparent and predictable way. And if solutions are not found, the Dispute Settlement Mechanism offers an impartial and predictable avenue to solve these issues.

The Mechanism is in high demand. To date, more than 520 disputes have been brought by WTO members, ensuring that trade disagreements do not spiral into larger conflicts.

Finland and the EU are major supporters of the WTO — and of the principles of openness and multilateralism more generally.

Now is the time to redouble that support. We must not take the multilateral trading system for granted.

Faced with the current challenges, I believe we have to stand up, and work to defend the system.

We all have a part to play to safeguard this key element of global economic governance.

Here too Finland can offer us an important perspective.

I was interested to learn about the Finnish concept ofsisu’.

I am told it is one of those expressions which is hard to translate, but that means a mix of bravado and bravery; the stubborn ability to keep going.

In face of strong headwinds, that is what we must do.

We have to continue charting the way forward. This means strengthening the trading system, and ensuring that it can reach more people to deliver benefits in a more inclusive way.

This would not only spread the economic benefits of trade more evenly, but it would also help to change the perception that trade only works for the big corporations.

I think there are a number of steps we can take in this direction.

First, domestically. We need to work with governments to help them build policies which respond to the many challenges in the economy today.

As I have said, unemployment and other dislocations are not strictly or mainly a trade issue.

We need a far-reaching response, across many areas, to ensure that people have the right skills to participate in today’s markets.

More active, ambitious and cross-cutting labour market policies will likely be essential, also touching on aspects of education and skills, help for smaller companies, and improved adjustment support to the unemployed.

There are a range of interesting new ideas being tested and discussed — including, for example, the trial here in Finland to provide unemployed citizens with a basic monthly income, with the aim of cutting government red tape, reducing poverty and boosting employment.

Second, we need to act globally.

We can do more to ensure that the benefits of trade reach further and wider through new trade reforms.

For example, SMEs account for a large proportion of employment in many economies. In Finland, they provide more than 900,000 jobs.

But SMEs’ participation in trade simply doesn’t match up to their economic importance domestically.

Tariffs and the costs involved with meeting particular standards or other non-tariff barriers can make trading across borders particularly difficult for SMEs. The smaller the business, the bigger the barriers can seem.

Technological advances and the booming number of internet users mean that e-commerce is evolving at an unprecedented pace, changing the way we trade — and providing huge opportunities.

Of course Finland is a leader here, as the first country in the world to make broadband a legal right for every citizen.

Nonetheless, there is still a long way to go to ensure that the opportunities of e-commerce are available to all.

The WTO can play an important role here, by delivering reforms to the trading system which can lower barriers and help everyone to participate.

And we have had encouraging news on this front.

Last month the WTO’s Trade Facilitation Agreement came into force.

This was actually the WTO’s first global agreement since the organization was created in 1995 — and it was the biggest global trade agreement this century.

The Trade Facilitation Agreement — or TFA — aims to streamline, simplify and standardise customs procedures. By doing so, it will help to cut trade costs around the world.

Estimates show that the full implementation of the TFA could reduce trade costs globally by an average of 14.3 per cent. This impact would be greater than the elimination of all existing tariffs around the world.

By 2030 the Agreement could add 2.7 percentage points per year to world trade growth and more than half a percentage point per year to world GDP growth.

So this is a big deal. The business community was a strong supporter of this Agreement. And I would like to thank the ICC for their work here.  

This Agreement was the first in a series of breakthroughs for the organization.

In 2015, WTO members agreed the biggest reform in global agriculture in 20 years by abolishing agricultural export subsidies.

This was actually one element of the UN Sustainable Development Goal on Zero Hunger. So it is a big achievement that we delivered just three months after the goals were agreed.

In addition, a group of WTO members, including Finland, 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.

I think that these successes achieved more than the sum of their parts. 

Besides making a difference to people’s lives and livelihoods, they also showed that the WTO is a place where you can do business.

And they showed that 164 members can work together in a meaningful way to solve the complex problems that they face.

Of course, these breakthroughs were no accident. They happened because members worked hard and — crucially — because members were creative, flexible and pragmatic. These elements will be vital to making further progress in the years ahead.

Members are now discussing how we can make progress in a wide range of areas.

Many are focused on the longstanding issues that are part of the Doha Round.

Conversations are ongoing, for example, in agriculture, where there is a strong focus on domestic support and on issues related to food security, such as public stockholdings in developing countries.

Members are also interested in moving work forward in the WTO on an agreement to limit fisheries subsidies.

And there are other issues where there is growing interest in having a discussion at the WTO such as e-commerce, and facilitation in services and investments.

At the end of the year, all 164 members will come together at our ministerial conference in Buenos Aires. That will be an important opportunity for progress.

We have achieved a great deal together in recent years. Looking forward, I think we can achieve much more.

It may not be easy, but now we know that progress is possible.

Continued cooperation at the global level will be essential to realising future stability, peace and prosperity.

Yet the current climate provides a number of challenges to this kind of cooperation — from low growth, to inequality, to major shifts in public sentiment.

The question is how do we respond? Do we sit back, and hope that the storm clouds will fade away? Or do we stand up for what we believe is an essential pillar for the well-being of all?

We all have a duty to engage and help make the case, both for trade and for the multilateral trading system. This includes governments, the private sector, and academia — everyone who believes in trade as a force for good; and in global cooperation on economic issues.

These structures are only as strong as our drive to defend and strengthen them.

So I urge Finland to stay engaged. I look forward to working with you to safeguard this valuable element of global economic governance.

Together, we can ensure that trade continues to serve Finland for many years to come.

Thank you.

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