ICTSD & Friedrich Ebert Stiftung conference: “The Future of the WTO and the Role of the G20 economies”

Ricardo,
Hubert,
Ladies and gentlemen,
Colleagues,

Good morning. I would like to thank ICTSD and the Friedrich Ebert Stiftung for arranging this event, and inviting me to speak today.

Your organizations have long been important incubators of new thinking on trade – and today’s dialogue is especially timely.

I am going to tackle our topic – the future of the WTO – with some caution.

I share Niels Bohr’s famous view that “prediction is very difficult, especially about the future.”

In fact, an interesting point about this quote is that its source is disputed. It may indeed have been Niels Bohr who said it first – but equally it may have been Mark Twain, or a number of others. So, as you can see, even “post-dictions” are uncertain!

We are indeed living in an uncertain world.

What I can say with certainty is that the global trading system is at a critical juncture yet again.

On the one hand, the WTO has never been more important – for growth, for development, for managing an increasingly interconnected global economy.

On the other hand, the system faces real challenges. The economy of today is vastly different from when the WTO came into being in 1995 – and the pace of change is accelerating. New technologies are changing the way businesses work. They are changing the way we trade. And they are having a significant impact on patterns of employment.

Trade is often pointed to as the culprit here. But actually 80% of jobs are lost to new technologies, not imports.

Therefore a response which focuses on trade would be misguided. And it would risk worsening the problems that workers face. Raising barriers would not bring the jobs back. Moreover, it would hit consumers in the wallet, by reducing their purchasing power.

In responding to the shifts we are seeing in employment, it may be more effective to focus on domestic actions to support workers and equip them with the skills to compete in the modern global marketplace.

Most actions taken to address this focus on three pillars: education; training in new skills; and support to those that lost their jobs.

And while governments formulate those policies in the way that they see fit, I think we need to recommit to trade and to cooperation through the multilateral trading system. Of course the G20 will play an important role here.

We have ample evidence of the importance of the trading system. And it will continue to play a critical role in the future.

I’d like to highlight three specific elements now – though of course there are others.

First, trade plays a central role in fuelling global growth.

Between 1990 and 2000, world trade expanded by over 7 per cent annually – double the rate of global output. This expansion helped to lift incomes and improve living standards across advanced, emerging, and developing countries alike.

Of course, since the financial crisis trade growth has been rather more disappointing – reflecting the broader economic difficulties.

2017 will likely be the sixth consecutive year with trade growth below 3 per cent – a situation seen only once before in the 70 year history of the multilateral trading system.

Given today’s increasingly interconnected world economy, it’s hard to imagine a robust economic recovery without a parallel recovery of global trade. Indeed, with the right mix of policies, trade can help to drive that recovery.  

So that’s the first point. Trade fuels growth.

The second point I want to highlight is the system’s key role in the rise of developing countries. This is viewed by many as the most important economic event of our time, particularly given its impact in reducing the numbers living in poverty around the world.

There are many reasons why developing countries have achieved economic lift-off, but none is more important than their integration into the global trading system – and the access that this brings to new markets, new technologies and new investment.

The developing country share of global trade has grown from less than a third in 1980 to nearly half today.

While the focus is most often put on emerging economies like China and India, the story of dynamic trade-driven development includes countries of all sizes and regions – from Vietnam, to Cambodia, to Madagascar.

It’s inconceivable that developing economies can continue their growth trajectories without the further opening and expansion of global trade. The same applies for our prospects of meeting the 2030 Sustainable Development Goals.

And let’s be clear, the growth of developing countries is a fundamental force for the creation of jobs, and for peace and stability worldwide.

Trade and the trading system will remain essential here.

The final point I would like to highlight is the predictability, security and fairness that the WTO provides.

The rules-based trading system was the world’s response to the chaos of the 1930s – when rising protectionism, rival trade blocs, and beggar-thy-neighbour policies did so much to harm economic prospects and lay the ground for the Second World War.

When countries clash over anti-dumping duties or subsidies today, instead of fighting it out in a destructive trade war, they do it through the WTO’s dispute settlement system under rules that both sides have agreed and helped to design. The system has now dealt with over 500 cases in a little over two decades. That is actually a pretty impressive work rate – in excess of any other such body on the global stage.

This helps to provide stability in global economic relations. But of course the clearest example of this came after the financial crisis of 2008.

That crisis posed a major challenge to the multilateral trading system – and it passed the test.

We did not see a significant rise in protectionism, and we certainly did not see a repeat of the 1930s. 

The share of world imports covered by import-restrictive measures implemented since October 2008 is just 5%. Of course it could be even lower – but it shows that the WTO did its job.

And it shows that while the system is not perfect, it is essential.

With all of this in mind, I think our task now is to keep strengthening the system, delivering new reforms and resisting the erection of new barriers to trade.

Members have every reason to want – and expect – improvements. There are many areas where we can do more.

Recent WTO negotiating successes prove that the system can deliver. Just look at the Trade Facilitation Agreement, the expansion of the Information Technology Agreement, and the agreement to abolish agricultural export subsidies. And the different approaches represented by these agreements show that members are willing to be adaptable and dynamic.

We are learning to be ambitious, but also to be pragmatic, realistic and flexible. We are learning to be creative, finding innovative solutions, and engaging in flexible formats.

A wide range of areas are now being discussed.

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 which lead to overfishing.

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.

The debate is the most dynamic it has been for some years. And the G20 has made an important contribution here. I would like to pay tribute to the work done by the Germany Presidency this year, building on a very active Chinese Presidency in 2016.

The G20 has seen good discussions on a number of issues which are of great interest here in Geneva – including some of those I just outlined.

In this context I am looking forward to the Hamburg Summit in July. It will be very helpful to have a strong outcome there which recognises the importance of trade in supporting jobs, growth and development.

The G20 brings together the world’s major economies. They are all big players in the debate at the WTO. But I’m happy to say that actually all members are involved.

Over the last 12 months, we have seen many different members, and groups of members, putting forward a wide range of new ideas and proposals.

Clearly the 11th Ministerial Conference will be an important moment in taking all of this forward.

MC11 is now only eight months away. If we want to see real progress, we must work hard.

Earlier this week I met with our host for MC11 – Minister Malcorra of Argentina.

We co-chaired a roundtable meeting with the WTO negotiating group chairs. It was very constructive, and it shows the commitment of the host country to have successful outcomes at MC11.

Minister Malcorra and I will be doing everything we can to facilitate as much convergence as possible over the coming months.

But, as ever, progress is in the gift of members, and members alone. Continued political engagement will be vital.

To conclude, the question before us today is about the future of the WTO. I think that a dispassionate look at the record shows that the organization is vital – and I see no reason to believe that this is going to change in the near future.

Almost none of the global trade challenges we face today would be easier to solve outside of the multilateral system. In fact, the opposite is the case.

How can we manage an increasing borderless digital economy – or respond to the globalization of the internet – through bilateral agreements?

Why would countries limit their agricultural or fisheries subsidies via regional arrangements?

This is not to imply that bilateral and regional approaches are not important. They absolutely are. They complement multilateral rules and act as building blocks for the global system.

But on their own they are not sufficient.

A multilateral approach is essential. The fact is that if the WTO didn’t exist, you’d have to invent it.

Nevertheless, I believe that the system can be better.

We are the custodians of the system today.

In an increasingly interdependent and multipolar world economy, it is our responsibility to ensure that we bolster global economic cooperation – and that we leave a strong and well-functioning trading system for future generations.

But it is also our responsibility to ensure that we do more to spread the benefits of trade.

We must ensure that trade is a solution to the myriad of problems that leaders are wrestling with today. And that it can do even more to create jobs and support growth and development.

The G20 can play a crucial role here. And I look forward to working with those economies – and all WTO members – to this end.

Thank you.