SPEECHES — DG ROBERTO AZEVÊDO
B20 Summit, Berlin: "Making Trade Work for All: Trade Liberalization and Inclusiveness"
Remarks by DG Azevêdo
Ladies and gentlemen,
I’d like to thank the B20 for inviting me to be here today — as well as the BDI, DIHK and BDA, and all of the other partners.
What I’m going to say today seemed quite commonplace just a few years ago – but today it almost seems radical.
I want to make the case for trade.
People long regarded this as almost self-evident. Making the case for trade seemed almost like making the case for breathing. Trade wasn’t a choice – it was an economic norm. It was an obvious and fundamental ingredient for any strategy of sustainable economic growth and social development.
However, I believe that, since the fall of the Berlin wall in 1989, economists, academics, opinion makers and politicians concluded that the argument had been won. They no longer thought it necessary to raise their voices for trade and for an open and better integrated global economy.
But this proved to be problematic for two reasons.
First, we found that people began to forget the value of trade. They simply took the benefits for granted.
Second, over time, the trading system did not receive the close scrutiny and engagement it needs – and this may have made it more difficult for the system to evolve in tandem with the demands of the people it is there to serve.
I believe that trade and the global trading system are essential for jobs, for growth, for development, for prosperity and, actually, for peace. But I also believe that the system can be improved even more. Its benefits can be spread more widely. And this requires more work, not less.
This is the case I have sought to make since I became the Director-General of the WTO in 2013. And we have made real progress in improving the system. But I have no doubt that there is more we can do.
On a number of occasions over the last four years, we have had reason to say that the trading system is at a critical juncture. I think we have good reason to say it again today.
On the one hand, the WTO has never been more important for managing an increasingly interconnected global economy that is experiencing extremely low growth rates.
On the other hand, the system faces real structural 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. They are changing the way we live. And they are having a significant impact on patterns of employment.
Trade is often pointed to as the culprit here. But actually in developed economies around 80% of jobs are lost to new technologies, not imports.
Technology and innovation are driving a revolution in the labour market. It is estimated that 65% of children entering primary school today will end up working in types of jobs that don’t yet exist.
Therefore a response that focuses on restricting trade would miss the real issue. 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.
One could say that these technological changes are not new. We have been adapting to them basically since the industrial revolution in the late 19th century. However, what we experience today is different – very different – in one particular and fundamental way: speed! The speed of change in the digital world is like nothing we ever witnessed before. And it shows no sign of slowing down.
In responding to these quick shifts we are seeing in employment, we must focus on the real causes of the structural changes we see in labour markets. The best response will vary from country to country, depending on their special circumstances, such as: composition of the work force in terms of skills, major areas of competitiveness, level of development, and many other factors.
While we can say for sure that there is no “one size fits all” set of policies, we can also find examples of policies that have been adopted by some countries that seem to be working for them.
Most actions taken to address these structural labour market tensions seem to focus on three pillars: education; training in new skills; and support to those that lost their jobs.
Whatever the response, it’s clear that we have to consider how to adapt to this new world.
And while governments formulate policies in the way that they see fit, I think we need to remember the value of trade as an ally in these efforts.
We have ample evidence of the importance of trade and the trading system. I’d like to highlight three specific elements now – though of course there are many others.
First, trade is economically vital and a major job creator.
In Germany, 30% of jobs are export-related.
21% in France. 10% in the US. 13% in Japan. 16% in China.
Trade helps to lower prices, contributing to better living standards. For low-income households it has cut prices by two thirds. For high-income households, by one quarter.
Let me be clear – of course a positive net gain to the economy and to other individuals is no comfort to someone who has lost their job. And of course trade is a factor here. But I come back to the point that most jobs are not being lost to imports. They are disappearing because of new technologies – because of automation and innovation. So any effective response must deal with this reality.
This is why many governments are looking at how they can help their workforce to adjust and adapt. And actually I think that trade can be part of the solution here.
We know that trade plays a central role in fuelling economic growth.
Between 1990 and 2000, world trade expanded by over 7% annually – double the rate of global output. This expansion helped to lift incomes and improve living standards across advanced, emerging, and developing countries alike.
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% – a situation seen only once before in the 70 year history of the multilateral trading system – since the creation of the General Agreement on Tariffs and Trade in 1947.
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 energize that recovery.
So that’s the first point. Trade has fuelled growth in the past – and it will do so in future.
The second point I want to highlight is the system’s key role in the rise of developing countries. This is surely one of the most important economic events of our time. It has helped to lift a billion people out of poverty between 1990 and 2010.
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 – under a set of shared rules.
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 Viet Nam, 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 worldwide – as well as for global peace, stability and security.
So my second point is about this strong link between trade and the growth of developing countries.
The third and final point I would like to highlight is the predictability, security and fairness that the WTO provides – which is essential for business.
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, subsidies, technical barriers or IP rights today, instead of fighting it out in a destructive zero-sum trade war, they now do it through the WTO’s dispute settlement system under rules that both sides have agreed and helped to design.
This dispute settlement system, while not perfect, has dealt with over 500 cases in a little over two decades. That is a pretty impressive work rate – more than any other adjudicating body on the global stage.
In this way – and others – the multilateral trading system helps to provide vital stability in global economic relations – and therefore for businesses as well.
Perhaps the clearest example of this came after the financial crisis of 2008. 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, again, the trading system is not perfect, it is essential.
The WTO’s 164 members have every reason to want – and expect – improvements in the system. There are many areas where we can do more.
Recent negotiating successes prove that the system can deliver such reforms. For the first time in many years, the WTO is seen as a place to get things done.
For example, the WTO’s Trade Facilitation Agreement, which came into force earlier this year, is the biggest global trade deal this century. Its economic impact promises to be more significant than removing every remaining duty around the world.
And this wasn’t a one-off. WTO members have struck a number of other deals in the last two years – including the expansion of the Information Technology Agreement, and the elimination of agricultural export subsidies.
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 number 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 looking into an agreement to limit fisheries subsidies which lead to overfishing. And there is growing interest in discussing several other issues 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 B20 has made an important contribution here. I would like to pay tribute to the work done by Jurgen Heraeus as B20 Chairman, and his team – including Stormy Mildner.
In fact, since the beginning of 2016, private sector engagement at the WTO has been higher than ever.
We have set up a series of ’Trade Dialogues’ sessions in Geneva, to bring in voices from business, labour, consumers and a range of other stakeholders. The B20 has been very involved in this process and has helped to put forward a raft of very practical ideas for areas where the WTO could act.
Some of the ideas are still quite controversial and will require flexible and pragmatic approaches. Others are perhaps more straightforward.
But let’s be clear, putting forward ideas is the easy part. That’s when the real work starts.
If you’re a business or other stakeholder, you have to make your case to governments. Convince them to champion your ideas. If you’re a government, you have to convince other governments, so that you can build coalitions to move things forward.
The WTO will keep providing a platform for our members to pursue their aims for the system, and an opportunity for other stakeholders to have their say.
Our 11th Ministerial Conference will be an important moment in taking all of this forward. It will be held in Buenos Aires in December – in less than 8 months’ time.
I will be doing everything I can to facilitate as much convergence as possible.
I ask for your help in focusing minds on the importance both of advancing new trade reforms, and in strengthening and safeguarding the trading system itself.
I think that an objective and dispassionate look at the record shows that both trade and the trading system are 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 would we manage an increasing borderless digital economy – or respond to the globalization of the internet?
How can we get countries to limit their agricultural or fisheries subsidies?
Ideally we would have a fully multilateral approach to tackle such issues. At a minimum, we’d need a reasonable number of parties in this conversation.
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.
The fact is that if the WTO didn’t exist, we would 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 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 right now.
We must ensure that trade is a solution to the myriad of problems that leaders are wrestling with today – that it can do even more to create jobs and support growth and development around the world. This is how we will make trade work for all. And for this, we also need the contribution of the private sector. We need your contribution.
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