SPEECHES — DG ROBERTO AZEVÊDO

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Thank you Mr Waddell,
Ladies and gentlemen,

Good morning. Thank you for your kind invitation.

We are living through a time of fundamental structural economic change – but also a time of real disaffection and division.

Throughout history these two factors – economic change and social division – are often found together. Today we say we're seeing the 'Fourth Industrial Revolution'. The term is accurate, not just because of the economic message it sends, but also because of the societal upheaval it implies.

Previous industrial revolutions created great wealth and opportunity, but they also created significant social disruption – with many missing out on the benefits entirely.

In my view, the economic revolution we are seeing today has to be different. It has to be inclusive. It has to be an answer to the problems we are seeing today – not an aggravating factor. So we all have a responsibility to mould it in this way – and that includes trade and the trading system.

The expansion of global trade in recent decades has helped to lift hundreds of millions of people out of poverty. It has helped to raise living standards for many millions more. And it has boosted growth and development around the world. It has acted as a tool to deliver in the national self-interest – not as a threat to those interests.

I know that I don’t have to make the case for globalisation here. But, as positive as it has been on the whole, there is no doubt that many people feel excluded. Many feel angry and let down.

I don't detract from those concerns at all. They are absolutely valid and heartfelt, and they demand a response. My priority, however, is that we find the right response.

The tendency can be to find easy targets – the foreigner or the outsider. And as these sentiments enter the political arena, they can lead the debate down the path of nationalism, intolerance, and protectionism. This is a real concern. 

Of course moves towards protectionism are nothing new. Since World War 2, whenever tensions have emerged between trading partners, the multilateral trading system has been able to respond effectively, keeping those tensions at bay.

We all rely on the stability and predictability that the system creates. In fact, it can be argued that without the WTO, we would have been in a trade war some years ago.

After the crisis of 2008 we did not see an outbreak of protectionist policies, as we did in the past. This is precisely because of the framework of rules and practices provided by the multilateral trading system, by the WTO.

However, the circumstances today feel somehow different from anything we have seen before.

Some of the policies and the rhetoric in the trade debate are not just seeking to raise barriers here and there, or to challenge specific elements of the rules. Rather, they are actively opposed to the aims of the trading system itself. Long-held principles such as shared rules, cooperation, dispute settlement through the system, and enhancing stability and predictability, seem to be thrown into question.

Taking those policies further could undermine the system, and thereby pose a serious risk to the stability of the global economy as a whole.

Of course, I understand the attraction in wishing away the rulebook. The bigger the country, the bigger this temptation becomes. But these same leading economies created this rules-based system for a very good reason.

Without the rules, trade war would be a certainty. Unilateral actions would escalate, leading to a tit-for-tat series of trade measures. In the best case scenario this could happen slowly and take time to develop. But if we go down this road, the destination is clear.

And in an interconnected economy, the effects of such actions would likely be globalised, reaching far beyond those countries who are directly involved. These effects are likely to spread to many different economic sectors as well, touching on areas that were entirely disconnected from “ground zero”.

Let me give you one illustration of how disruptive this could be. If tariffs returned to the levels before the multilateral trading system was created, we could see trade flows fall by almost two thirds. At the same time, the global economy could contract by 2.4%. That's even bigger than the contraction after the 2008 crisis. It's an extreme example, but it shows just how important the system is.

So how should we respond?

The challenge is to shape the new economy in a positive and inclusive way, and to shape the debate which is raging on these issues right now.

I think that there are three main steps we need to take.

The first step is to take a clear-eyed look at what is really causing the disruptions in our economies.

The research shows that trade is not the key factor.

The majority of jobs lost in manufacturing, around 80%, have been lost due to automation and new technologies.

This is the major force that is driving economic change today.

The shift is structural, and it is global – it is not only happening in the advanced economies. McKinsey research suggests that by 2030 manufacturing jobs will fall by 22% in China and 15% in India.

And it will affect the services sector as well – including financial services.

As Artificial Intelligence develops, it’s going to be replacing white-collar jobs in fields such as accounting, banking and legal services. According to the Bank of England, as many as 15 million jobs in the UK could end up being replaced by AI-enabled software and machines in the years ahead.

A response that simply raises trade barriers would not respond to the cause of the difficulties we face today. Indeed, choking off global trade would only bring greater harm.

The fact is we are entering a new economic era. The 'Fourth Industrial Revolution' is real.

We need to find ways to adapt and do it in a way that benefits all, with a particular focus on those who are being left behind.

And we have no time to waste. We have no precedent for the speed, scale and scope of change that is underway today. Besides, entrepreneurs, companies and other economic agents are already creating rules, norms, techniques and infrastructure around the new technologies. So it is clear that, in 10 years, it will be too late to try to frame these changes in a more inclusive manner. 

The structure of new technologies will be more or less set, and the perspectives and values of those who created them will be firmly embedded in possibly anti-competitive platforms and within the many technologies that surround us and which have become part of us.

So this is an urgent challenge.

In addition, we need to help the workforce to adjust to these new realities. Domestic policies will be key here.

Education, skills and support policies, for example, will have to evolve to match the challenges of the new economy. And there is no 'one size fits all' recipe to deal with these challenges. Each country will have to find the policies that work best for them.

So that’s the first step – responding to real drivers of change today.

With all of that in mind, the second step is to speak up for the trading system, and to raise awareness of its inherent value.

Trade can continue to be a powerful force for growth and development in the world – but only if we continue to strengthen and improve it.

Governments listen to the private sector. Yet, I think that many are not making their views heard. This has to change. The global trading system cannot be taken for granted. Its efficacy and responsiveness rely on the support of those who have the clear vision to perceive its vital importance.

This brings me to my third point; the third step.

International institutions – including the WTO – need to be ready to evolve to meet the challenges of today. The trading system needs to be responsive to members’ needs.

While stability is essential, that does not mean stasis. Helping governments and businesses meet the demands of a rapidly evolving global economy is a vital, on-going task for multilateral institutions.

Our members have shown that they are prepared to deliver new reforms, and that they are prepared to think differently.

The WTO's Trade Facilitation Agreement is a case in point. This deal aims to streamline, simplify and standardise customs procedures. Estimates show that the full implementation of the Agreement could reduce trade costs globally by an average of 14.3 per cent. The economic impact here would be greater than if we eliminated all tariffs that exist today around the world.

This Agreement succeeded because members were willing to do things differently and pursue a more flexible framework for that agreement.

In an organisation with 164 members of different sizes, different political priorities and different stages of development, these kinds of flexibilities are essential.

Members are still seeking to make progress where negotiations are already ongoing. And many have begun conversations in a number of new areas, which are related to the economic changes we are living through.

This includes discussions on:

  • electronic commerce,
  • investment facilitation,
  • steps to help smaller businesses to trade, and
  • how trade connects to the economic empowerment of women.

Trade finance is another case in point. 

After the financial crisis banks started to pull out of certain markets as risk appetites shrank and new regulations changed the calculus.

Huge gaps have since emerged in trade finance provision. The Asian Development Bank estimated that the global trade finance gap was $1.5 trillion. And of course the effects are felt most acutely by SMEs and in developing countries.

I am working with the International Finance Corporation, the regional development banks, the Financial Stability Board and others to tackle this issue. This is vital if the system is to be genuinely inclusive and responsive to its users.

So there is a range of challenges before us.

We are on the cusp of a new era. It truly is a new industrial revolution. And this demands a truly revolutionary response aiming at the right targets.

It demands clear thinking. It demands new thinking. And it demands engagement – we can’t just cross our fingers and hope for the best.

We have the chance to ensure that this revolution is truly inclusive, to reshape the debate, and to ensure that a modern, responsive trading system is part of the solution.

I look forward to your support towards that end.

Thank you.

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