SPEECHES — DG ROBERTO AZEVÊDO
Remarks by DG Azevêdo
Ladies and gentlemen,
I am very pleased to be back in Japan, and to have this opportunity to congratulate JETRO on its 60th anniversary.
As WTO Director-General I have always valued your engagement on trade issues and your strong support for the trading system.
Moreover, I think it's clear that JETRO has made a huge contribution over the years in supporting Japan's integration with the global economy and driving the country to be the leader in trade that it is today.
- Japan is currently the world's 4th largest exporter of goods and the 4th largest importer. One out of every 10 Japanese jobs is linked to exports.
- You are also working to further increase your integration with other markets. Prime Minister Abe signed a free trade deal with the EU in July. The CPTPP is set to enter into force at the end of the year.
- And of course Japan is a very prominent member of the WTO. In fact, Japan's representative to the WTO, Ambassador Junichi Ihara, is currently the chair of the General Council. This is one of the most important roles in the organisation.
All of this shows how much you value trade and the trading system – including the WTO. And I want to underline this point.
In these times of rising tensions, and questions about the WTO's future, I think it's vital that we remember the system's fundamental importance.
The WTO provides the framework of rules and practices that underpin 98% of global trade today.
It provides the foundations on which decades of economic openness and integration have been built.
As such it has supported a major expansion of world trade. Since the WTO's launch, trade volumes have increased two-and-a-half times, with average applied tariffs being cut in half.
The WTO also acts as an essential pillar of global governance. The system provides stability and predictability in trade – holding firm even during the financial crisis. And, as a result, it has helped to fuel unprecedented growth, development and job creation around the world as well as a dramatic reduction in poverty.
Of course the trading system is not perfect – no one would claim that. But it is essential. It is effective. And it represents the best efforts of governments around the world, working together for 70 years, to find ways to cooperate on trade issues.
It took a lot of people and a lot of time to push the boulder this far up the hill. Even keeping it in place requires constant effort. And if we let it slip it would likely take a long time to get back to where we are today.
When we talk about the problems we are seeing in global trade, we should always remember that fact.
You are all well aware of the tensions that have been rising, in recent months, between a number of major trading partners.
The situation is of real concern.
New tariffs announced so far this year cover hundreds of billions of dollars in trade. Further measures have been proposed. And, at present, continued escalation is a real possibility.
This could have dramatic consequences for trade and GDP growth. And it could have very serious systemic consequences as well.
I am talking to all sides to try to resolve this situation. Instead of escalating tensions, we need to find ways to resolve them constructively.
In this context I want to mention one specific systemic issue which is particularly pressing – and that is the problems in the WTO's Dispute Settlement System. As you know, we currently have an impasse regarding appointments to the Appellate Body, which could eventually threaten the functioning of the whole dispute settlement system as we know it today.
Again, I am talking to all sides to identify possible ways forward.
These challenges require an urgent response from members. There is a responsibility on the whole international community here.
And while we work to respond to these immediate threats, we also need to develop a deeper understanding of the longer-term economic shifts.
Technological change is revolutionising the global economy.
We recently published a major WTO report looking at precisely this issue – setting out how innovations like Blockchain, AI and 3D printing could change the way we trade. We see a future with lower trade costs, more opportunities for developing economies and smaller companies, and an even greater emphasis on services. There isn’t time to go into more detail now – so I urge you to take a look at this report for yourselves.
But it's clear that we are, in many ways, in a state of flux. The situation raises a series of questions about how governance structures should respond.
Our focus today is the future. So, faced with these issues, what is the future of the WTO? What role do we want the organization to play?
These questions of course can only be answered by WTO members. But let me share a few thoughts.
- Firstly, I think we need to ensure that the trading system is strong enough to continue providing the stable underpinnings for global trade cooperation.
- And secondly, I think we need to ensure that the system is flexible enough to help countries to meet the challenges and seize the opportunities before us today.
Let me take each point in turn.
Ensuring the system remains strong requires work and it requires constant engagement.
The current trade tensions are leading directly to a high-level conversation about 'WTO reform' or 'modernisation'.
At the root of the current grievances is the argument that the trading system is allowing distortive trade practices to go unchecked. Therefore, the argument goes, the system needs to change.
There are a range of ideas and initiatives being proposed.
Japan is a very active participant.
It is part of a trilateral initiative with the US and the EU which is discussing transparency and a range of other issues.
And the government has been involved in some key moments in the debate. For example, Japan took part in a ministerial meeting convened by the Canadian government in Ottawa two weeks ago to discuss these issues.
And, of course, Japan is also part of the discussions that are happening in the G20. WTO reform was at the top of the agenda at the G20 trade ministers meeting in Mar del Plata in September. And the upcoming G20 Summit will be a key moment to advance this debate. I will be there – and I will be bringing a very clear message to the leaders about the need to preserve and strengthen the trading system in the interests of all.
This debate will continue into 2019, when Japan will hold the G20 presidency. I look forward to your continued leadership there.
While there are members who do not share the view that a reform is needed, it's clear that this debate is gathering significant momentum. So if this conversation is to advance, it is essential that all members' views are considered.
I should stress that in some ways this conversation about strengthening the WTO isn't new.
I have been working with members over recent years to achieve exactly this and we have made real progress.
In recent years we have struck major deals like the Trade Facilitation Agreement, the abolition of agricultural export subsidies and the expansion of the Information Technology Agreement. Together, these deals represent the biggest trade reforms in the WTO's history.
This brings me to my second point, which is that the system must be flexible enough for progress to be possible.
These deals also provided some valuable lessons about how to make progress. So what did we do that suddenly made it possible? Ultimately it is all about flexibility – and we have shown how this can be applied in a number of different ways.
- For example, we can have flexibility in substance. We saw this with the multilateral Trade Facilitation Agreement, where each developing country may ask for technical assistance and may itself decide how fast it can implement each specific commitment.
- And we can have flexibility in geometry. This is the case of the Information Technology Agreement, where only a group of members participate. In this case the zero tariffs of the participants apply for all members. Of course, Japan is a leading proponent of this agreement.
In a system with members of different sizes, different priorities and different stages of development, the only way to advance is by being flexible.
People see the economy evolving. They see important issues being stalled. They want to make progress. So they must be ready to explore creative, flexible approaches to achieve that.
Another notable development over recent months is that groups of members have begun conversations in a number of issues of emerging economic importance.
These include electronic commerce, investment facilitation, SMEs and the economic empowerment of women. We have also seen a group of members coming together to issue a joint statement on domestic regulation in services. It won’t surprise you to hear that Japan is part of all of these initiatives.
Time will tell exactly how this work develops. While some members do not support these initiatives, it is clear that they are fast evolving.
Of course, interest here does not mean abandoning issues that are very dear to many members and that also need to see progress. This includes issues such as agriculture, food security and development.
It also includes fisheries subsidies, where members are working towards a deal by the end of 2019. I commend Japan's engagement here, once again.
We need to keep working hard on all of these fronts if we want to see progress – and we need to use all of the different options and avenues that are available to us.
Ultimately the future of the WTO is in the hands of its members.
In the WTO we have 164 different perspectives. Exactly how our story evolves, we will have to wait and see.
In my view we must work together to ensure that we can meet the trade challenges of today, and be ready to face the challenges of tomorrow.
I am confident that we can do this – and ensure that the global trading system goes from strength to strength. I know that we can rely on Japan's leadership and support in that endeavour.
In the end, this is how we will continue to support growth, development and prosperity for the years to come.