> Roberto Azevêdo’s speeches
- Mr Ildefonso Guajardo, Secretary of the Economy;
- Mr Enrique Jacob Rocha, President of the National Entrepreneurs' Institute;
- Ambassador Fernando de Mateo, representative of Mexico in Geneva;
- Ambassador Marcos Raposo Lopes, Brazil's Ambassador to Mexico, a friend for the last 30 years;
- Ladies and gentlemen,
It is a great pleasure to be here today. I thank you for your kind invitation.
I am pleased to have the opportunity to meet with the private sector during my first visit to Mexico as Director-General of the World Trade Organization.
My meetings with government representatives, including President Peña Nieto, have been very positive and fruitful.
Mexico was a founding member of the WTO — and remains a very important player in our work. At the same time, I think the WTO plays an important role in supporting Mexico's trade — and therefore in supporting Mexican companies.
Indeed, the multilateral trading system does a great deal to help businesses — and SMEs in particular — in ways that aren't immediately apparent and of which I think many people aren't aware.
So this is the topic of my speech today — I want to tackle the question: “what can the WTO do for SMEs?”
WHAT IS THE WTO?
But first it might be useful to answer a more fundamental question: what is the WTO?
In simple terms the WTO provides the rules of the global trading system and it does so on the basis of an agreement between its members.
We have 160 members, who together account for around 97% of the global economy. Every one of those 160 countries or territories has signed up to observe a set of rules which now govern global trade on a very wide range of topics — from tariffs and subsidies to patents and technical barriers to trade.
To back up these rules, the WTO also monitors adherence to these rules and provides a forum to resolve any trade disputes which may arise.
Our purpose is to boost trade as a means to an end. This end is to support growth and development — and therefore to improve people's lives.
But let me be more specific…
WHAT THE WTO DOES FOR SMEs
Over the years, WTO rules have helped to improve the business environment worldwide.
First, by providing predictability.
By locking-in countries' obligations on trade practices, the WTO safeguards important business interests and increases the stability businesses need to flourish.
SMEs know the importance of stability more than anyone — and the risks caused by the lack of it. Small companies may not have a second chance to adapt to unpredictable rules.
Second, the WTO helps improve transparency of trade-related measures.
WTO rules help businesses across the globe to better understand practices and policies from different countries.
This also helps WTO members to scrutinize policies and, if necessary, to raise concerns about their trading partners.
Through WTO Inquiry Points, for example, any company can ask about the technical barriers to trade that are being imposed by a WTO member. And of course it's free of charge.
But now let's focus specifically on how the WTO can help to create new business opportunities for SMEs.
By lowering barriers to trade, the WTO provides access to new markets and keeps protectionism at bay.
To use the most obvious example, every WTO member has limits to the import tariffs they can adopt, and this is because of WTO rules.
The same is true for non-tariff barriers to trade. If it were not for the WTO, there would be no clear safeguards to prevent protectionist measures being disguised as technical barriers to trade.
Compared with large firms, SMEs are especially dependent on trade-liberalizing initiatives to break into foreign markets. For example, unlike big companies, SMEs do not possess offshore business affiliates that can be used to circumvent trade or investment barriers.
The WTO also helps reduce the costs of cross-border trade by streamlining and standardizing customs procedures.
Bureaucracy is a problem that SMEs know too well.
The WTO Trade Facilitation Agreement was a major step in tackling bureaucracy to trade. Estimates shows that 10 to 15% of costs can be eliminated with the implementation of this land-mark agreement that was concluded last December in Bali.
Implementation of the Agreement would go a long way to help SMEs to penetrate more foreign markets.
However, at this point in time, WTO members are considering how — or whether — to bring this Agreement into force. Unfortunately the first major deadline for the implementation of the Agreement was missed at the end of July. Members are now considering what the way forward might be. I'll come back to this later.
Next, WTO rules increase opportunities for companies to join global value chains.
Tackling barriers to trade in goods and in services, reducing transaction costs, improving the business environment: these are key elements for SMEs in Mexico or anywhere in the world to be able to join global value chains.
These value chains offer an opportunity to integrate in the world economy at lower costs, by specialising in producing just some components or tasks instead of complete products.
Of course, there are risks, but there is no doubt that there are real opportunities here.
The WTO can also support SMEs through our work in resolving trade disputes.
Very often these disputes involve big companies but that's not always the case.
A variety of disputes in the WTO involve interests of SMEs in different parts of the world. For example, the high number of cases involving sectors such as textiles and footwear shows that, even without knowing, important market access opportunities for SMEs in these sectors are being secured through WTO disputes.
More fundamentally though, as countries have to abide by shared rules, companies all over the world have better chances to compete in a fair way, according to their ability, rather than any other consideration.
And we know that trade is an important driver for business.
Evidence shows that SMEs that trade and are involved in the international economy tend to be more innovative, create more jobs, pay better wages and have better revenue growth.
So even if SMEs are not engaged with the work of the WTO — nevertheless, the WTO is working for them. It helps to shape the environment they operate in.
And even if SMEs are not directly engaged in foreign trade, our work will affect the competition you face in your market, or the products and services you need for your business.
So it's important for SMEs that we carry out our work successfully.
And I think we can do a lot more.
WHAT WE CAN DO FOR SMEs in FUTURE
Let me expand on some of the things I believe the WTO can do for SMEs in the future.
To begin with, we can improve what we do.
- We can help to increase transparency of trade measures, such as non-tariff barriers.
- We can work to improve the monitoring of countries' rules and practices.
- And we can further help to keep protectionism at bay.
Perhaps the biggest difference we could make, however, would be through advancing negotiations to update WTO rules, in the context of the Doha Round.
This is where the big gains are.
The issues on the table include:
- further reductions in tariffs and to prevent them from increasing;
- tackling trade-distortive subsidies in the agriculture sector;
- and increasing predictability and market access opportunities for all service sectors.
At the WTO conference in Bali last December, ministers tasked members to develop a well-defined work programme by the end of this year to set out how we would complete this work.
However, the setback that I mentioned earlier on the implementation of the Trade Facilitation Agreement may affect this work.
My sense, in the light of the things I was hearing from members, is that this is not just another delay which can simply be ignored or accommodated into a new timetable.
But of course it is not me who will decide what the consequences will be. How we move forward is in the hands of members.
For this reason, I asked them to use the summer break to think carefully about what the next steps might be — and to reflect long and hard on the ramifications of this setback.
The support of the Mexican government and the Mexican business community is essential here. Mexico can play an important role presenting constructive and reasonable ways forward.
THE EVOLVING TRADE LANDSCAPE
And we have to be conscious that the trade landscape is evolving.
Clearly for some countries a lot of focus is currently on regional trade agreements.
Mexico itself has already built a considerably dense web of trade agreements. NAFTA, to begin with, is 20 years old and came into existence around the same time the WTO itself was being created.
So, as you know all too well, regional trade agreements are not something new and they can complement the multilateral trading system.
A good example of this is the continuous use of the dispute settlement system in the WTO by countries that are also part of regional trade agreements. A couple of years ago, when disputes raised at the WTO amounted to 443, a total of 82 of those involved members of a regional agreement. It is noteworthy that NAFTA members participated in over 20 of these disputes at the WTO.
Nowadays, what we see is a new set of trade initiatives covering different groupings and different topics. I am sure that you have heard of the proposed Trans-Pacific Partnership, or ongoing talks on the Transatlantic Trade and Investment Partnership between the US and the EU, or the talks on the Trade in Services Agreement.
Of course, Mexico is involved in some of these initiatives.
But, as in the past, I do not believe they are at the expense of our work at the multilateral level. These initiatives clearly have a role to play — indeed, I believe that they are an important complement to multilateral efforts.
As a matter of fact, one very important undertaking with a group of countries is being conducted in the WTO itself — the expansion of the Information Technology Agreement. This is a crucial agreement for trade and economic development. The initiative on environmental goods is another negotiation that may result in commercial liberalization in a non-discriminatory way. And in this case, with especially positive effects for sustainable development.
But it is clear that these initiatives are not sufficient on their own.
For example, they leave out a large number of countries — not only the most dynamic emerging economies, but also the smallest and most vulnerable.
In addition, many of the big issues can only be efficiently tackled at the global level — and therefore many of the big gains can only be delivered at this level too. These issues include:
- streamlining customs procedures;
- tackling agricultural subsidies; or
- dealing with regulations on critical areas such as telecommunications or financial services.
Therefore the different tracks have to exist together — they are symbiotic.
We cannot ignore the importance of updating the multilateral trading system, so that we can better respond to the needs of businesses worldwide — including SMEs.
The emergence of new challenges to global trade does not detract from the importance of the issues that we currently have on the table at the WTO in Geneva — in fact it's quite the reverse.
Addressing outstanding market access barriers and trade distorting practices in agriculture, industrial goods and services remains crucial — not only to redress old imbalances in world trade, but also to reduce remaining barriers and open up new markets and opportunities.
Supporting inclusive and sustainable development will remain at the heart of our work. Trade negotiations are not a zero-sum game. We can find outcomes that deliver new opportunities and growth to all countries, and new opportunities for SMEs.
And therefore I ask for your support. We are in a critical period and as things stand the future of the system is full of uncertainties.
I don't think we can take the benefits of the system for granted. The multilateral trading system supports growth and development, it resists protectionism, it makes sure that all countries have a seat at the table and it ensures that the poorest are not left behind.
In this way, since its creation in 1948, the multilateral system has been a powerful force for openness, cooperation — and peace.
So we must work to strengthen it.
Mexico has always been a strong supporter of the WTO. And I thank you for that.
We must keep up this kind of engagement. And this isn't just about government. The support of the private sector will be even more crucial in the future.
I believe, with your support, we can deliver the economic gains that are in play now and succeed in strengthening the trading system for the future — for the benefit of us all.