WTO NEWS: SPEECHES — DG ROBERTO AZEVÊDO


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> WTO Seminar on Cross-Cutting Issues in Regional Trade Agreements

Good afternoon everybody. I trust that you have had a productive day discussing what is a very complex issue.

I am pleased to have the chance to speak to you on RTAs and the many cross cutting issues that they give rise to.

Clearly RTAs are not a new phenomenon.

In fact they pre-date the multilateral system because, in a sense, they were the seeds which grew into the General Agreement on Tariffs and Trade. You can argue that the GATT was effectively a multilateralisation of the network of reciprocal trade agreements that countries had been pursuing for some years previously.

So the system as we know it today has its roots in these agreements — and we have always allowed for new agreements to be created. Both the GATT and now the WTO have specific rules providing scope for this.

So these initiatives are important — they co-exist with the multilateral system — and they can bolster it in a significant way.

RTAs are blocks which can help build the edifice of global trade rules and liberalization.

But of course things have changed in recent years.

RTAs have grown much more rapidly since the WTO came into being compared to the days of the GATT.

The WTO has been notified of 253 RTAs that are in force today.

On average this has meant 24 notifications per year since the formation of the WTO, compared to 3 on average during the GATT years. This is a considerable increase.

And these agreements are not only more numerous, they are becoming increasingly complex.

While over 80% of RTAs notified are bilateral agreements, we are seeing more and more large regional agreements.

And we are seeing more agreements between countries in different regions, rather than between neighbours. This is very different from the pattern we saw during the GATT years.

In addition we see many more developing countries negotiating RTAs today.

This proliferation of agreements, each with their own sets of rules, has been dubbed a “spaghetti bowl” — and I would certainly agree that we are seeing a significant increase in the level of complexity inside the agreements and in their relations with each other. 

Most RTAs of today make deeper and more extensive commitments, and have moved beyond commitments only in market access in goods.

Research by the Secretariat based on RTAs notified since 2000, shows that:

  • Around 60% of these RTAs contain commitments in both goods and services.
  • Over half contain rules on investment.
  • Other issues such as provisions on government procurement, competition, SPS, TBT, trade defence measures and intellectual property rights are also found in over half of the RTAs notified.
  • A smaller proportion also include other issues such as environmental and labour standards and electronic commerce, which are not covered by the WTO.

A question which requires further consideration is how RTA provisions can be complementary to the multilateral trading system.

The papers that were presented today are an attempt to fill that gap in our knowledge.

The papers address similarities and differences between the provisions in RTAs and the WTO agreements.

And, as you saw, it is a very mixed picture.

For some issues such as market access in goods and services, most RTAs grant their partners a higher level of market access than that available through the WTO.

For other issues, the picture is less straightforward.

For example, RTA provisions on anti-dumping rules. In general RTAs do not appear to have gone much further beyond where we are in the WTO today.

Similarly, for provisions on intellectual property rights, almost half of all RTAs examined simply reaffirm existing rights under the TRIPS Agreement.

While for issues such as investment, which is touched on by some RTAs, there are no WTO rules.

Furthermore, although some RTAs have provisions on disputes, most of the dispute settlement mechanisms provided are rarely used. Meanwhile the level of activity in the WTO's DSB is rising very rapidly — and one in five of the disputes brought to the WTO involve parties who are also themselves part of an RTA.

Another trend that has been noted in the past few years is negotiations that could potentially bring together a number of existing RTAs, in so-called “megaregional” negotiations.

These negotiations aim to consolidate existing preferential relationships — so their potential effect on the overall level of complexity will be a topic for further research and analysis.

While the trend to negotiate new RTAs continues, liberalizing trade bilaterally or regionally is only a part of the picture.

As I have said many times — these initiatives are important for the multilateral trading system — but they cannot substitute it.

I would point to a number of factors.

To start with, there are many big issues which can only be tackled in an efficient manner in the multilateral context through the WTO.

Trade Facilitation was negotiated successfully in the WTO because it makes no economic sense to cut red tape or simplify trade procedures at the border for one or two countries — if do it for one country, in practical terms you do it for everyone.

And this is not the only issue that’s inherently multilateral.

Financial or telecoms regulations can’t be efficiently liberalized for just one trade partner — so it is best to negotiate services trade-offs globally in the WTO. 

Nor can farming or fisheries subsides be tackled in bilateral deals.

Disciplines on trade remedies, such as the application of anti-dumping or countervailing duties, cannot significantly go beyond WTO rules.

The simple fact is that very few of the big challenges facing world trade today can be solved outside the global system. They are global problems demanding global solutions. 

Another important aspect, leaving aside the content of the agreements for a moment, is their geographical scope. RTAs tend to exclude the smallest and most vulnerable countries. That's a major source of concern.

And as our economies become more interconnected across borders and regions, RTAs do not — and probably cannot — fully address the gains from trade that can be obtained through global value chains. Indeed, the strict, product specific rules of origin that often accompany RTAs may actually be detrimental to value chains and therefore exclusionary for some. The smaller the country, the smaller the company, the smaller the trader, the bigger the likelihood is that they will be excluded.

There is also concern that by creating different sets of rules and regulations, RTAs may be burdensome for traders and business. This is the complexity point that is a concern for many.

Finally, although these initiatives show that WTO Members continue to liberalize trade, fragmentation of the trading system cannot be a substitute for the benefits of negotiating one set of rules for all.

Ideally, this is where we should be putting our focus.

But in order to ensure this clearly one thing we need to do is to deliver on what we agreed in Bali.

We are now halfway through an intensive consultation period to resolve the current impasse on this — but as things stand today, at this point in time, we don't have a solution.

While this situation persists I think the risk of disengagement increases exponentially. And this point is underlined by the proliferation of these other approaches which you have been examining today.

For the sake of the multilateral system, and all those who stand to benefit from it, I think we have to find a solution to our current problems and put our work here at the WTO back on track. And we have to do it quickly. Time is not on our side.

To conclude, I hope today's meeting has given you the opportunity to look at some of these issues in detail — and provide some food for thought. I hope it has been a very interactive exercise. 

As I have said, RTAs are not new, but they are growing and spreading at an unprecedented rate — and it is clear that there remain some considerable gaps in our knowledge.

One fundamental point is that very little information exists on the benefits of RTA preferences.

So I cannot emphasise enough the importance of the WTO's Transparency Mechanism for RTAs. I commend you for the important information you have provided. It is this information that enables the kind of research that you have seen presented today.

The information, however, is not complete. A number of RTAs that are in force have not yet been notified. So we need to fill that gap as well.

Therefore I very much hope for your continued cooperation through timely notifications of RTAs as this will help us to address this issue. 

In this way we will be able to gain a better understanding of the impact that RTAs have — how they work together amongst themselves, how the complement the multilateral system, or not — and what that means for us all.

So it with a sense of gratitude that I join you today.

When I visit a country — and I visit a great many as part of this job — every single time I hold a press conference or public event, the one question I always get is: “what do RTAs mean for global trade — how do they impact the multilateral system?”

So this is a big issue. And I am thankful for your time in tackling it today.

Thank you for listening.

 

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