WTO NEWS: SPEECHES — DG ROBERTO AZEVÊDO

US CHAMBER OF COMMERCE, WASHINGTON DC, 10 MARCH 2014


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INTRODUCTION

Ladies and gentlemen, it’s a pleasure to be here.

I want to start by thanking you for your support in delivering the Bali Package in December.

The US business community played a crucial role in our success.

Bali demonstrated for the first time that the WTO can reach multilaterally agreed outcomes — and deliver for business in a big way.

Once implemented, the Package will provide a huge boost to the global economy, delivering much needed growth and jobs. And, significantly, it will lower the barriers which can prevent small and medium-sized businesses, in the US and all over the world from becoming exporters.

There is no doubt that Bali was a transformative moment for the WTO. But, at the same time, some big things remain unchanged.

There is still a huge amount of work to do.

We still need to strain every sinew to push the trade agenda forward.

And we still need to make the case for the multilateral trading system as a viable and effective negotiating forum.

There is a very active trade debate in Washington at the moment — and it’s good to be here in the middle of that discussion.

Yet, despite so much talk about trade, I haven’t been hearing much about the World Trade Organization. Of course, I understand the reasons for this — it’s fair to say that the multilateral system has moved very slowly in recent years.

But I am here to tell you that the WTO is back in business. And I think that’s good news for exporters across the US.

I want to talk you today about why the multilateral system matters more than ever, why the US should continue to care about that system, and why is so important that the US continues to play a leading role.

Because, while it’s clear to me that the WTO needs America – I also think that America needs the WTO.

 

THE TRADE DEBATE IN THE US

The US is at the center of the trade debate worldwide.

This is the home of many of the mega-trade initiatives taking place globally.

But, while perhaps it is less talked about, US representatives are also at the center of the debate in Geneva.

Some doubted US commitment to multilateral negotiations before the Ministerial Conference in December. How wrong they were. You delivered at every level. The US played a truly vital role in Bali.

I think this approach is borne out of a clear understanding that the different tracks — regional, plurilateral and multilateral — are not mutually exclusive. Rather, they are symbiotic — they have to exist together.

Indeed, when US leaders formulated the General Agreement on Tariffs and Trade after the Second World War, they effectively multilateralised the network of reciprocal trade agreements they had been pursuing since 1934.

The multilateral system grew out of these other initiatives — and it has always allowed for new ones. Both the GATT and now the WTO have specific rules providing scope for such agreements.

In my view the current work that is going on at the plurilateral and regional level is positive and welcome. Those initiatives have a clear role to play. These blocks help to build the edifice of global trade rules and trade liberalization.

But there are some issues which they simply cannot begin to tackle — and which can only be dealt with in the multilateral system.

Trade Facilitation was successful in the WTO because it makes no sense to cut red tape or streamline customs bilaterally — if do it for one country, you automatically do it for everyone.

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

Financial or telecoms regulations can’t be 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 — or disciplines on trade remedies, such as the application of anti—dumping or countervailing duties.

The simple fact is that none of the big challenges facing world trade today can be solved outside the global system. They are global problems demanding global solutions. 

Against this backdrop, US leadership remains vital at all levels.

And — as I indicated a moment ago — this is nothing new.

 

HISTORY OF THE WTO — US LEADERSHIP

Throughout the history of the multilateral trading system America has led the way.

It was the US that invited its wartime allies to negotiate a new International Trade Organization in December 1945 — to complement the institutions created at Bretton Woods the previous year.  

US officials made a major contribution to the drafting of the original 1947 GATT text and the ITO charter from which it was taken.

In the 60s, President Kennedy was instrumental in launching the round that would bear his name. The round sharply reduced tariffs and brought development issues under GATT rules.

In the 70s, the Tokyo Round was another US initiative, and began the process of extending the GATT system to nontariff measures, such as product standards and subsidies.

Then, in the 80s and 90s, the Uruguay Round was championed by the US and proved to be the most ambitious round yet. It aimed to reflect the changing world and the end of the Cold War by bringing, eventually, all of the trading powers together in the open, rules-based system. As well as launching the WTO as we know it today, it also brought agriculture and textiles into the system, tackled services and intellectual property, and dramatically strengthened the dispute settlement mechanism — all of which were US priorities.

Now, more than ever, the multilateral trading system belongs to the world — from the original GATT members, to the least developed countries, to the emerging economies — but if anyone can claim primary authorship of the system, it is the US.

And in recent years we have seen the validation of one of the core aims of this leadership.

Contrast the financial crisis that we are still living with today to the crisis of the interwar years.

In the 1930s governments responded by throwing up trade barriers, such as the Smoot-Hawley Tariff Act, which pushed the world into a spiral of protectionism.

Between 1929 and 1933 retaliatory trade restrictions wiped out two thirds of world trade.

But the mistake was not repeated.

After the financial crisis hit in 2008 the value of world trade did fall, but the decline was only a fraction of that seen in the 1930s — and it rebounded straight away. 

Instead of a protectionist panic the response was one of restraint and caution.

Why was the response so different? One key reason was the multilateral system that had been painstakingly constructed in Geneva covering 97% of the world economy.

Because governments knew that they were bound by rules and obligations that were common to all, they had the confidence to resist protectionist pressure. And so we avoided turning a damaging financial crash into an economic catastrophe.

 

THE BENEFITS OF TRADE AND THE MTS

And, as the global economy begins to recover, I believe it’s clear that trade — within the multilateral system — is more important than ever as a force for growth and development.

Trade creates new jobs, it creates new markets and provides access to them, it lowers prices and the cost of living, it brings us new products, it improves lives.

And this is particularly true here.

Export growth has provided a third of US economic growth under President Obama. 

Over the last four years, exports have supported 1.3 million new private sector jobs.

300,000 American companies are now exporters, the vast majority of which — 96% — are small and medium-sized businesses.

And as US Trade Representative, Michael Froman, pointed out last month, there are huge potential new markets out there: half a billion middle class consumers in Asia today will rise to 2.7 billion by 2030.

Through the multilateral trading system you will be able to access these new markets on terms where you can compete fairly, to find new buyers for your goods and services, and to create more American jobs.

But, important as this is, the trade agenda of opening markets and promoting an interconnected global economy has never just been about dollars and cents.

It has always been about values.

It’s about being part of an interconnected world where countries interact and do business under agreed rules and where disputes are settled in a fair and transparent way.

It’s about the very concepts of co-operation and openness which are at the heart of the multilateral system — and which are also at the heart of American values and leadership.

Openness reinforces growth. Jeffrey Sachs and Andrew Warner famously found that the more open a developing country is, the faster it will grow. Open economies saw 4.5% growth a year in the 1970s and 80s, against 0.7% in closed economies. Economists at the World Bank reached similar findings.

Moreover, development combined with opening through trade, brings openness in other fields.

From Aristotle to Milton Friedman it has been argued that economic empowerment brings greater participation in the political system. More recently, a study by the Fraser Institute found that more economically open countries are three times more likely to enjoy full political and civil freedoms. In this sense, openness to trade supports democracy — it creates the habits of freedom.

And so by spreading greater openness and prosperity, the multilateral trading system serves to support wider objectives of stability, peace and democracy. It helps to fight terrorism, reduce poverty, and integrate countries into the global economic community.

Franklin Roosevelt’s Secretary of State, Cordell Hull, put it like this:

“Enduring peace and the welfare of nations are indissolubly connected with… freedom in international trade.”

So perhaps I can now add to my statement of a moment ago. Trade, within the multilateral framework, is more important than ever not just as a force for growth and development — but as a force for peace and democracy.

 

THE WTO AGENDA

So what of the system today — where do we stand after Bali?

The success of the Bali package has heralded a new era for the multilateral trading system — and for the WTO. It has given our work a new momentum — and a new sense of urgency.

We now have two very significant tasks before us.

First and foremost, we need to harvest the benefits of Bali by implementing the decisions and agreements reached.

Second, as instructed by ministers in the Bali Declaration, we must prepare a clearly defined work program to conclude, once and for all, the Doha Development Agenda.

Under the Bali declaration we must define our new approach by the end of this year. And — in my view — we should then move to conclude the negotiations as quickly as possible.

In doing so, we will deliver potentially huge gains, while also freeing up the global trade agenda for the first time in a generation.

So we cannot afford to just dust off our old Doha briefs and go back to the same old intractable positions.

We have a chance to modernize the organization — and it’s not just about the Doha agenda, though of course it remains absolutely central.

We also need to have a discussion about other emerging issues which are affecting your businesses and which are shaping the global trade agenda.

And so in order to begin this work we will need to rethink our approach.

In instructing us to prepare a work program Ministers were saying that we must put a much greater focus on planning. As I see it a crucial mistake in the past was that we simply didn’t plan for what we were going to negotiate.

Instead we tried to plan along the way. As we were negotiating we were also deciding what we were going to do and how far we were ready to go — and clearly it didn’t work.

There were many areas where we could have gone further during the many years of Doha negotiations that could have yielded good and important gains. But we didn’t, because we had agreed to an approach which would not allow it. We need a more ambitious path where it is possible to go further. We need a process of more flexible engagement that enables us to overcome the well-known obstacles that have paralyzed us in the past.

We now have a lot of experience and negotiating time behind us, and we must learn from it. We are better positioned to plan now than we were before.

We know what works and what doesn’t — so let’s allow for that.

We need to think very hard about where we want to end up, and then define the easiest and straightest path to success. Instead of abstract goals, let’s look at what we can do and set goals that are reachable.

WTO Members have to be sure that the things they put on the table now are the building blocks which will allow us to construct the bridge towards the conclusion of the round.

Inevitably this will mean doing things differently. We must avoid the mistakes of the past, and learn the lessons of Bali.  I have therefore outlined some parameters to frame the debate and which members have responded to positively.

They include:

  • Keeping development issues front and center.
  • Maintaining an inclusive and transparent process, which engages all members at all stages of the negotiations.
  • Being ready to be creative — keeping an open mind to new ideas that may allow members to overcome the most critical and fundamental stumbling blocks.
  • Our efforts must have a sense of urgency. This was an essential element of the success in Bali and will remain so. We cannot afford to wait another 18 years for a result.
  • Perhaps most importantly though, we must be realistic and focus on those things which are doable.

I know when I talk about focusing on what’s possible, rather than what’s desirable, that some people automatically think it means lowering the level of ambition or reaching for low hanging fruits. But I want to be clear — this is not the case. 

I think we have to tackle the really intractable issues up front. Some issues have not even been discussed in nearly 6 years. Now is time to bring them back to the table.

The large majority of Members have been pointing out that any multilateral engagement will require outcomes in agriculture. And if agriculture comes into discussion, then so will the other two legs of the tripod: industrial goods and services. 

And I am confident that we can tackle them in a way which will provide meaningful outcomes.

I know it is important to you that we tackle these difficult issues. And in a way this is self-evident. These issues are difficult because that’s where the big gains are. That’s why they’re difficult — and that’s also why they’re so important. But whatever path we take I’m sure that there will be gains in these areas.

If we can figure out solutions for agriculture, industrial goods and services, then we’ll have the momentum and political will to complete the round — the other issues will fall into place much more easily. Conversely, if we can’t find a solution on the big issues, any progress elsewhere will be limited.

So this isn’t about lowering ambition — it’s about finding other ways to deliver on that ambition. As I see it, what we need to do is recalibrate our thinking across the board. We must be more ambitious where that’s possible, and respect the limits in areas where the debate has perhaps already gone too far.

And the conversation has already started — members are beginning to reengage on these issues. I addressed a meeting of all 159 members in February to outline a way forward — and so the work is now well underway. Indeed, I will convene another meeting of the whole WTO later this week to review progress.

The aim is to agree on a roadmap for the next steps in the Doha round by the end of this year.

 

CONCLUSION

There’s no doubt that we have set ourselves a big challenge.

Bali has put real political momentum behind the WTO. It has created an opportunity which we now have to seize.

I think the cause of trade — and the multilateral system — has never been stronger:

  • for growth and jobs
  • for recovery and development
  • for businesses large and small
  • and for the values that we hold dear, and which are indivisible from the very idea of America.

If the WTO didn’t exist today, we would have to invent it.

I have talked about the history of US leadership in establishing and championing the multilateral trading system — and in securing the deal in Bali.

As we seek to define the future of the system in 2014, US leadership at the multilateral level will be more important than ever. The US needs to be at the center of the discussion.

And in fulfilling our mission this year we are going to need advocates in business.

My focus in the US, as well as building the WTO’s relationship with American lawmakers, is to ask for the continued support of the private sector.

As I said at the outset, your support and the combined voices of US business leaders were pivotal to our success in Bali.

So, please, don’t stop now!

Your support will be even more crucial to the future of the WTO — and as I’ve set out, I believe this is in all our interests.

By supporting the multilateral trading system, you allow the system to support you.

Thank you for listening.

Roundtable with Roberto Azevędo, Director-General World Trade Organization (WTO) — U.S. Chamber of Commerce

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