2 July 1997
An enabling environment for development: the contribution of the multilateral trading system
Address to ECOSOC
It is clear that we live in a world which is unsatisfactory - even unacceptable - in many respects. It is a world where, according to the latest United Nations Human Development Report, over a quarter of the developing world's people still live in poverty. About a fifth - 1.3 billion - live on incomes of less than $1 a day. And over fifty per cent of the global population has less than five per cent of global income. These statistics reinforce what our eyes and ears already tell us - that though we are part of an ever more integrated global economy, the distance between rich and poor is still intolerably great.
But there is another reality which should not be obscured by these sombre statistics - a reality of real progress and hope, underlined by Michel Camdessus. Worldwide growth and living standards are rapidly rising, more rapidly than at any point in the last thirty years. We can welcome the fact that even this year's UN World Economic and Social Survey - published today - notes that the circle of economic growth has spread to most parts of the world - averaging over 3 per cent worldwide. Of the 95 countries it covers, only 11 failed to increase per capita output in 1996, compared with 24 in 1995.
And the UN's Human Development Report reminds us that poverty has been reduced more in the last fifty years than in the last 500. It talks about the potential for eradicating global poverty in the early part of the next century - a utopian notion even a few decades ago, but a real possibility today. In the same vein, the OECD now predicts that per capita income in the developing world could rise by a remarkable 270 per cent by the year 2020, and in the developed world by 80 per cent. Already developing countries account for a quarter of world trade; at current rates of growth, they could account for half of world trade by the year 2020.
Globalization will not solve the very real problems of distribution we face - nor will it, on its own, feed and clothe our children, or educate and empower their parents. What globalization provides is the most powerful engine for growth the world has yet seen - an essential basis for building the shared global society that is now within our reach. For as the Secretary-General's Report reminds us, global economic and social development on a sustainable basis requires "solid rates of economic expansion" - expansion which cannot be achieved if the raw material of globalization is compromised. A new global "enabling environment" can only be built on the foundation of an open and integrated global economy.
Without denying the real challenges of adjustment and change that liberalization presents, we must reaffirm our resolve to continue opening our markets - and not just in developed economies, but in the developing world as well. The evidence is strong that countries which are prepared to liberate market forces and compete vigorously on the world stage can expect faster growth and more rapid development. The most impressive case, perhaps, is in some Asian developing countries where 1.5 billion people have, on average, doubled their income in the last decade.
Increasingly, an open trading system is also playing a crucial part in widening and deepening the flow of technology and information around the world - a process which is central to the enabling environment we need to create. Recent WTO agreements liberalizing global telecommunications services and information technology products are about much more than trade. They are about building the new infrastructure of the information age - in the same way that the expansion of railways and shipping in the nineteenth century provided the infrastructure for the industrial age. Equal access to this knowledge infrastructure will determine equal access to the technological and information tools of the future - which will in turn define the potential for growth and modernization in the developing world.
The next step in this process is to reach a successful conclusion to the current financial services negotiations this year - and to implement the mandate we have to examine the relationship between the flows of global trade and global investment. Like telecommunications or information technologies, financial services cannot be viewed through the outdated paradigm of importers versus exporters, North versus South. Whatever the country and its level of development, sustained growth in a competitive world economy now depends on access to a solid financial system and access to investment. Investment provides much needed capital; it is a pipeline for transfers of technology and managerial skills; and it can provide access to global production and distribution systems which in turn open up export opportunities.
Developing countries have a growing interest in liberalizing their financial sector and deregulating their investment regimes in order to build the kind of competitive financial infrastructure they need for future growth. At the same time, developed economies have a clear interest in an agreement which will open the fastest growing markets to one of their fastest growing industries. And all sides in this negotiation have an interest in building a strong global financial system to support a strong global economy. A rules-based, multilateral playing field for financial services and investment - rather than a cat's cradle of discriminatory bilateral or regional deals - will go a long way towards creating the enabling environment we are discussing today. I listened with great attention to what Mr. Camdessus has just said about the new r˘le of the IMF in opening capital accounts.
There is a third way the multilateral system contributes to the enabling environment. As the world becomes more interconnected economically, all countries - but especially the weakest and most vulnerable - will more and more need what the report calls a "fair, equitable, and transparent regime" of rules to manage their interdependence. This in turn calls for a full involvement by developing and transition economies in drawing up and using the multilateral rules, not limiting their focus to exceptions and special provisions.
I am pleased to note that developing countries are now far more active players in the functioning of the system. Between 1980 and 1994 developing countries were involved in less than ten per cent of the 120 disputes examined by the old GATT. But in the last two years alone, developing countries have initiated about half of the requests for WTO consultations or panels. And the active and crucial participation of developing countries over the last twelve months in negotiations on telecommunications services and information technology are clear evidence of their engagement and commitment to a system which belongs to them as much as to anyone.
The multilateral trading system is thus itself a key element in fostering an enabling environment for development. It helps countries at all levels of development relate to the basic fact of globalization within a framework that opens opportunities and provides the security of agreed rights and obligations.
Of course, it is not perfect. One particular area in which it has been recognized that we need to do more is the situation of least-developed countries - and doing so is leading us into improving the ways in which we work together with our partner organizations and governments. As the 1997 World Economic and Social Survey has noted, output per head has continued to decline on average in Africa through the 1980s and early 1990s. Indeed, the ratio of trade to GDP fell in 44 of 93 developing countries over the last decade, while the ratio to foreign investment to GDP fell in more than a third of these countries. While its true that a number of least-developed countries have recently shown dramatic signs of turning their economies around - Africa's growth of 4.3 per cent last year was the best in two decades - it is also true that there remains much more we can do.
I have been very encouraged by the way in which WTO Member governments have responded to this challenge by adopting in Singapore a Plan of Action for the Least-Developed Countries. A major objective of this Plan is to ensure that all least developed countries have a strong voice in the WTO. After all, membership in the organization does not automatically mean that all countries have the resources to participate equally in the system. To fully reflect the interests and objectives of least-developed countries, these countries have to be able to use it fully. A key contribution of the WTO, working closely with UNCTAD and the International Trade Centre, is technical assistance for building trade policy expertise in these countries. We are also employing new technologies much more extensively to extend the reach and the effectiveness of that assistance, and to make technical information more relevant to specific economic needs.
As you know, the Singapore Conference also called for a High-Level meeting for the least-developed countries, to be organized by the WTO with UNCTAD, the International Trade Centre and other major multilateral institutions, to forge an integrated approach. The Secretariat's preparations for this High Level Meeting are proceeding well. There is good cooperation between the six core agencies involved, and there is every indication that the Conference will yield positive results.
The goal is to join with other multilateral institutions, and with least-developed countries themselves, to devise a new integrated strategy to assist their development; the kind of enabling environment that will help the least-developed countries to move from the margins of globalization to the centre.
It is clear that, as the World Bank has reminded us, building human and institutional capacity is fundamental to realizing these aims. In many countries, the existing social, health, and education systems are not even sufficient to meet basic human needs, let alone to prepare people to take advantage of the information economies and global markets of the future. Then there is the difficulty many countries face of trying to manage profound economic change with weak governing structures. We cannot expect to achieve sustainable growth without the foundations of strong financial and legal systems, a healthy environment, and the basic necessities of health, education, and security.
As the Secretary General's report correctly emphasizes, the task begins with national governments themselves. But it does not end at national borders. In a world where economic opportunities and challenges increasingly transcend national borders we have to look to forms of international cooperation and new approaches to international governance. When trade has become thirty per cent of world GDP - and is projected to grow to fifty per cent by the year 2020 - how else to define the management of sovereignty? By going back to nineteenth century ideas? Or by embracing the global rule-of-law, agreed by consensus, which extends, not limits, the ability of national governments to defend national interests in a world without borders? The fact remains that the international policy framework required to exploit today's global opportunities and to manage today's global challenges is not yet fully in place.
The need is not to discuss whether globalization is a good thing, but to ask two further questions. The first question we have to ask is "what would be the alternative?" It would be a world divided by economic and political nationalism - a world in which we would go down the road towards power-based relations, increased tension and violence, as history has taught us.
The second question - the real one we must answer - is how can we improve the present international system keeping it strongly based on the rule of law and on further lowering of barriers among people and countries.
We should try to lift our vision towards a greater coherence among national and international institutions. This, surely, is one of the most important keys to creating an enabling environment for development.