9 October 1998
"A Borderless World"
Address to the OECD Ministerial Conference, Ottawa, 7 October 1998
In some ways the Internet has come to symbolise this powerful yet uncertain world. For we are not just talking about a new service or a new communications network. We are talking about technologies that are shaping a new kind of global economy the closest thing yet to a single, "borderless" world market.
This development has many implications, but the most important is that it is greatly accelerating the process of globalization - and making it even more irreversible than it already is.
First, the electronic marketplace is rapidly spreading the very factors of production that make globalization possible technology and information. It is already transforming the way ideas-based products move across borders from financial services, to data processing, medical information, and entertainment. But something more fundamental is also going on. The electronic market is changing the way economies function by making technology and information more accessible than ever before. It is making itself felt in the way skills or expertise can be sourced from around the world. In the way production can be integrated, 24-hours-a-day, across times zones and borders. In the way information on design, costs, or marketing can be shared everywhere - instantly. This widening circle of technology can and I believe will - have a massive levelling effect in the world economy: helping to bridge the economic divisions between countries and individuals, by equalizing access to the most important resource of the 21st century knowledge and ideas. This would be a real revolution.
Second, the electronic marketplace has, by definition, a global rather than a national or regional dimension. The global market is becoming an internal market and vice versa. This reality means that governments are being pushed to work together, plan together, and pool their efforts as never before creating what Lou Gerstner of IBM has called "global public policy". Four years ago, when I became Director-General of the WTO, it was almost universally accepted that regionalism would be the new shape of world trade. Today the reverse is true. In a digital world where Singapore is as close to Toronto as Chicago the idea of regional preference and integration begins to lose its logic. Regional arrangements still have an important role to play, but increasingly as catalysts for the global system, not as alternatives. They are obliged to turn outwards, not inwards.
The third - and most important point is that the electronic marketplace is redefining our notions of interdependence. Already a quarter of global output is exported up from just seven per cent in 1950. For the developing countries, this share is even higher, almost forty per cent. But it is no longer just goods and raw materials that cross borders. Increasingly we share in a global market for each other's services, entertainment, culture, media - even environmental, social and political concerns are increasingly shared. There is a globalization of our hopes and fears. And this interdependence of ideas and images is creating a far more immediate and intimate bond among peoples than trade in goods ever did.
The acceleration of globalization has huge potential to improve the lives of billions around the world. But how to manage the forces it has unleashed? How to help peoples and societies adjust? And how to ensure that its benefits are widely shared so we don't see a widening gap between those who are part of the global economy and those being left behind? In a certain sense, we find ourselves between two worlds - between an economic system that is increasingly global, and institutions and structures which have not caught up with this complex world. The challenge we face is to bring these worlds together - by reshaping the global rules and policies needed to support our globalizing economy.
Let me suggest three areas where we need to focus our attention: First, we clearly need to build a global policy framework for the electronic marketplace. Free trade does not mean freedom from rules. On the contrary, rules and institutions are central to making markets work - and the electronic marketplace is no exception. Part of this framework is already in place. For example, the Services Agreement of the WTO applies to much of electronic commerce because digital trade is really trade in services through a new medium. Likewise, the Intellectual Property provisions of the WTO address another major concern the security of Internet transactions such as the selling or licensing of information, or trade in cultural products like films and music. But there is clearly more to do in these and other areas.
The second priority is to expand the physical infrastructure of the global electronic marketplace - which means making computer and telecommunications networks available and compatible world wide. The Internet revolution has not developed in a vacuum. It stands on the shoulders of an equally profound revolution in global telecommunications. Here again the trading system is playing an important part. In February last year, 69 countries representing 95 per cent of the global market concluded a massive agreement to free telecommunications services - opening many markets which had up till then been dominated by state-owned monopolies. Two months later, 40 countries accounting for over 90 per cent of world trade in IT products, agreed to the elimination of tariffs on computer and telecommunications products by the start of the year 2000.
Which leads me to a third challenge - the need to widen the knowledge base of people, especially in the developing world, so that everyone has the potential to be part of the information economy, not just a fortunate few. The least-developed countries have ten per cent of the world's population but do less than half of one per cent of world trade. This marginalization is dangerous absolutely unacceptable and it risks worsening if these countries are left behind by the next wave of globalization. Electronic trade, which can abolish distances and frontiers, can also provide an escape route from marginalization. But without investments in the human infrastructure skills, training, know-how - no amount investment in physical infrastructure will help. With this in mind, the WTO is helping to provide least-developed countries with computers equipment and the know-how needed to access the great volume of trade information which is available on the WTO website.
I am not suggesting that everything we need is already in place. On the contrary, one of the fundamental challenges that governments face is trying to keep pace with a technological revolution that is literally changing with the speed of the Internet with the risk that regulations or rules will be obsolete before they are even in place. In all of the areas I have mentioned telecommunications, information technology and intellectual property we must continue to work to keep up with this revolution.
At our second Ministerial Conference in May this year, all WTO Members adopted a Declaration on Global Electronic Commerce with two major results: We agreed not to impose customs duties on electronic transmissions until Ministers reconsider the matter at the end of next year. We agreed to launch a future programme of work on electronic commerce under which the relevant bodies in the organization will examine and report back on any trade-related issues arising from electronic commerce which Members wish to raise.
What does this work programme which will begin this month entail? First we will confirm the rules on electronic commerce that already exist in the WTO to avoid undermining existing rights and obligations by treating electronic commerce as if it were outside the normal trade regime. Second, we will identify any weaknesses in the existing legal structures that need to be strengthened or clarified. And third, we will see if there are any areas not covered by WTO disciplines where Members agree that it might be appropriate to move forward.
But what is perhaps most significant about this very ambitious work programme is that it was agreed by all 132 Member governments on the basis of consensus and all in a matter of weeks. Why? Because with so much of our economies dependent on one another, no country any longer has an interest in closing off markets or weakening its ties with the rest of the world. And certainly no country, developing or developed, has an interest in building walls against technology and investment flows from outside flows that will determine whether it is equipped to participate in the new global economy, or is left behind. This represents a sea-change in the global trading system and stands as a powerful symbol of optimism for the future
We hear many critics in this period of time of globalization and its role in the present crisis. But globalization is not a policy - to be judged right or wrong. It is a process - driven by the realities of economic and technological change. Two hundred years ago, steam power launched the first industrial revolution. A hundred years later, mass production and mass transport launched a second industrial revolution. Each led to a fundamental change in the organization of production and in the role of governance. Now a revolution in communications and informatics the digital revolution is reshaping the global economic landscape in equally powerful ways.
The advent of a borderless economy has enormous potential to generate growth, to spread the benefits of modernization, and to weave a more stable and secure planet. But it also challenges the status quo. It demands that we adapt. The real issue before us is not the debate about globalization but to see how technological process can be better channelled to promote more growth, more trade and greater modernization and so help the world economy to remerge from its present difficulties. This is a complex challenge a challenge that will require vision and patience. But let us begin to meet this challenge now, knowing that with electronic commerce we have another, very powerful tool in our hands.