Let me first say
how pleased I am to address this gathering of transatlantic government and business
leaders - a group which is among the most important constituents of the multilateral
trading system. As we approach that system's 50th anniversary, it is important to remember
how much we owe to the vision of a few people on both sides of the Atlantic who together
laid the foundations of an international order which has secured for us a half century of
unprecedented prosperity. In many ways, the Transatlantic Business Dialogue is a direct
descendant of this remarkable period of transatlantic cooperation and creativity. Today we
live in a world which is very different from the one which existed a half century before -
a multipolar world of multiple interests bound together by trade, investment and
technology as never before. But it is also a world whose security and equilibrium is no
less dependent on a strong transatlantic partnership where not only interests but also
values and visions are shared.
This is why this
dialogue is so valuable. You are operating at the leading edge of economic integration,
and the accelerating pace of globalization gives your work an importance which reaches
well beyond your region. In this time of rapid transition, business and government must
work together as never before to ensure that our national and international rules keep
pace with our evolving economies; to ensure that they help, not hinder adjustment; and to
ensure that they provide a common ground of stability in a period of breathtaking change.
is not globalization, as some think; the problem is governance.
want to talk about this challenge of governance in an integrated and interdependent world
- and how the transatlantic community has a central role to play in bringing together the
two main paradigms of this emerging international order - multilateralism and regionalism.
ago the central challenge facing the postwar trading system was to prevent a return to
protectionism - a path which had led directly to the Great Depression of the 1930 and
ultimately to the descent into world war. The deep levels of economic integration we have
achieved today are in many ways a testament to the success of that system. The new
international competition is for wider markets, more investment, and better technologies,
not for building higher tariff walls. And yet for all our progress, it would be
unrealistic to assume that deeper integration is inevitably leading to a period of
universal cooperation and stability. The impulses for international rivalries,
competition, and protection have not disappeared in our interconnected world - arguably
deeper integration makes them stronger than ever. In many ways, these new challenges
facing the international trading system are now being played out in the debate over the
relationship between regionalism and multilateralism.
observers have concluded that regional agreements have made a generally positive
contribution to the liberalization of world trade. In many cases, regional arrangements
have provided stepping stones for integration into the global trading system
- helping industries, sectors and countries adjust to the competitive winds of
globalization. They have served as important crucibles for trade policy innovation, the
results of which have frequently spilled over into the multilateral arena. Regionalism has
also often been a source of creative tension in the global system as a whole, forcing the
pace of other regional and multilateral initiatives. It is not coincidental that the
Kennedy Round moved forward with the creation of the European Community, the Tokyo Round
with the Community's first enlargement, and the Uruguay Round with the Single Market
initiative and with NAFTA.
importantly, regional integration has offered countries a way to resolve issues that would
be more difficult to resolve in the wider multilateral context. For the European Community
- to take perhaps the best example - greater trade and economic integration was seen above
all as a way of welding Europe's political future together and making another continental
war unthinkable. The goals of NAFTA were explicitly economic rather than political. But
here too the idea was that North America's degree of economic integration called for
deeper and more comprehensive regime of rules than could be achieved in the larger
we find ourselves in a new phase of regionalism - one which is qualitatively and
quantitatively different from the kind of regionalism represented by the European
Community or even NAFTA. The last decade has witnessed an unprecedented proliferation of
regional arrangements. Since the entry into force of the GATT in 1947, 163 regional trade
agreements were notified to the GATT or the WTO. In the period 1986-1991 only five
agreements were notified to the GATT; the equivalent number for the period 1992-1996 is
77. Of these 163 agreements, around 60 per cent are currently in force. Thus over three
quarters of the operational regional agreements in existence today have entered into force
in the last four years.
And it is not
just the pace of regionalism which is different today, but its breadth of ambition as
well. The proposed Free Trade Agreement of the Americas (FTAA), to take one example,
covers all but one of the 35 countries of North, Central and South America, boasting a
combined market of well over half a billion people. And then there is the grandest
regional project of them all - APEC. Spanning both sides of the Pacific Ocean and
incorporating three of the world's four economic superpowers - the United States,
Japan, and increasingly China - APEC includes 40 per cent of the world's population,
some 54 per cent of the world's GDP, and 42 per cent of its trade.
argument for regionalism has always been that smaller groups of countries may be able to
move further and faster towards integration than in a much wider multilateral system. But
does this logic still lie behind the vast regional arrangements we see unfolding around us
thing, it is very difficult to make the argument that liberalization is any easier in,
say, APEC, the FTAA or between the EU and the Mediterranean countries, than in the WTO.
Many of these new regional arrangements contain countries as different in outlook,
economic size and level of development as any countries in the multilateral system. And
the points of trade friction are no less vexing. For example, are negotiations between
Japan and the United States really any easier in APEC than in the WTO? Can the Europe
resolve the issue of agricultural liberalization any more swiftly transatlantically with
Mercosur, or across the Mediterranean with the countries of the Middle East and North
point is that the globalization process itself underscores the logic of global rules for
global firms operating in a global marketplace. As firms increasingly internationalize
their production and distribution systems, and as economies become increasingly
integrated, it is in no one's economic interests to have a fragmented system with
fragmented rules and even perhaps a fragmented dispute settlement system. This is even
more true in the world of borderless technologies we are now entering - world where
economic activity in areas like telecommunications, financial services, and electronic
commerce will more and more take place in a single, global economic space, one which
is basically indifferent to distance, time and geography. In this borderless information
economy, regional preference becomes an increasingly inadequate - even
anomalous - instrument for managing the integration process.
This leads to
a third important point - the new strength of the WTO system itself. This year alone
we have reached path-breaking agreements in information technologies and
telecommunications - the combined value of which equals world trade in autos, textiles and
agriculture. I believe a successful financial services agreement is within our grasp. And
we have made important progress in the 32 accession negotiations currently underway, one
of which, China's, will have an economic effect roughly equivalent to the Tokyo Round.
Hardly the signs of a system unable to keep up with the fast pace of globalization.
If the logic
of regionalism often makes less economic sense in an era of globalization, why are we
witnessing such a dramatic expansion of regional initiatives? Perhaps part of the answer
could be that in some cases these initiatives are less about advancing regional economic
efficiency or cooperation - as the TABD clearly and commendably is - and more about
securing regional preferences, even regional spheres of influence, in a world marked
by growing competition for markets, for investment and for technology. This, in my view,
is potentially the most worrying feature of the new regionalism we see unfolding around
the world today. Let's be clear that it is a feature which stands in stark contrast to the
unifying vision of the founding fathers of the multilateral system half a century ago.
this competition more worrisome is that at its heart lies the world's two major economic
players - the United States and the European Union. What we see when we look at the
pattern of regional expansion in the world today is essentially two focal points with
concentric circles of preferential trade arrangements radiating outwards - almost as if
they were competing to see who can establish the greatest number of preferential areas the
If it is true
that the strength of the multilateral system for fifty years rested on the strength of the
transatlantic partnership, it is also partly true that the sudden proliferation of
regional arrangements reflects a certain inability of the transatlantic community to
coordinate its trade interests and vision.
One danger is
that this transatlantic competition could encourage other regions to form more
preferential groupings of their own. The other danger is that we could run a risk of
re-opening the North-South divide - after all, the only countries presently excluded from
the expanding web of regional arrangements are the least- developed countries. This, in my
view, would be one of the most tragic outcomes of all since globalization's greatest
promise is its potential to erase the barriers between previously separate worlds.
fundamental point is that while regionalism can provide an important complement to the
multilateral system, it cannot provide a substitute. The solution, in other words, is to
globalize regionalism, not to regionalize globalization. I see two important dimensions to
must ensure that the foundation of the trading system remains non-discrimination as
embodied in the two fundamental principles of National Treatment and Most-Favoured-Nation.
Regional agreements which are preferential by nature represent an exception to the most
favoured nation treatment. When the number and extension of these exceptions to the most
favoured nation treatment reach a very significant level, the exception could become the
rule and the multilateral system would be substantially changed. Surely our goal must be
to make regionalism conform to multilateralism, not vice versa.
challenge is to ensure that regionalism and multilateralism converge in their goals and
aspirations - which means that we must ensure that our multilateral goals remain as
ambitious as our regional efforts. More and more the success of regional arrangements must
be measured in terms of their ability to help design and build this new economic order
- both in terms of their own interests, and in the interests of the global economy as
a whole. Here initiatives like the Transatlantic business dialogue can play a critical
rôle in channelling regional energies and initiatives into multilateral negotiations
- as you helped to do so successfully in the case of the information technology
agreement and the recent telecommunications deal.
I know that
you are playing a similarly positive rôle in financial services - the key priority
for the WTO in the coming weeks.
of the financial services negotiations is to achieve real improvements in access to
markets. Essentially, this means the right for foreign investors to operate on equal
competitive terms with national companies in national markets. It also means the removal
of unnecessary restrictions on the cross-border supply of financial services
- restrictions which will, in any event, become increasingly anomalous in a world of
borderless, electronic commerce. And it means protecting equity rights already achieved in
that an agreement should now be close at hand. Ninety-five countries have already made
provisional market access commitments on financial services in the two previous
negotiations, and in the negotiations which are due to end on 12 December we shall
see improvements or new commitments made by something like 40 countries. This is a highly
significant harvest. The number and the quality of the commitments negotiated are
essential for a positive outcome. But it is equally essential that we firmly anchor the
financial services sector in general in the multilateral system of rules and procedures.
We cannot afford continuing doubt about the commitment of the major powers to
multilateralism in this fundamental services sector. We cannot afford to lose at the last
moment what has taken so long as so much energy to attain.
about the possible effects of the recent turbulence in financial markets in Asia on the
WTO negotiations to liberalize financial services. Partly these reports spring from
confusion about the distinction between liberalization of market access - which is
our aim - and capital account liberalization - which is not. They are quite
different, and the Services Agreement explicitly recognizes not only the right of all
governments to regulate financial markets but their responsibility to take whatever
prudential measures that are necessary to safeguard the integrity of those markets and
their liberalization. I am greatly encouraged by the affirmation of all participants in
the negotiations that recent events in the markets have not shaken either their belief in
liberalization or the commitment to this negotiation.
transatlantic community's unique contribution to the global system has always been as a
bridge - across the Atlantic, across languages and cultures, across interests. It is
a community which already represents the most important economic link in world - some US$
300 billion in two-way trade in 1996, $810 billion in investment, against a combined
transatlantic output of over $16.5 trillion. Nor do these statistics capture the essential
quality of the transatlantic relationship - the extent to which Europe and North America
are at the epicentre of a growing web of transborder investment, technology and ideas -
the new arteries of the global economy. In many ways the economic ties between your two
continents represents a single transatlantic market.
In such an
intense economic relationship disputes and differences are inevitable - and fortunately we
now have in the WTO a new binding dispute settlement mechanism where most of these
conflicts can be resolved expeditiously on the basis of mutually agreed rules and
disciplines. It is not only in the interests of all government to strengthen and build
upon this system - it is there responsibility.
said this, it would be difficult for me not to be concerned about certain recent signs of
deterioration in the tone of the transatlantic relationship. And this is why an
organization like the transatlantic business dialogue is so vitally important. It is not
that closer transatlantic cooperation is an end in itself or an alternative to broader
global cooperation; it is rather that a strong North Atlantic relationship is central to
our ability to advance a broader and multipolar global community.
conclude by summing up what I see as being at stake in this fundamental relationship. It
comes down to the basic question of what sort of world we want; one of three or four major
regional blocs - each of which discriminates against the other's members - or a
truly global system of rules to deal with our globally integrating world.
than any other force, the principle of non-discrimination - as embodied in the rules-based
multilateral trading system - has reduced power politics, and guaranteed all countries
equal rights as well as equal responsibilities, irrespective of their size and power. This
has proved a remarkably cohesive force over the years, providing a unique and invaluable
foundation for international cooperation and consensus. Non-discrimination was the vision
of the transatlantic community which arose out of the ruin of the two world wars and which
has guided us to today. It is a vision which has helped us to expand trade and investment,
to break down barriers between economies and peoples, and to build the multilateral
institutions which have done so much to spread the benefits of modernization and growth
around the world.
It must also
provide a guiding vision for the challenges that lie ahead. I repeat, the challenge is not
globalization, which is a growing reality, but our system of international governance,
which is still clearly inadequate to our interconnected and interdependent world. The
transatlantic community is again being called upon to help build a new vision for our
globalized world - it must be one still rooted in the basic ideals of non-discrimination
and the rule of law.