I want to begin
by thanking the Brookings Institution and the World Affairs Council for hosting this
event. Their generosity is matched only by the breadth of vision which has made
these two institutions respected contributors to the public policy debate.
It is entirely
fitting, therefore, that this is a speech about vision. A very specific vision,
however, and one which has become a reality - something rare enough in international
affairs. That reality is the multilateral trading system which is now centred on the
World Trade Organization, and whose fiftieth anniversary we are marking this year.
behind the system owed much to American inspiration. It is a vision which remains as
fresh and as relevant to the realities of our present - and the challenges of our future -
as it was at the outset. For fifty years it has fostered economic growth as well as
international stability. Now, in a world of uncertainties, this vision and the
system that has been built on it are a priceless global asset. In celebrating it
with you here today, I would like first to look back, so that we can then see ahead more
clearly to the significance of the system for the global economy of tomorrow.
The world we
see around us - a world of growing economic integration, widening circles of development,
and unprecedented prosperity - is in many ways the fulfilment of an idea which arose out
of the destruction of the Second World War.
inequalities and poverty are still present on an unacceptably wide scale. But at the
same time, in the last 10 to 15 years, 10 developing countries with a combined population
of 1.5 billion people have doubled their income per head.
And while the
gap between countries is in some cases widening, it is also true that from 1990 to 1996,
developing countries recorded an average growth rate of 5.4 %, three times more than
All of the
world's major economies now follow, in their various way, the principles of the
market. Billions of people are becoming increasingly interested in the process of
globalization. If the challenge of the Cold War era was to manage a world divided,
our challenge in the post-Cold War era is to manage a world of deepening
interdependence. And yet the basic idea behind multilateralism remains as valid to
this global age as it was to the post-war era - that world prosperity and world peace can
best be built on a foundation of open and non-discriminatory trade.
This idea was
central in the minds of the architects of the post-war order for two broad reasons.
One was their conviction that protectionism had been an unmitigated disaster for the world
economy. All had lived through the economic chaos of the 1930s - when turning
defensively inwards led directly to the breakdown of international trade, the Great
Depression, and ultimately to world war. All were agreed that the only route to
economic reconstruction and recovery lay with open markets and liberalized trade,
underwritten by a system of negotiated and enforceable rules.
guiding idea was political - the belief that free trade and its role in promoting economic
prosperity was an essential element in international stability and security. Trade, in a
rules-based system, would promote economic interdependence among nations, making another
global war improbable. The principle of non-discrimination would prevent the kind of
exclusionary deals and blocs which had done so much to fuel inter-war rivalries and
protection. Behind all this was a fundamental belief that economic freedom among
nations was an essential prerequisite to political and other freedoms. As one US
observer, Arthur Krock, put it at the time: "economic freedom for all is the
basic American foreign policy for the prevention of war."
fundamental strength of the system was, and remains, its rule-based nature. Like the
GATT before it, the WTO rests on contractually binding commitments negotiated and
undertaken freely by governments and ratified by their domestic legislature - including
the US Congress. It is thus a transparent and profoundly democratic system.
the success of the system testifies to the enduring power of its basic principle -
non-discrimination. GATT's most obvious goal was to reduce barriers to trade - a
goal which was pursued through eight successive Rounds of negotiations which have brought
industrial tariffs down from an average of around 40 per cent to under 4 per cent.
But a second and equally important goal was to provide a non-discriminatory set of rules -
resting on the twin pillars of National Treatment and Most Favoured Nation - to help
manage the interaction among distinct and different national economies. It was this
core principle of non-discrimination which did much to reduce power politics in trade
relations, by guaranteeing members equal access to the security of the rules irrespective
of their size and level of development.
strength was the system's commitment to consensus in decision-making. Its existence
depended, not on power or coercion, but ultimately on the willingness of members to
sustain it. Yet far from weakening the system or slowing it down, this principle of
consensus has proved a remarkably cohesive force over the years, providing a unique and
invaluable foundation for international cooperation in trade matters.
process of bargaining an exchange of concessions among trade partners - and then
multilateralizing these concessions for the benefit of all - has proven a powerful
catalyst for liberalization, creating a built-in incentive for developed and developing
countries alike to place far-reaching market-opening offers on the table in each
successive Round. The genius of the WTO system lies in the way the national pursuit
of self-interest can produce such extraordinary collective benefits in terms of open trade
and international cooperation.
benefits are all around us, in a world where trade has expanded nearly three times more
than output since 1950.
Over the past
twelve months alone, we have launched an important initiative to integrate the
Least-Developed Countries into the mainstream of the world trading system. We have
reached an historic pact on telecommunications representing more than 90 per cent of the
global market. We have agreed to remove tariffs on information technology products,
one of the fastest growing sectors of the world economy. And we have reached an
equally sweeping agreement to liberalize global financial services, bringing trade in
banking, insurance, securities, and financial information in the realm of multilateral
rules for the first time. Taken together, these achievements amount to the
equivalent of a major trade Round.
The value of
these agreements is underwritten by a dispute settlement process which is the only one of
its kind. In the transition from GATT to WTO it was both strengthened and given an
additional element of security through the establishment of an Appellate Body.
years of existence this system's enhanced effectiveness has been underscored by the
greatly increased use by Members. The United States has been the major user, and - I
would like to emphasize - a strong upholder of the dispute settlement system. But
the success of these procedures is not only a matter of reaching judgements - it has
acquired a strong deterrent value, helping to encourage "out-of-court"
settlements in about a quarter of cases so far.
Of course the
limit of the system is that it can only operate on the basis of trade-rules which have
been approved by governments and ratified by Parliaments. This is why there is a
strong need for progress by the international community to establish coordinated rules in
other fields like the Environment. An environmental problem needs an environmental
answer, not a trade answer.
These fundamental economic and political characteristics have not changed in this age of
globalization. Just the opposite. More than ever before, the world's
prosperity - and America's - rests on maintaining an open international economy based on
commonly agreed rules. The contribution of trade to US growth has increased
significantly over the years - it has been estimated, for example, that exports have
generated a third of all economic growth over the past decade. A decade ago, exports
supported seven million American jobs. The Commerce Department estimates that by the
year 2000 this figure will have more than doubled, to sixteen million.
changed are the challenges which the system now faces. One challenge in the time
ahead will be to manage global economic integration when national systems still remain
very different. As tariff barriers are stripped away, the trade policy focus is
shifting inside the border - to regulatory and structural differences in areas like
investment, competition or environmental policy which can have significant impact on
market access, and on international trade and investment flows. Breakthroughs in
information technologies and telecommunications are creating the potential for borderless
trade in key sectors - raising important questions about how to regulate or manage
an economy operating in cyberspace.
I need not
remind anyone here today that these technologies are opening unprecedented opportunities
to reach a new global frontier in the 21st century. Led by your innovation and
vision, we can see opening before us the possibility that billions of people in the
developing world can for the first time share equal access to information and knowledge,
the two most vital raw materials of the information age. Developing countries are
now gaining the means to accelerate the pace at which they raise the living standards of
economy calls in turn for a truly global system of trade rules. Today this system is
more global than ever. In addition to our 132 members, there is a "waiting
list" of 31 countries applying for membership in the WTO, another feature that makes
this organization unique among the international agencies.
WTO is not like joining a political forum or an organization which can provide loans or
grants; it means hard negotiation with existing members, and very often major
changes in national policies in order to be able to sign on to binding commitments across
the whole trade spectrum. But countries which join the WTO gain security and
predictability in their trade relations, and gain a great measure of equality by gaining
access to the dispute settlement system.
Most importantly of all, by opening their economies these countries accelerate their
development, while their partners gain the assurance that unilateral economic reforms are
henceforth bound into an international legal framework.
This is one important reason why the accession process is such a high priority for the
WTO. The 31 candidates are all developing or transition economies. They
include giants such as China and Russia; Saudi Arabia; ex-Soviet republics in
the Baltic and Central Asia; and also some of the smallest island states. The
fact that such a diversity of economies, including the former bastions of central
planning, have made WTO membership a key objective leaves no room for doubt about the
system's relevance and appeal.
must complete these negotiations as soon as possible. The process of global economic
integration will not wait for us, and it is everyone's interest to have it take place
within the coverage of the WTO's rules. The urgency is that much greater when we
consider that with the new century we are already committed to major new negotiations in
key sectors like agriculture and services. But, equally, enlargement of the WTO must
strengthen the system, not dilute it - and it must be done under sound commercial
to this challenge will also say much about our capacity to manage our deepening
interdependence in a world of multiple powers and multiple interests. All nations
today face a dilemma: whereas governments answer mainly to local constituencies,
increasingly economic systems must answer to global needs. This dilemma will if
anything become more apparent as globalization advances. As we consider how best the
international architecture may need to be adapted to bridge this systemic gap, the
experience of the multilateral system in building consensus across a wide range of issues
and interests takes on an added relevance.
celebrate today is a system of consensus-based rules that could embrace all of the world's
economies. One that is helping to break down barriers, not just between economies,
but between peoples. One that is weaving together a web of economic interdependence
which gives us a shared interest in our mutual prosperity. And one that is helping
to equalize the human condition through the spread of technology and knowledge, building a
global vision as well as a global economy. If there is a danger facing the multilateral
trading system today it is that we risk forgetting the ideals that created it.
This is why
the 50th anniversary could not come at a more appropriate moment and why it means much
more than just recalling past successes. The financial turmoil in Asia has
underlined once more economic interdependence of our world and highlighted the need for
international responses to problems which transcend frontiers.
The role of
the trading system in delivering a solution to this crisis has been and will continue to
be critical. There can be no solution without the positive contribution of the
rule-based multilateral system: a system which has proven itself a bastion against
Let me state
unequivocally, THIS IS NO TIME FOR PROTECTIONISM.
moment, we need the collective efforts of all the key players in the global economy if we
are to solve this problem effectively. Europe, North America, Asia and South
America, must all participate in the process of bringing Asia once again to its
feet. China and Japan must show the regional leadership that is expected of them.
multilateral system with its binding commitments to open markets and progressive
liberalization can provide the trade framework necessity to meet the challenge of
resolving this crisis.
celebrations of the 50th anniversary are also taking place in a time of rapid expansion of
regional trading systems. In the next few years, as we approach the target dates set
for the establishment of preferential areas, we have to better define what kind of a
future we want. Do we want a future which is based on non-discrimination, which is
rules-based and global in coverage? Or do we want a very different future, in which
the world is fragmented into a few huge regional trading areas, with different rules and
which is based - by definition - on discrimination among trading partners?
There is only
one way of avoiding this difficult second scenario and that is to preserve beyond any
doubt, the primacy and dynamism of the multilateral system.
anniversary event planned for 20 May in Geneva will give political leaders of WTO member
nations a unique platform from which to send this message of reaffirmation and confidence
to their own people and to the global constituency. I fervently hope they make full
use of it in a moment characterized certainly by huge challenges, but also by