13 April 1999
Group of 77 Preparatory Committee for UNCTAD X
Published and distributed version
Address by Renato Ruggiero, Director-General, WTO
Just over three weeks ago, in Geneva, we held the WTO's first High-Level Symposium on Trade and Development an event which brought together senior government official, academics, and non-governmental organizations to discuss the formidable challenge of development in a globalizing world.
It could not have come at a more critical time. The past year has been overshadowed by the financial crisis a crisis that now hopefully appears to be passing, but which has left its most damaging effects in the developing world. This past year has also seen a dangerous widening of the gap between the transatlantic economies, which have so far been less affected by the crisis, and the rest of the world economy, which has seen its progress towards development dramatically set back by financial instability, retreating investment, and falling commodity and industrial prices.
This symposium was not intended to provide immediate answers. It was instead an opportunity to share perspectives, express concerns, and debate our differences. As a result of this symposium, I believe we have already emerged with a much clearer idea of the tasks we face - the need to make development a central part of the future trade agenda; the need to see development as a challenge for advanced countries as well developing, with a shared burden of responsibility for its solution; and the need for developing countries to coordinate their objectives, to leverage their growing influence, and to prepare themselves for future negotiations with a positive agenda.
What does the developing world want and need - from the multilateral trading system in the present circumstances? First, an examination of the implementation of existing commitments. This is of course a concern for all WTO Members, but for a number of developing countries in particular it is an issue which influences their attitude to further trade negotiations. These countries have stated repeatedly that they are encountering unexpected problems with implementing existing Uruguay Round commitments, and furthermore that some of those agreements have deficiencies that have only become apparent during the implementation process.
On the other hand, they claim that anticipated benefits have failed to materialize because, for example, industrialized countries have not lived up to the spirit of liberalizing agreements (such as textiles), made excessive use of anti-dumping measures, or failed to respect the principle of special and differential treatment. In short, these countries see an imbalance in the way existing agreements affect them, and they see this as a problem which needs a political solution, not just more technical assistance. They also argue that since this is a question of righting an existing imbalance, it should not become something they are expected to "pay" for in new negotiations.
Recent meetings of developing-country leaders, most notably the G-15, have shown that their full support for new negotiations cannot be assumed as long as they feel that their legitimate concerns are not being adequately addressed. This same message was heard again and again at the High-Level Symposium. I too want to underline the critical importance of approaching this complex issue with all the necessary attention and good will as we prepare for our next Ministerial Conference in Seattle in November.
Second, developing countries need improved market access for their exports. A 1998 joint study by WTO and UNCTAD shows that, even after the successful implementation of the Uruguay Round, a substantial number of high tariffs will remain both for developed and developing countries. About 10 per cent of all QUAD country tariffs are still above 12 per cent ad valorem. Moreover, there is a very high variation in these rates, with some tariff peaks reaching 350 per cent or more, and the majority of peaks being somewhere between 12 and 30 per cent. These sectors include textiles and clothing, footwear, leather and travel goods, fish, processed food stuffs, agricultural products many of which are of primary interest to developing countries. The point is that it would be misleading to assume that tariffs are no longer an issue in trade policy today. And these areas must receive due attention in future negotiations.
Improved market access is an especially important objective for the least developed and the less dynamic developing countries. I have urged WTO members to provide the elimination of trade restrictions and bound duty free access for the export products of least-developed countries since the 1996 G-7 summit in Lyon and this call has been echoed by a growing list of leaders and governments, also at the High-Level Symposium. A number of WTO Members have already taken steps in this direction, and I congratulate them. The elimination of all obstacles to trade with least-developed countries by all industrial countries and with a different timetable by the most dynamic developing countries, must be a key objective of the next Round, possibly to be achieved as early as the Seattle Ministerial Conference.
Fourth, capacity building. Eliminating trade barriers will not be enough unless we also reduce the very serious supply-side barriers these countries face from infrastructure and institution building, to health care, education, and social policy. This is why we have launched with UNCTAD, the ITC, the World Bank, UNDP, and the IMF a new approach to technical assistance an integrated framework where these international institutions ask the countries themselves to design a results-oriented programme tailored to their needs.
Fifth, debt relief. I want to underline the great importance that least-developed countries attach to debt relief and to personally endorse their efforts to resolve this central issue even if it is not in the mandate of the WTO. Advanced economies should accompany free market access, with an initiative to cancel foreign debt for as many of these countries as possible. Several proposals have been made recently. They should be given careful consideration, and we should send a message of solidarity to those who want to move forward. A creative approach to debt relief together with full market access in the advanced economies and capacity building can provide the three pillars of a new strategy for bringing least-developed countries into the mainstream of the system.
Sixth, the importance of new technologies. Many of the issues we will face in future negotiations will involve new, technology-based issues like telecommunications, financial services, information technologies, and electronic commerce. Again some have portrayed these as developed country issues. Nothing could be further from the truth. New technologies like computers, cell phones, or the internet help to shrink distances and time, providing an escape route from physical marginalization. They equalize access to the most important resource of the 21st century knowledge and ideas. They determine whether a country is equipped to participate in the new global economy, or is left behind. Far from seeing technology as a barrier between North and South, we should see it as a bridge and work to make this bridge a reality.
Seventh, we need to underline the importance of investment and competition policy to development and the need for flexibility and creativity in considering these issues in order to take full account of developing country needs. The case for considering investment rules in the WTO is a simple and compelling one: The need to create a level global playing field for developing and developed economies alike by building a framework of secure, predictable and non-discriminatory rules. The threat to developing countries today is not from a flood of foreign investment, but from the lack of it. Net private capital flows to emerging markets plunged in 1998 to $152 billion, down from $260 billion in 1997 and $327 billion in 1996 although it should be said the most of the decline has been in the flow of short term capital, not long term investment. And we are not just talking about access to productive capital. We are talking about access to developed country markets, access to managerial and marketing techniques, access above all to technology and advanced processes all of which now flow through cross-border investments and business alliances. The way to tackle - and take into account - legitimate investment concerns is through negotiations, not by refusing to negotiate.
The case for considering competition rules in the trading system is equally compelling and the idea that developing and least-developed countries have no interest in this subject must be dispelled. In reality, if we want to encourage the development of the private sector in these countries we have to help them to create the regulatory environment that will allow markets to operate the commercial, competition, and financial laws that must underpin business confidence and investor security. Of course, there are sensitive issues as is the case with every key issue. But the role of negotiators is to take account of these sensitivities and to find the appropriate answer.
Last but not least we need to strengthen the multilateral trading system by ensuring that developing countries have an equal voice in the system - and an equal stake in its success. Trade is now even more critical to the economic future of the developing countries than the industrialized countries. In 1970, trade as expressed as a share of developing-country GDP was slightly less than 20 per cent. Today it is 38 per cent compared to less than 15 per cent for the EU, and 11 per cent for the United States. What these figures reflect is the developing world's remarkable integration into the global economy over the past three decades. But what they also underline is the fact that there will be no sustained economic recovery in the developing world, without a sustained recovery of their global trade.
It is in this context of uncertainties and increasing imbalances - together with the certainty of interdependence and of its unprecedented opportunities - that we are facing the challenge of new negotiations. We are now at the end of the first phase of the preparations for the Ministerial Meeting which has essentially been one of issue clarification. The second phase, from February to July, is centred on specific proposals from WTO Members. This process has the challenging task of preparing recommendations to Ministers about the work programme that will take the WTO into the new millennium. We are already committed to negotiations in important areas such as services, agriculture, and aspects of intellectual property. And there is now a growing number of voices in favour of a substantial and ambitious multilateral Round, though it should be said that not all countries especially not all developing countries - are guided by the same vision.
Against this background, I want to make a general but very important observation. It is absolutely vital that the WTO's negotiating agenda should be a balanced one, and should be seen to be so from a developing country perspective. Clearly the active participation of developing countries will be essential to the launching and success of negotiations. Developing and least- developed countries now make up almost four fifths of the WTO's membership. Politically this system will not be able to move ahead confidently through its next Ministerial Conference and into the next century without these countries sharing in the belief that new negotiations are warranted and in their economic interests.
Let me conclude by saying that development is a global challenge which requires global solutions. Trade provides us with a powerful tool, but it cannot provide all the answers. I believe that the high degree of interdependence we have reached lends a powerful weight to the view that we need a new strategy for development which involves all the international and national stakeholders at the highest level - a new integrated strategy which embraces not only trade and investment, but also sustainable development, debt relief, capacity building, health care, education, social safety nets, poverty eradication, human rights, cultural diversity, gender equality in short what we call "human security" - all as subjects which must be embraced in an improved concept of global economic management. Without a coherent plan for tackling the unacceptable marginalization we see in the world today we risk building this new global economy on foundations of sand.
Yesterday at the Institut pour les Hautes Etudes Internationales, in my last public speech, I offered the conclusions I have drawn from my four years as Director-General. I am increasingly convinced that the international system has to adapt to realities of globalization in three main ways: First, we need to move towards more collective leadership for the international system one which reflects the reality of a multi-polar world, and especially the emergence of new developing country powers. Second, we need to look at the policy challenges we face as pieces of a larger interconnected puzzle. Third, we need a new forum for the management of these complex issues one that is truly representative of the new global realities, and which can bring world leaders together to tackle an expanded policy agenda. The Millennium Summit, recently decided upon by the General Assembly of the United Nations, could be the appropriate occasion to move towards a global architecture that can meet the challenges of globalization.
Our challenge today is to improve the governance of interdependence - and to increase its human and development dimension, not to refuse it. The next multilateral trade round has to reflect a growing awareness of the inter-linkages among all these issues; not to pretend that the trading system has to find an answer to each and every one of them, but to ensure that they will be brought within an inclusive global view. Thank you.