WTO NEWS: SPEECHES DG SUPACHAI PANITCHPAKDI
9 June 2004, Marrakesh, Morocco
Ten Years After Marrakesh: the WTO and Developing Countries
Honourable Minister Mechahouri,
Ladies and Gentlemen
It is indeed a great honour to join you here today to mark the ten year anniversary of the Marrakesh Agreement establishing the World Trade Organization. In the words of His Majesty King Hassan II at the closing ceremony, the establishment of the WTO represented “a gigantic leap forward towards broader and more intensive international co-operation”. I am also very pleased, personally, to be back in the beautiful city where, ten years ago, I was representing my own country, Thailand.
Just a couple of days ago we commemorated another anniversary — the 60th anniversary of the D-Day landings. And this reminded me of Morocco's very early association with discussions about the shape of the post war international order. Morocco's hosting of the Casablanca Conference of 1943 marked the beginning of a series of Allied conferences to prepare the end of the Second World War and a strong and enduring peace. It is widely recognised that economic tensions, including spiralling trade retaliation, hastened the march to war. The founders of the post-war economic order had the foresight to recognise that economic co-operation must be central to achieve a lasting peace. This is perhaps most clearly encapsulated in the words of President Roosevelt to the Bretton Woods conference in 1944. He reflected that “Commerce is the life blood of a free society.” He also urged that “we must see to it that the arteries which carry that blood stream are not clogged again, as they have been in the past, by artificial barriers created through senseless economic rivalries”. From this imperative, were built the three pillars of the post-war international economic order: the International Monetary Fund; the International Bank for Reconstruction and Development (the World Bank) and the multilateral trading system embodied in the GATT.
The GATT was essentially an ad hoc arrangement — created because of the failure to implement the Havana Charter which would have given birth to the International Trade Organization. It was only forty-seven years later that the GATT evolved here in Marrakesh into a fully fledged international organization — the World Trade Organization.
My predecessor, Peter Sutherland, described the Marrakesh Agreement as a “priceless cargo” and the “greatest trade agreement in history”. He was right. After 7 years of tortuous negotiations, over 100 Ministers signed the Final Act containing 28 agreements and appended to by some 26,000 pages of national tariff and services schedules. In so doing they created a stronger, clearer and extended framework for the conduct of international trade, underpinned by a more effective and reliable dispute settlement mechanism. Progress was also made in opening markets, building upon the work of previous GATT rounds.
Now, ten years down the line, it is perhaps timely to reflect back on the hopes expressed at Marrakesh that the WTO would usher in a new era of global economic co-operation. Are we on the way to realising those expectations? Yes, I do believe we are on the right track, particularly because the multilateral trading system embodied in the WTO is about more than just trade liberalization. It is about Members' commitment to the rules they have created governing the conduct of trade with each other.
Let me support my optimism by touching more specifically upon, what I think, have been the five key developments in the multilateral trading system over the last ten years. Firstly, the role played by the multilateral trading system during the Asian Financial Crisis. Secondly, the WTO's record in settling trade disputes. Thirdly, accessions to the WTO. Fourthly, an increased focus of the WTO on technical assistance and capacity building for developing countries. And finally the launch of the Doha Development Agenda.
As concerns the first point, I was Thailand's Deputy Prime Minister and Minister of Commerce when the Asian Financial Crisis broke out in the 1990s. It was nerve racking to see the dramatic drop in exchange rates which threatened to drain Asia of foreign exchange. It was a rough ride. But looking back on these events I am struck most by how that crisis was contained and reversed within a relatively short period of time. The majority of the five countries most affected by the Asian Financial Crisis had regained their pre-crisis income levels within a couple of years. Of course, there were a lot of factors at play in determining this recovery. But certainly one of them was the discreet role played by the multilateral trading system. In the face of an increase in exports from Asia, Members honoured their WTO commitments, kept their markets open and resisted calls for protectionism at home.
The five Asian countries had a combined trade deficit of forty billion dollars at the outbreak of the crisis in 1996 and managed to record a trade surplus of more than eighty billion dollars two years later. These countries' exports to Western Europe and North America increased in the crisis years of 1997 and 1998 by 22 and 16 per cent at a time when global merchandise trade stagnated in value terms.
Not only this, but Members pressed ahead with the Financial Services negotiations that were ongoing in the WTO at that time — and brought them to a successful conclusion. Asian countries were able to export their way to recovery and the crisis was prevented from spreading more broadly. It is particularly significant that the Financial Services negotiations were concluded outside a broader round of trade negotiations.
Without a strong multilateral trading system, the consequences of the Asian Financial Crisis could have been unimaginably worse. Today, the developing Asian region is one of the brightest spots on the global economic map.
The second development I want to talk about is dispute settlement. One of the key achievements of the Uruguay Round was to strengthen the multilateral trading system's framework for settling disputes. The panel process was made more automatic and binding and a body of appeal was created. The new dispute settlement system has commonly been referred to as the jewel in the crown of the multilateral trading system.
Over the last ten years, more dispute settlement cases have been taken to the WTO than were brought to the GATT in nearly fifty years of its existence. To date, 311 complaints have been filed in the WTO, leading to the composition of 100 panels and nearly 70 Appellate Body proceedings. In the last five years nearly sixty per cent of all cases initiated in the WTO have been brought by developing countries. The increase in dispute settlement activity may, of course, be a reflection of the fact that the WTO system of agreements, and therefore Members' rights and obligations, are far more extensive than was the case under the GATT. But it also clearly reflects Members' confidence in the system. Such confidence is based no doubt in part on the willingness of Members to implement Panel and Appellate Body rulings and recommendations. In this regard losing parties have already fully implemented Panel and Appellate Body reports in 90 per cent of the cases and are working in good faith to implement those reports in the remaining cases.
My third point relates to accession to the WTO. A good measure of the success of any institution, is certainly its ability to attract new Members. Again the WTO's record has been decisive. Over the last ten years, the WTO has welcomed 19 new Members to its table bringing the total WTO membership up to 147 at the momment. These have included major players like China — now the world's fourth largest trader. Recent accessions have also included some of the world's smallest and most vulnerable countries like Nepal. A further 25 countries are in the process of negotiating accession. Today, WTO Membership covers 92 per cent of the world's population and 95 per cent of world trade.
Another measure of the success of the trading system is its ability to adapt and respond to the needs of its Members. Today, the vast majority of WTO Members are developing countries and their ability to actively participate in the system has become a much higher priority than ever before — particularly with the launch of new trade negotiations under the Doha Development Agenda. There is, on the one hand, a much more widespread acceptance of the central role trade can play in fostering economic growth — a prerequisite for development. On the other hand, there is an appreciation that new commitments undertaken by WTO Members will be bound by the rule of law and underpinned by a strong dispute settlement mechanism. Hence, developing countries have a bigger stake in setting the agenda, formulating proposals that reflect their priorities and interests and also understanding the implications of the positions of others.
Many developing countries expressed strong concerns about their capacity to participate in the negotiations, and more generally to exercise their WTO rights and obligations, because of limited human resources. The WTO has responded to this need, by significantly ramping up the number and range of technical assistance activities, and cooperating more closely with other international agencies. There is also emphasis being placed on capacity building.
Since the launch of the Doha Development Agenda, Moroccan officials have participated in some 37 technical assistance activities, of varying lengths of time. One new initiative which has been highly successful are the regional three month trade policy courses: two of them in Africa (one in Kenya and one in Morocco). The aim of these courses is not only to provide intensive training in all aspects of the WTO for African officials, but also to develop local capacity for training and analysis by involving regional teachers and academics. Morocco hosted the first of these courses for francophone African countries in Casablanca two years ago, and will host it for the second time in Rabat later this year.
Finally, proof of the strength of multilateral co-operation in trade was signalled by the launch of the Doha Development Agenda two and a half years ago in Qatar. This was not, as you will know, an easy endeavour. An attempt to launch negotiations in Seattle two years previous had ended in failure, creating widespread mistrust and resentment among WTO Members which took some time to overcome.
On reflection, it seems the Seattle experience impressed upon Members the need for the WTO to be inclusive if it is to be sustainable. It was a hard lesson learned, and what emerged from the Doha Ministerial meeting was a broad and ambitious work programme built upon difficult compromises and characterised by an unprecedented focus on the needs and priorities of developing countries. In parallel we have seen a much more intense focus by WTO Members on procedural transparency.
The development dimension of the Doha Development Agenda cuts across the whole length and breadth of the whole work programme. Market access for developing country exports is, of course, a central component. We know that if developing countries are to grow their way out of poverty, more must be done to remove barriers facing their exports of goods and services. All three areas of market access — agriculture, manufactures and services are on the table in the negotiations. While developed country tariffs are on average low, developed countries still maintain tariff peaks and escalation in product areas of interest to many developing countries, including labour-intensive manufactures and agriculture. Indeed, since agricultural products and textiles and clothing account for more than 70 per cent of poor countries' exports, the potential benefits from liberalization could be quite large indeed.
Developing countries, however, should also not shy away from the opportunity the round presents to strategically open up their own economies, including to other developing countries' exports. The evidence is clear that those developing countries which have derived the greatest benefits from the multilateral trading system, and most successfully integrated their economies into the global economy, are those which have pursued sound economic policies, including maintaining liberal trade and investment regimes.
There are also elements of the Work Programme which have a specific “development” focus — among them: negotiations to make special and differential treatment more precise effective and operational; implementation issues and work programmes on: small economies; least-developed countries; trade, debt and finance and trade and transfer of technology.
Developing countries have also identified other areas of the negotiations as being of key interest. One example is strengthening disciplines on anti-dumping to ensure it is not used as a covert form of protectionism — not only by developed countries, but also by other developing countries too. Strengthened disciplines on anti-dumping are all the more important because of the rapidly approaching phase for final removal of quotas on textiles and clothing products under the ATC.
The Doha Development Agenda now stands at a critical juncture. Because of missed deadlines and the setback at Cancun, we have lost a lot of precious time. But, Members have now strongly recommitted themselves to make progress on some key issues by the end of July. These issues include developing what we call “frameworks for modalities” on agriculture and non agricultural market access and agreeing on the treatment of cotton within the negotiations and a solution to the so called Singapore issues. In addition, there is a growing consensus that Members would also like to see some advances in the area of special and differential treatment. These issues were among the most difficult to resolve at Cancún and are regarded as crucial to unlocking progress across the board. This is one unique opportunity to get the DDA back on track. If we miss this deadline, it is likely the rest of 2004 will be unproductive as far as making progress in the DDA is concerned, and probably much of 2005 as well
It is clear to me that most WTO Members are aware of the urgency of the situation and we have seen some real flexibilities being shown, which is very encouraging. The European Union, for example, has indicated its willingness to consider the elimination of export subsidies which is a major step forward. The EU has also very substantially modified its position on the Singapore issues. I recently attended a meeting of Ministers from Least Developed Countries in Senegal — they too showed a willingness to be accommodating. We need to see at the same time, more indications of flexibility from the highest political levels as well as a dynamic process in Geneva which can focus on working out the finer details.
Ten years ago, His Majesty King Mohammed, standing in this very building, spoke to the historical significance of the Marrakesh meeting in establishing the legal and institutional pillar of international trade in the twenty-first century. We should be immensely proud of the achievements of the last decade. The trading system has shown its resilience in the face of financial turbulence and it has contained and resolved over 300 trade disputes between its Members, providing for greater stability and predictability in global commercial exchanges. The WTO is moving towards becoming a truly universal organization — welcoming new countries some of whose membership would have been unthinkable not so long ago. The multilateral trading system has proved that it is responsive to the needs of its Membership by realigning its priorities to provide more support to its poorer members. It has also shown that it is a dynamic organization — through the commitment undertaken by Members at Doha to further reform and strengthen the WTO — a commitment which was undertaken, against a background of considerable economic and political uncertainty. The challenge ahead is to make good on the political investment made at Doha, so that trade can play its role in generating economic growth and raising incomes and living standards around the world.
Before closing, may I thank Minister Mechahouri and the Government of Morocco again for holding this conference and for your warm and generous hospitality. Morocco has a very special place in the history of the multilateral trading system.