SINGAPORE Statement circulated by H.E. Mr. Goh Chok Tong, Prime Minister

SINGAPORE
Statement circulated by H.E. Mr. Goh Chok Tong,
Prime Minister

The Multilateral Trading System: Challenges and opportunities

[1] This is an important occasion to toast the success as well as ponder over the future of the multilateral trading system.

[2] Together with the Bretton Woods Institutions, the GATT has provided the foundation for post-war global prosperity. Through a non-discriminatory system of rules governing international trade, it has underpinned the robust post-war growth in trade and output. Without the multilateral trading system, the world would not be as prosperous as it is today, nor as peaceful.

[3] The benefits of multilateral trade cannot be evenly spread by decree. Each country has to compete for its share of the benefits through its own hard work, efficiency and competitiveness. Competition is tough, but every country can find some areas where they can do well.

[4] Developing countries have shown this to be true. Over the past decade, their share of world trade has increased from 20 per cent to 25 per cent, while their share of trade in manufactured goods has doubled from 10 per cent to 20 per cent.

[5] The remarkable success of the GATT, however, is rather recent history. The “beggar-thy-neighbour” policies that were pursued during the inter-war period brought disaster to world trade and the global economy and contributed to the 2nd World War. The most-favoured-nation principle is very much a post-war phenomenon. It is not yet securely entrenched.

Asian financial crisis

[6] For all its success, the multilateral trading system faces great challenges ahead. The on-going Asian financial crisis is its first major test. This crisis wiped out large amounts of public and private wealth in the affected countries. A more serious concern is its systemic implications. The economic development of the NICs, or the so-called “tiger economies”, seems to have gone awry. Liberalization in trade, capital flows, and investment may no longer be viewed as the right model for growth but the root cause for their financial collapse. This would be the wrong conclusion, but the perception may nevertheless grow in prevalence.

[7] Even of greater danger are possible errors in the policy responses of the developed economies. The affected Asian countries will recover through cheap exports because of their depreciated currencies. This will lead to strong political pressure in the major markets to protect their affected industries. There may be rampant use of safeguards and anti-dumping actions to protect domestic industries against competition from the recovering Asian economies. Recent workers agitation in Europe may be a precursor to these market closing activities.

Coping with regionalism

[8] If the multilateral trading system fails to support the recovery of the troubled Asian economies, it would reinforce demands for bilateral and regional arrangements. This was demonstrated by the vigorous pursuit of regional arrangements in the late 80s due to fear of the collapse of the Uruguay Round. Currently, more than 100 bilateral or regional agreements are in place. Such agreements, in pure logic, go against MFN. That countries choose to pursue regionalism when the multilateral trading system is thriving is a cause for concern. Regionalism cannot provide the same efficiency as equal access under a multilateral trading system. The proliferation of regional trading arrangements could fragment the world economy into competitive trading blocs. They could in time create economic rifts, and be an underlying cause for global tension and possibly conflicts. I dread the day when the global economy is divided into mega trading blocs like the Free Trade Area of the Americas, the enlarged Single European Market, a Greater Asia Prosperity Sphere, and a New Africa Economic Bloc.

[9] It is essential that regional initiatives reinforce rather than detract from the multilateral trading system. Managing relations between regional and multilateral trade liberalization, and ensuring that regional integration agreements open up further trade liberalization under the multilateral trading system, will be a challenge to the WTO.

Marginalization

[10] Another key challenge that the multilateral trading system faces is the marginalization of the least developed countries. Many small and least developed countries play only a marginal role in international trade fora. They face considerable difficulties in participating in policy formulation as well as implementation of GATT/WTO obligations. This lack of effective participation also extends to the increasing number of countries that are awaiting to accede to the WTO, the most important being China and Russia. Hence, ways should be found for the early entry of these new members, particularly those that have major trade share.

Technological advances

[11] Lastly, advances in telecommunication technology will pose a challenge to the traditional notion of national borders. The advent of the IT Age and cyberspace trade calls into question existing definitions of trade across borders that form the bedrock of the WTO. It would also have implications for the trade-related aspects of intellectual property rights protection. The WTO will have to adapt its rules to the changing technological environment.

The future

[12] The existing multilateral trading system will undergo severe tests and challenges. Let us hope that history and the past achievements of freer trade will guide us to the right decisions for the future. The GATT and an open multilateral trading system have enabled nations to compete peacefully without the need to resort to wars in order to carve out trading empires to keep out economic rivals. The WTO must now carry this responsibility. It can do so successfully if it is clear on what it can and should achieve in pursuing its fundamental objective of multilateral trade liberalization. Singapore would like to see on WTO's 21st century agenda a new round of trade negotiations. The 50th anniversary of the multilateral trading system is a fitting opportunity to seed the idea for such a new round to build on the past success of the system.