World Trade    WT/MIN(96)/ST/32

    9 December 1996




Singapore, 9-13 December 1996


Statement by Mr. Donald J. Johnston


(Speaking as an Observer)

    As the latter part of the Twentieth Century recedes into history, it, like other periods of history, will be characterized by a word or a phrase which in turn carries a multitude of images, lessons and historical memories. The Dark Ages, the Renaissance, the Industrial Revolution are examples. I would predict that this period will be characterized as the dawn of the "Age of Globalization", with all that implies.

    Technology has been central to globalization. Transportation and communications technologies have been leading the way. Governments are scrambling to catch up with the international commerce which has taken advantage of the technologies in so many areas and in so many new and innovative ways.

    Yes, this is the dawn of the age of globalization and when historians tell of it, let us make sure that it is a good story: a story of how world leaders seized this moment to harness unprecedented opportunities not just for the developed world but for the world community; of how the poverty, misery and disease in many parts of the developing world were put on the fast track to eradication through multilateral free trade and investment; of how the prosperity of the developed world was sustained through the evolution of the global market and how, in turn, economic growth was firmly established in the developing world through the transfer of capital, technology and know-how combined with unfettered access for their goods and services to the markets of the developed world; of how the widening gap between the rich and the poor in the world community was arrested and then began to narrow.

    What a wonderful story it could be ... and you, gathered here in Singapore, have the opportunity to ensure that it is written. And we at the OECD wish to help in any way we can. I believe there are many ways where the OECD should play a role but I shall just highlight a few of them.

    I imagine that most of you are familiar with work done by the OECD Secretariat before I became Secretary-General which made a significant contribution to the successful conclusion of the Uruguay Round. I remind you especially of the work on agricultural subsidies, the famous PSE and CSE. The OECD enjoys a remarkable and perhaps unique capacity for tackling complex cross disciplinary issues from an objective and hence credible position. Armed with highly trained professional talent drawn from all corners of the OECD universe, it is the captive of no one. It has proved that time and again whether the task at hand relates to trade, the environment, the challenges of job creation, the appropriate allocation of tax revenues through transfer pricing guidelines or complicated and hotly debated issues such as the relationships, if any, between fair trade and labour practices. Any perception that the analytical work of the Secretariat is controlled or manipulated by a select group of rich countries is simply wrong. The credibility of the Secretariat's analytical scholarship speaks for itself!

    I assure you as I have assured Director-General Renato Ruggiero that this great resource is at the disposal of the WTO to help move the trade and investment agenda forward. There are a number of areas frequently cited as emerging or new issues where the OECD is currently doing such work. I refer to trade and labour standards (which I have already mentioned), trade and the environment and trade and competition policy. The list will continue to grow because we know that the trading system does not stop at the border of nations or regions and we must increasingly deal squarely with the interface between domestic policies and global trade.

    Trade liberalization is shattering tariff walls and border barriers that have protected economies as surely as political changes shattered the Berlin Wall.

    Most of the regulatory structure of the industrialized world evolved within the context of a domestic market place. Regulatory regimes are not adapted to a global market-place, and often hamper economic efficiency and the ability of producers of goods and services to compete. An example would be domestic transportation costs for components of finished export products. If those costs are driven up by regulatory monopolies within nations, they translate directly into higher less-competitive prices in export markets.

    Domestic regulatory frameworks of nations must adapt quickly to this new environment. If not, their economies and their domestic industries will become marginalized in the face of strong international competition. But adaptation is easier said than done.

    Regulations create vested interests. In many of these cases, those vested interests have strong political constituencies, and governments in democratic societies are sensitive to the next verdict of the ballot box. The political will to take on those regulatory measures protecting such vested interests can be reinforced by international organizations, not the least by the OECD. Indeed, the OECD work on regulatory reform is a critical building block of the international free-trade and investment agenda.

    Another area of support for free trade with which the OECD is much involved is that of assisting the structural adjustment process in OECD countries necessitated by the globalization process. Yes, regulatory reform often in the form of deregulation and free trade does not reduce jobs in less productive sectors of the economy while creating jobs elsewhere. The OECD analysis demonstrates a major net benefit to all societies through open market structures and liberalized trade. Properly designed adjustment policies should ensure that everyone benefits. This is the only way to still the protectionist voices of dissent which, in the absence of such policies, could derail or seriously slow down the move to global free trade and investment.

    A further area of OECD activity in support of the free-trade agenda is that of pathfinder on new issues. I refer to areas not yet addressed in WTO negotiations but which ultimately should find their place in that forum. The liberalization of air transport is one example. A major study by the OECD in cooperation with governments and the private sector on this important issue will be published in a matter of weeks. Hopefully this area will be moved under the umbrella of the WTO as soon as possible.

    The OECD can also report decisive achievements in its efforts towards eliminating trade distorting government subsidies for export credits.

    Bribery and corruption which distort trade just as effectively as subsidies is another active area of work within the OECD.

    A major preoccupation is the accelerating emergence of electronic commerce and what it implies for trade in goods and services, especially the latter. What kind of regulatory regimes will be required to ensure consumer protection, to tax profits, to monitor trade data, to trace electronic money? The OECD is doing much work in this area, including the complementary efforts to establish cryptography guidelines intended to balance the interests of privacy and the public interest. Again, I see this as a pathfinder issue which ultimately should find its place in the world trade contract administered by the WTO.

    In conclusion let me emphasize that the OECD will contribute in any way it can to ensuring that momentum remains in the global free-trade agenda within the WTO to be followed I hope, by a complementary investment agenda within the WTO. This is an area where much important work is already under way within the OECD in the negotiation of the Multilateral Investment Agreement.

    But let us not create unrealistic expectations nor be discouraged by temporary obstacles ... they ultimately will be overcome because the advantages of global free trade and investment will in time be seen in the interests of each economy of the global community. Patience, perseverance and understanding of the concerns of those who wish to move at a different pace than others is critical. What is important is that there be constant movement towards the ultimate goal. That will ensure that the story of the Age of Globalization will have a happy ending to which all of you will have contributed. It is a daunting challenge but it is an even greater opportunity which has fallen to this generation of world leaders at this moment in history.

    As I prepared these comments a passage from Shakespeare came to mind which offers wise counsel.

    "There is a tide in the affairs of men,

    Which, taken at the flood, leads on to fortune;

    Omitted, all the voyage of their life

    Is bound in shallows and in miseries."

    Ladies and gentlemen, the global tide of free trade is at the flood.