7 March 2000
After Seattle The WTO and Developing Countries
Formal Evidence to the International Development Committee of the House of Commons and Remarks to the All Party Parliamentary Group on Overseas Development of the House of Commons
It is a great honour to have the opportunity to share my thoughts with such an informed and influential audience as this one on developing countries and the WTO.
There is no question that the relationship between trade and development is one of the central policy issues we face today. We live in a world where 50% of humanity lives on less than $2 a day. We live in a world characterised by massive inequality between nations. Two billion extra souls will share our crowded planet within the next 30 years. We will have to double food production within 20 years. We face a world of incredible opportunities and challenges. Trade and trade policy must play their role as part of a wider development scenario. And our efforts to push forward this agenda must be strengthened and coordinated at all levels; national, regional, and international.
I emphasise the need for increased cooperation because I feel that this is absolutely essential for us to move forward. This is no more the case than in our relations with national parliaments. The WTO can make a huge contribution to creating a more just, prosperous and equitable world but it is ultimately reliant on your participation. To survive and be effective, structures have to be underpinned by the support of the people. It seems at the moment that this is singularly lacking. As demonstrated by Seattle, Davos, and now at every international gathering, many people feel that decisions which are having a fundamental impact upon their lives are being devised behind closed doors. This is not in anyone's interests, least of all the interests of developing countries. If the WTO is to succeed, it must reinforce its democratic credentials. It must engage the confidence and support of civil society, it must respond to their needs and interests, and it must be answerable for the decisions that are made. As the key representatives of civil society, greater Parliamentary involvement in our work, beyond the important function of ratifying our Agreements, is therefore not only desirable, it is essential.
It is my personal policy goal that the WTO should be a more open and accountable institution. This requires initiatives from both our side and yours. I will be putting to our Governments, some practical ways in which we can achieve a closer, and more focused relationship with national parliaments. I would ask you to become more involved, to hold hearings, scrutinise where taxpayer's money is being spent to ensure that accurate information reaches your citizens about what we do and what we stand for. This is true not only of the WTO but other international agencies. The WTO is not waiting to be called to account, I welcome it, I'm seeking it, we want it. We are owned by Governments. In the end Governments are sustained by the people, by the people you represent as Parliamentarians.
I am working with representatives in Geneva in creative ways to advance this proposal. We will in a few days begin discussions of how we can be more transparent. Reports have been called for, we will do this without ever surrendering the principle of consensus and that we are a government to government institution.
International trade has a key role to play in development: the winners of today show this to be true. Those developing countries that have integrated themselves into the international trading system have reaped the rewards both in terms of export growth and increases in human welfare. Take, for example, Bangladesh. Ten years ago their exports of textiles and clothing amounted to $1m. Last year they were worth $3bn. In East Asia a rapid growth in exports and large flows of inward foreign direct investment have been paralleled by a fall in the number of people living on less than $1 a day from 418m in 1987 to 278m in 1998. This was notwithstanding the impact of the Asian financial crisis. We have seen the rates of mortality for children under five drop by more than half over the last fifty years. The number of people dying from hunger or hunger-related diseases every day has fallen from 35,000 ten years ago to 24,000 today. Every night almost 800 million people in the developing world go to sleep hungry. Today 10 per cent of children in developing countries die before the age of five. This is down from 28 per cent fifty years ago. But these figures are still abysmal. We must do better. Trade, of course, is hardly going to solve these massive challenges alone, but by raising living standards it certainly helps.
In the WTO, development-related issues are at the forefront of the new work programme which was endorsed by our General Council on 7 and 8 February. Let me say at the outset that this work is not an end in itself. It represents an essential set of first steps towards the goal of a more ambitious and wide-ranging trade negotiation round to which I remain firmly committed.
First of all there are the mandated negotiations in agriculture and services. These are of vital importance to the economic future of countries at all levels of development. In agriculture, improved market access and reduced competition from richer countries' subsidies are crucial for most developing countries, both to develop their present structure of trade and to diversify into products for new development.
Negotiations on services can also bring considerable gains for developing countries, both in allowing them to develop and diversify their exports, and also in injecting a dose of competition into their national markets. As I am sure you will agree, a competitive and healthy domestic services sector is vital for the economic performance of a country as a whole. Exports of manufactures rely on a vast range of service inputs, from distribution services to financial services. In the wake of the internet revolution, placing orders and sourcing products will increasingly take place on line. Developing countries, if they want to be players in the game must make haste in facilitating cheap access to efficient communications infrastructures. In one African country, the price internet service providers have to pay the telecom operator for leased lines is around $11,000 a month. This translates into an average cost to the user of $100 a month. This is prohibitively expensive for any market, and puts them at a massive competitive disadvantage when compared with developed countries. In the US and UK, for example, average user costs are around $20 a month and there is a growing trend towards a free service.
Secondly, we are working on a package of measures to assist least developed countries. LDCs account for less than half of one percent of world trade, and get less than 1 per cent of foreign direct investment. They are the most marginalized group of countries in world trade. They need both free access to markets both developed and among their other developing partners and, even more importantly, assistance to build up their institutional and human capacity, and their infrastructure, to produce and trade a diversified range of goods and services. It is in this area that we need to better coordinate our efforts with other institutions, such as the World Bank and UNCTAD, to provide the best possible service.
For developing countries in general we are also looking to improve and regularize the funding of the WTO's Technical Co-operation activities. I was shocked to discover that the WTO's core budget for technical assistance is only half a million dollars, although we receive additional funds from generous donors such as the UK. Nevertheless, last year we were only able to meet one-fifth of the requests made to us for technical assistance. We need a regular budget sufficient to enable us to plan two to three years ahead and respond to increasing demands for technical assistance programmes, not just individual projects. We are undertaking a major review of technical cooperation in its scope and quality this year and are fully accountable to Members for what we do. I am seeking an extra 10 million Swiss francs for the regular technical co-operation budget, and I hope that I will receive your support.
Thirdly, an issue that took a lot of time before Seattle was implementation of the WTO Agreements. Transition problems with some WTO Agreements are only the most immediate aspect of the whole complex of implementation-related issues facing developing countries. Among these is the fact that real resource costs are involved in establishing institutional and administrative machinery to implement some WTO Agreements. None of us can be in any doubt about how important these issues are if we are to build and strengthen a coherent, equitable and inclusive multilateral trading system. The WTO membership as a whole has shown a real willingness to work constructively together in order to resolve them.
We were close to reaching agreement on implementation in Seattle. We had on the table a set of detailed proposals combining immediate action with the establishment of a mechanism to review implementation issues. I see a collective willingness among WTO Members in Geneva to engage in a constructive, sensitive way in this area.
Lastly, Members, Ministers and the media have focused on the issue of the WTO internal procedures for consultation and decision-making. This became a high profile issue before and at Seattle, where a number of developing countries, especially smaller ones, felt excluded or marginalized. The culture is changing. Originally the GATT had less than 30 Members. Now there are usually more than 30 in the so-called Green Room. There is clearly a problem to be resolved here, although I should mention that many Members have cautioned against a simplistic or hasty approach. In particular, the consensus principle which is at the heart of the WTO system and which is a fundamental democratic guarantee is not negotiable. The membership has agreed that consultations should be held in which all would be able to express their views, and I have urged all Members who wish to do so to submit suggestions. We will approach transparency in a most transparent way. With such a diversity of situations and priorities among our Members, and 31 applicants representing 1.5 billion people looking to join us, it is absolutely vital that we ensure that the organisation is inclusive and responsive to the demands of our Members. We will do a thorough job. We can lift our play. We will.
In the few months since I became Director-General, I have made it a personal priority to include all our members. My first visits as Director-General were to meetings of the G77 and the OAU, and I have put special emphasis on bringing our non-resident Members those who do not have the resources to maintain a permanent mission in Geneva more fully into the WTO's work. In October 1999 we held the first Geneva week for non-resident Members, and this will be a regular event in future. Last week we held a meeting to see how we could improve our contacts with non-residents on a day-to-day basis and, as a first step, I have appointed a member of our staff as their point of contact.
I also feel that considerably more can be done to ensure better coordination between international donors and agencies in the provision of aid and advice. Although the Agreement establishing the World Trade Organisation provides for cooperation between the WTO, the IMF and the World Bank, there is much more we can do to ensure our work is mutually supportive. For least developed countries we also have the Integrated Framework for Trade-Related Technical Assistance, or in short the IF programme. But to be honest at present it's more like the "IF only" programme. This framework represents an opportunity to do something really valuable for, and together with, least-developed countries. Making it work better, in cooperation with UNCTAD and other organisations, is a major priority of mine this year.
I am also very much in agreement with Clare Short, who has spoken on a number of occasions about the need for developing countries to undertake domestic reform and restructuring. As she rightly points out, developing countries need inward foreign direct investment to develop their infrastructures, to create jobs and enhance their export performance. Over the eight year period from 1990 to 1998, flows of inward FDI to developing countries increased from US$20 billion to US$150 billion. Over half of this, however, has been concentrated in the hands of a few countries. Singapore, for example, receives more than the whole of Africa put together. Why? In order to attract foreign capital developing countries need to create attractive conditions for investors. Property rights need to be protected, sensible economic policy decisions need to be taken as do steps to combat corruption. We had a chance in Seattle to make constructive moves in these areas through proposed decisions on transparency and government procurement and trade facilitation. But this was not to be.
Trade on its own is not enough. It is not the answer to all of the troubles of the developing world. Everybody appreciates that developing countries have a number of particular problems that make progress extremely difficult. In many cases growth is inhibited by the burden of debt relief, shortages of water and food and lack of access to education and health care. Ninety-five per cent of HIV sufferers, for example, live in developing countries. In one country, expenditure on debt repayment is nine times higher than on health and 25 per cent of the people are HIV positive. But where trade crucially helps developing countries is that ultimately it liberates them. Sustained economic growth enables countries to afford to help themselves, to direct their own future, to educate their own citizens and to provide for those who fall through the net. It allows these countries to achieve independence through interdependence.
I am a firm believer in the importance of international structures. I am convinced that global problems require global solutions. If we want to tackle the inevitable tensions of greater integration between nations and if we are to ensure that benefits of globalisation are evenly distributed, frameworks for cooperation among states need to be maintained and strengthened. As representatives of a country which has been the driving force behind the creation of the international economic architecture, I know I can count on your continued support. I look forward to working more closely with you.