The WTO and LDCs: delivering a better future through trade
Third United Nations conference on the Least Developed Countries (LDC-III)
Communiqués de presse
Allocutions: Mike Moore
Allocutions: Renato Ruggiero 1995-1999
When I became Director-General of the World Trade Organization in September 1999, I pledged that helping developing countries, and in particular the world's poorest countries, would be a priority. I reaffirm that commitment today on behalf of the WTO. As part of that commitment, I am proud to announce a set of ‘deliverables’ to help least developed countries (LDCs) better integrate into the multilateral trading system and world economy. These are ‘deliverables’and in most cases they are also ‘delivered’; done, not promised sometime in the future.
This year is a crucial year for the multilateral trading system, and so also for our efforts to assist LDCs. In November, Qatar will host the Fourth WTO Ministerial Conference, in Doha. My aim there is to launch a new round of multilateral trade negotiations. Four out of five WTO Members are developing countries and they are urging us to address the missing development dimensions of the trading system. They will make sure any new round launched in Doha is a development round. We need your support now and throughout the year to ensure the Doha Ministerial is successful and a new round with development at its core is launched. The WTO is not the GATT. No new round can start, and more importantly, no new round can conclude without LDC and developing country interests being addressed and resolved. To secure LDC support, and maintain LDC support, progress must be real.
History shows us the importance of trade and the importance of the multilateral trading system. The trading system has probably done more to boost living standards and lift people out of poverty than any government intervention. The 17-fold rise in world trade since 1950 has gone hand-in-hand with a 6-fold rise in world output. This has benefited both developed and developing countries: in both, living standards have risen three-fold; life expectancy in developing countries has risen from 41 to 62 years, infant mortality has more than halved, and the adult literacy rate is up from 40% to 70%.
History also shows us that those countries that have done well over the past half-century, such as in South East Asia and some Latin American countries, have all been trade-oriented. A recent WTO study on trade and poverty has confirmed that those poor countries that are catching up with rich ones are those that are open to trade. The more open they are, the faster they are converging. Other studies support our findings concerning trade openness. Jeffrey Sachs and Andrew Warner of Harvard University have found that developing countries with open economies grew over six times faster in the 1970s and 1980s than those with closed economies. David Dollar and Aart Kray of the World Bank, using data from 80 countries over four decades, have confirmed that openness boosts economic growth and the incomes of the poor rise in line with overall growth. The message is clear: freeing trade boosts economic growth, and so helps to alleviate poverty.
Developing-country governments increasingly recognize this. Their economic policies have changed dramatically since the mid-1980s. The name of the game in trade policy has been liberalization. Countries have realized that trade and investment, not aid, are the engines of economic growth. Average tariffs have been halved, and many non-tariff barriers swept away. Many of those reforms were bound, partially or fully, in the Uruguay Round. Although the degree of trade protection is still high in many developing countries, gross distortions in trade regimes have been greatly reduced.
In many developing countries, pro-market reforms have encouraged faster growth, diversification of exports, and more effective participation in the multilateral trading system. Excluding countries at war or in transition from communism, export growth in developing countries has risen from 4.3% a year in the 1980s to 6.4% in the 1990s. Growth in GDP per person has risen from 0.4% a year to 1.5% a year.
Even LDCs are doing a bit better, though not as well as other developing countries. Whereas GDP per person in these countries fell by 0.6% a year in the 1980s, it rose by 0.8% a year in the 1990s. Clearly, though, we need to do better.
Trade liberalization is essential for growth and development. But it is not enough. A new WTO round will do little for a nation that is torn apart by war or that spends all its export revenues on weapons. Nor will it be much use if good governance is missing or crippling debt overhangs. Nor will a round help those poor countries who have no domestic capacity or infrastructure to take advantage of new market access opportunities.
Trade liberalization must therefore go hand-in-hand with other reforms, including domestic reforms. After all, when people grow richer by exchanging goods with each other, they are less likely to fight each other or to jeopardize their trade by causing havoc. When governments adhere to WTO rules that prescribe transparency and predictability, there is less scope for corruption. That is why issues such as government procurement and trade facilitation eventually need to be considered. Market access is of little use if trucks are stopped for 3 days at the border or ships for a month in port, or if the infrastructure is not there.
The first responsibility for solving the problems of LDCs rests with LDCs themselves. But the international community has an important role to play and international institutions such as the WTO can also make significant contributions.
I am pleased to announce today that the WTO is ‘delivering’in a number of areas.
First, as a result of concerted efforts by our membership, there have been significant improvements in market access opportunities for LDCs. These improvements are outlined in the documents we have provided for this Conference. They are also detailed in a new WTO Secretariat study on market access that has just been released. Let me mention one or two highlights. Twenty nine WTO Member governments have pledged market access improvements. Two countries, Norway and New Zealand, have actually agreed to drop all barriers to LDC exports. They join a number of other countries who already provide open markets. The average non-weighted tariff applied by major industrial countries to LDCs exports has fallen from 10.6 percent in 1997 to 6.9 percent today. In the last 12 months, Canada, the United States, the EU and Japan have all taken significant actions to address access for LDCs.
Is it enough? It is never enough. But the improvements we have achieved demonstrate that WTO members recognize the needs of the weakest and most vulnerable members of the multilateral trading system. They also demonstrate that we are prepared to work to help integrate LDCs into the world economy.
Let me add that with every Minister and leader I meet, I argue the case for market access for LDCs. I will continue to do this and WTO members will continue to look to make further improvements as best they can. In the long run, however, the big benefits and advantages for LDCs will be achieved within the overall context of a wider negotiation, a new round.
LDCs need increased, focused and sustained technical assistance and capacity building to help them take advantage of existing and potential market opportunities. This brings me to our second ‘deliverable’. On behalf of a number of UN and international agencies, I can announce that we have successfully re-designed the Integrated Framework for Trade-Related Technical Assistance. The re-designed Integrated Framework will help LDCs mainstream trade into their national development plans and strategies for poverty reduction. It will help ensure trade, as an engine for growth, is central to development plans. It will also ensure that trade-related technical assistance and capacity building is delivered within a coherent policy framework rather than on a stand-alone basis.
The re-designed Integrated Framework will work. A pilot scheme has already been established under the Framework and we are starting to implement it. We have set up a Trust Fund for the Integrated Framework and I want to thank those countries that together have already contributed $4.5 million to the fund. I encourage all donor countries to contribute. I also want to thank the agencies involved — IMF, ITC, UNCTAD, UNDP, World Bank and WTO — for our joint efforts to bring this concept from its hesitant origins to a point where it could become a practical, project-driven example of intra-international cooperation, putting into effect the calls for coherence between agencies by Ministers and Leaders.
Our third, and related, ‘deliverable’ is the outcome of the first-ever joint seminar of the six core agencies of the Integrated Framework on “Mainstreaming Trade Into Development Plans” held in January. It demonstrated the rationale and techniques for mainstreaming trade into LDCs' development plans and poverty reduction strategy papers and showed how the re-designed Integrated Framework can operate as a mechanism for poverty reduction and delivery of trade-related technical assistance.
Our fourth ‘deliverable’ is a renewed commitment to give as much assistance as possible to those LDCs in the process of joining the WTO. LDCs acceding to our organization have to learn and understand how the WTO works. They need to draft domestic laws that comply with WTO rules. They need to establish mechanisms for enforcing those rules. And they need to negotiate with existing members suitable conditions of entry to the WTO. It is a tall order. But as the long queue of LDCs in the process of joining shows, LDCs recognise that it is worth the effort.
We are making some progress. But I cannot report enough progress. LDCs need more technical assistance in this area. And WTO members need to be more flexible in their negotiations with acceding LDCs. I have taken a personal interest in this and have raised it with Members and Ministers. I will continue to do so.
Our fifth ‘deliverable’ is the host of initiatives we have taken to help LDCs participate more fully at the WTO. Let me highlight a number of these:
have launched activities for non-resident Members and Observers to
ensure that those countries not represented in Geneva can still
follow the daily business of the WTO and still be an integral part
of our processes.
have instituted 'Geneva Week'; this is now an annual event
bringing together senior officials from Capitals and Europe-based
missions – not only of LDCs but also of other small economies -
to learn and exchange views concerning critical areas of the WTO
work. The third Geneva Week will take place in September and will
help delegations prepare for the Ministerial Conference in Doha.
have improved the WTO's Trade Policy Review Mechanism; as well as
shedding light on a country's trade rules, it now helps trade
policy capacity-building and the mainstreaming of trade priorities
into national development plans and poverty reduction strategies.
have expanded our WTO training and policy courses.
have set up WTO Reference Centres connecting LDCs' capitals to WTO
sources of information through the Internet.
- We have set up a new programme to fund interns within country missions in Geneva.
Our sixth and final 'deliverable' relates to food safety and quality standards and technical regulations. Compliance with WTO rules in these areas is very important for LDC trade. WTO agreements limit importing countries' scope to impose arbitrary requirements on LDCs' exports, and encourage the use of internationally developed standards. The WTO provides a forum where LDCs can and do raise particular problems, challenge measures imposed on their exports, and identify specific technical assistance needs.
The WTO's General Council mandated me to better co-ordinate our technical assistance activities with international standard-setting bodies, in order to improve LDCs' capacity to make full use of international standards. I have initiated high level discussions with the secretariats of relevant organisations. I shall continue to work in this area. The WTO welcomes the FAO proposal for the establishment of a food safety and quality facility for LDCs. This is an instance, where each agency, operating within its institutional mandate, can help achieve the policy aims of members of other multilateral agencies.
The WTO is not the only international agency working to assist LDCs in the trade area. For example, WIPO is doing excellent technical assistance work in terms of intellectual property issues. I want to pay tribute also to Denis Bélisle and the splendid work of the International Trade Centre. The Centre is 'hands-on' and practical in its delivery of services to Members. The Centre is also an example of effective inter-agency cooperation because it is the child of a union between UNCTAD and the WTO. I am proud that the WTO provides around USD 8 million per annum to the Centre. Mention should be made of JITAP, another cooperative targeted project between WTO and UNCTAD that has helped people advance their capacity and trading interests.
The ‘deliverables’ I have mentioned are a start. But they are not enough, and they are piecemeal. In order to do better, we need to launch a new WTO round this year. I know that many developing countries have argued that we cannot launch a new round until the perceived injustices of past rounds have been dealt with. I understand their concerns and we are working hard on implementation-related and other issues in Geneva. But dwelling on the perceived injustices of the past does nothing to prevent even greater injustices in future. Many developing country governments are coming round to that view. They increasingly say that the greatest threat to their economies is not globalisation, but marginalization. A new round is the surest way to prevent the further marginalization of LDCs from the world economy and to deal with the problems that they may have with existing WTO agreements and the way the WTO is run.
History is a grim master. Colonial oppression gave way as freedom marched forward. Then, so many were cursed with that seductive phantom of hope, Marxist economics. That hoax and tragedy was followed by another great tragedy, the cold war. The cold war gave leaders grim leverage – that leverage is gone. First there was no shortage of donors, then debts mounted. Alas, some in Capitals no longer care. But poor people in poor and developing countries have a new form of leverage in a new arena, the WTO. Ours is an Organization where Members have equal powers because we operate on a basis of consensus. All Members sit at our Security Council and all have the power of veto. I urge LDCs and developing countries to use that power not to stop a negotiation, but to start one. As I said, unless LDCs and developing countries have confidence that your issues are being addressed in meaningful way, no new round will conclude.
The economic case for a new WTO round is compelling. Cutting barriers to trade in agriculture, manufacturing and services by a third would boost the world economy by $613 billion, according to one study from the University of Michigan. That is equivalent to adding an economy the size of Canada to the world economy. Doing away with all trade barriers would boost the world economy by nearly $1.9 trillion: the equivalent of adding two more Chinas to the world economy.
Of course, these are only estimates. Reasonable people can quibble about the exact size of the gains from a new round. But the basic message from study after study is clear: a new round brings huge benefits to all parts of the globe. Let me add; by one estimate from the Tinbergen Institute, developing countries would gain $155 billion a year from further trade liberalization. That is over three times the $43 billion they get annually in overseas aid.
As storm clouds gather over the world economy, the prospect of launching a new round is a ray of sunlight for everyone, not least the world's poorest countries. Now is the time to move from words of support for a new round to making the compromises needed to launch one. Now is the time to question narrow, selfish interests in the interest of the overwhelming national good. Now is the time to look beyond yesterday's battles towards tomorrow's opportunities. The world economy needs the confidence a new WTO round will give.
If we are happy with the status quo, which is just yesterday's compromise, and comfortable with the injustices brought by these compromises, then let us continue to nibble at the edges of change. But if we want real change, then let us start a balanced, wider set of negotiations. Ministers must ask just one simple question: in your heart, do you think you can get more out of the present system, bit by bit, or, will more be delivered from a wider negotiation with a balanced agenda and with proper capacity building and technical assistance? There is only one answer.