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WTO NEWS: SPEECHES — DG PASCAL
LAMY

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> Pascal Lamy’s
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Ladies and Gentlemen,

It is a pleasure for me to be here with you today — the actual
“traders” for whom we craft world trade rules.  With the increasing
globalization of many of your industries, your need for “global rules” and
an effective “global rules-based system” also rises.  This is what
the World Trade Organization can offer you.  It offers the
rules-based anchor that makes your trade relations more open, transparent
and predictable.  It also offers an organized and orderly process for
the settlement of commercial disputes between Members, with an almost
unique compliance rate of over 90%.

The WTO has now been in existence for 15 years, but of course, the
multilateral trading system (since the days of the GATT) has been around
much longer.  That system, however, cannot be taken for
granted.  The WTO's stakeholders need to guide and stand-up for the
system that has served them so well.  They need to keep investing in
the system. Suffice it to see how the trading system, through its
monitoring and surveillance capability, has succeeded in stemming the tide
of trade protectionism during the economic crisis we have just been
through.  With our regular reporting on “any step backwards” that was
taken by a WTO member, a sort of “name and shame” system if you will, the
WTO succeeded in preventing a return to the 1930's like Smoot-Hawley
Tariff Acts!

But for the multilateral trading system to continue to serve us well,
and to respond to your new and changing needs, your involvement and
guidance of that system is crucial.  In other words, it no longer
suffices that you trade while relying on governments to craft the
regulatory framework for you in the WTO through which your trade relations
would take place. You must provide the “evidence,” through your trade
experience, of what is actually happening on the ground, and must guide us
in how to make things better.

Today's trade relations do not look anything like yesterday's —
something you know much better than I do!  In fact, international
trade has been growing much faster over time than production, steadily
increasing inter-dependency among nations.

Since 1950, world trade has grown more than twenty-seven fold in volume
terms.  This expansion has been three times faster than growth in
world GDP, which has expanded only eight-fold over that same period.
As more and more economic activity has become trade-dependent across the
globe, the quality of international trade cooperation has had to
correspondingly rise.  The WTO is the venue for this trade
“co-operation” (quote, unquote).

Patterns of trade have also changed profoundly over the last decade,
driven partly by market opening, but mainly by rapid progress in the
development of transport, communications and information technologies.
Developing countries, especially in Asia, have emerged as major players as
they harness globalization to “catch-up” to the industrialized West.
The share of developing countries in world trade has grown from a third to
over half in just fifteen years.  Furthermore, the increasing
importance of trade between developing countries is striking. In
1990, less than a third of developing-country trade was with other
developing countries; today over half of their trade is South-South.

Another significant change in the international trade landscape is the
spread of globally-integrated production chains — in effect, “global
factories” — as firms locate various stages of the production process in
the most cost-efficient markets. An iPod, for example, incorporates
Japanese microchips, US design, Korean flat-screens and Chinese assembly.
Hence, what we call “Made in China” is indeed “Assembled in China.” In
fact, according to American researchers, less than 10 per cent of value
added in an iPod actually comes from China.

Industry increasingly locates the different stages of its activities
from creation, to production, marketing and distribution in a way that
optimizes its value-addition chain.  This tends to suggest that the
“Made in a particular country” label on the back of a product should
really read:  “Made in the World”.  This new global reality
forces us to re-examine how we analyse and measure what we still call
“international trade”, as if nations were trading with one another.

It should also lead us to reconsider the very mentality with which we
approach trade negotiations.  When country A imposes high tariffs on
products from country B, it may in fact be imposing these tariffs on none
other than its very own producers who have located part of their
production in that country B.   What we need therefore are smart
and informed negotiations in the WTO; ones that mirror trade relations as
they truly exist today.

At present, international trade flows
are computed by attributing the full commercial value of a product to the
last country of origin.  This needs to change.  Recently, we
hosted a Global Forum on Trade Statistics in Geneva. The theme of the
forum was “Measuring Global Trade: Do we have the right numbers?” The
answers given by almost all participants were identical. No, we do not
have the right numbers on international trade today.  Or at least,
the numbers we have do not fully reflect the real picture of international
trade in a globalized world. According to researchers, one of the main
factors for this deficiency is the lack of sufficient firm-level data. I
believe there is a lot that we (you the industries, and us the WTO) can do
together on this front, to better associate business needs with
international trade rule-making. Let us know more about you so we can
better help you.  We need you to help boost our statistical database.
Let me here invite you to visit our website “Made in the World” and share
with us your contributions.

For the WTO rule-book to also serve you well, it must be a rule-book
that is kept regularly up-to-date.  What do I mean by that?  If
today's barriers to trade lie mostly in non-tariff barriers, if issues
like climate change are creating completely new challenges for
international trade, if food security is now a central pre-occupation in
international agricultural trade, if the link between trade and investment
is an essential one, then the WTO rule-book must start responding to some
of these questions.

As you know, the world had embarked on a global project for the
strengthening of world trade rules, known as the Doha Round, back in
2001.  There are as many explanations of why the Doha Round was
started as there are trade negotiators!  All I can offer you,
therefore, is my own interpretation and reading of why that Round was
launched.  It was created to address some of the injustices that
existed in the world trade rule-book, such as letting the developed world
get away with exorbitantly high subsidies for its agricultural
products.  Subsidies that crowded out the developing world from
international markets.  It was started, in my view, to cement the
spirit of global co-operation on trade which emerged in 1995 with the
creation of the WTO.

Some of the issues contained in the Round are very classical trade
issues, tariffs and subsidies.  How to reduce tariffs, and how to cut
trade-distorting subsidies.  But some of the topics it contains were
also very innovative, and represented the entry of the multilateral
trading system into new and relatively uncharted territory.  For
example, the Doha Round represented the first time that an “environmental
negotiation” would take place under the roof of the multilateral trading
system.  In the Doha Round, members are looking at how to open
markets for environmentally-friendly products, like fuel cells and
catalytic converters.  They are also looking at how to reduce
environmentally-harmful fisheries subsidies that cause overfishing and
depletion of the world's fish stock.  They also look at how to
enhance the compatibility between WTO rules and environmental treaties.
They are looking to cut down red tape with a global deal on trade
facilitation.

Of course, there are many other “trade issues” that the Doha Round
could have had on its agenda, like the ones I mentioned earlier, and
issues such as investment and competition policy for instance.  But
for many, the WTO needed to finish what it started — i.e. the Doha Round —
before it could move forward.

Today the Doha Round is struggling, and I make no secret of this.
We are stuck over a political difference between some of our Members on
the level of ambition in the area of industrial tariffs, an area where our
Members have over 60 years of experience.

Notwithstanding the difficulties, a lot is already on the table. But
does the political will exist to conclude these negotiations? Currently,
that is an open question. It is an open question that I also very
deliberately put to you for your reflection, since business is part of the
engine of, not only of the negotiation, but also of the WTO.

Can the WTO climb higher mountains, address new and emerging trade
barriers, without accomplishing the 10 year negotiating project that it
set out to do?  Without addressing classical issues such as
industrial tariffs? How best can your interests be served through the WTO
in future — a question you need to reflect on.

These are all questions for the WTO Members. I am currently consulting
them.  What they have told me so far is that nobody wants the death
of the Doha Round. And while they all recognise the immense challenge of
concluding the Doha Round by the agreed date of end of 2011, at the same
time, they are all acutely aware of the need for the WTO to deliver on its
legislative function, by the time we gather for the 8th WTO Ministerial
Conference in December 2011.

Ladies and gentlemen, let me conclude by drawing your attention to the
Public Forum that the WTO will be holding this year.  This is the
WTO's annual rendez-vous with civil society and the business community, at
its premises in Geneva.  An occasion for brainstorming and for the
tabling of all sorts of creative ideas.  This year's forum takes
place from 19-21 September and is entitled: Seeking Answers to Global
Trade Challenges.  May I ask you to bring some answers to the
questions I have posed to you at this Forum, and give us an opportunity to
discuss your views?

I look forward to hearing your views and to work together with you to
ensure the WTO remains strong and vibrant.

I thank you for your attention.

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