I want to thank
you for this opportunity to address such a distinguished audience - all the more so as
this year marks the fiftieth anniversary of the multilateral trading system.
The creation of the
system owed much to British leadership and vision, and it is one of history's happier
coincidences that its golden anniversary should occur while the United Kingdom holds
the Presidency of the European Union. I very much hope the United Kingdom will play a
leading r˘le in the anniversary event on 20 May, as I know it will in the future
development of the WTO.
It would be
difficult to exaggerate the contribution of the multilateral system to the remarkable
changes we have witnessed in the world economy over the last several decades. The walls
between East and West have collapsed, in part because the Soviet system could not meet the
challenges posed by technological change and global integration. Divisions between North
and South have also blurred, as developing countries have increasingly abandoned import
substitution and protectionism in favour of freer markets and open trade. When China and
Russia accede to the World Trade Organization - and I have every expectation they will -
all major economies will be joined together in a single market system. If the challenge of
the Cold War era was to manage a world divided, our challenge in the post-Cold War era
will be to manage a world of deepening interdependence.
current financial crisis is, in many ways, the first major test of this new interdependent
economy. The immediate focus is on the financial stability of a number of Asian economies
- and recent efforts by the IMF, the World Bank, and national governments to restore
financial confidence to the region. But it is clear by now that the impact of this crisis
reaches beyond the countries initially involved - and indeed beyond Asia. A broader
challenge lies with the global system itself - the pressing need to resist protectionist
pressures and to keep markets open, without which no lasting confidence or stability can
situation is serious enough. But a greater danger is that we will make policy errors in
response to these events which could prolong the crisis and even extend the difficulties.
Nowhere is this risk more real than in the area of international trade. Turning inward in
the 1930s in response to financial crisis - as epitomized by the infamous Smoot-Hawley Act
- helped drive the world into economic depression and ultimately world war. If this
experience has taught us nothing else it is that while financial crises can rise and fall
quickly, trade crises can have a more lasting and damaging impact. What must be avoided
above all is a vicious circle of economic reactions and counteractions leading to wider
and deeper distress.
This is not a
hypothetical concern. Exports from South East Asia can be expected to rise, perhaps
significantly - both because of currency devaluations and the need to finance external
debts. Not only will this result in increased import pressure on sensitive sectors and
industries in the advanced economies. It will also pose a competitive challenge for other
developing economies exporting similar products, especially those other regional economies
which have not devalued.
At the same
time, the imports of East Asian countries are projected to shrink overall because of
slowing growth and declining purchasing power - though possibly not as much might be
expected, as these countries are also highly dependent on intermediary inputs and raw
materials from abroad. Any such decline will particularly affect the East Asian economies
themselves because over half of their exports are within in the region. The effects will
also be felt to some degree in the rest of the world - especially in the U.S., the E.U.
and Japan. As export markets in East Asia shrink, growth in supplying countries will
clearly be affected - though it is too early to predict with confidence what these effects
of global institutions has a key role to play in keeping markets open and preventing
global contagion. The immediate task is to restore confidence in the financial systems of
South East Asia - and here the importance of supporting the IMF's efforts to preserve
macroeconomic stability and to encourage financial sector reform cannot be exaggerated.
But we must be aware that one important consequence of the current crisis will be in the
trade arena. And part of the solution to the present problems must be a trade solution;
our situation is very different from the nineteen-thirties when the absence of
multilateral trade rules and commitments contributed to the downward spiral from financial
crisis to trade crisis to generalized economic chaos.
most obviously, the WTO provides a powerful bulwark against protectionist pressures. The
strengthened rules and dispute settlement of the WTO system make it extremely difficult
and costly for countries to ignore their bound commitments and obligations. A more real
concern is what might be termed creeping protectionism - any unwarranted or excessive use
of safeguards, antidumping actions or other discretionary policy tools to block out
international competition. In the present situation there is a clear need to monitor and
guard against such trends.
WTO can help to advance and anchor necessary economic reforms in the affected economies.
An obvious and timely example is the Financial Services Agreement reached last December,
at the height of South East Asia's crisis. One of the main causes of the South-East Asian
crisis is financial sector weakness. Strengthening prudential regulation and supervision
of the financial sector and developing open and transparent financial services sectors are
seen as key for rebuilding confidence in the region. Here liberalization has a valuable
role to play. If closed financial systems are inherently opaque and unresponsive, open
financial systems have a built-in incentive to be transparent and prudential - if only
because they are under the scrutiny of depositors and shareholders. The Financial Services
Agreement offers a way for these countries to reinforce and lock-in financial
restructuring - but without compromising their ability to pursue sound macroeconomic and
priority is to continue the momentum towards universal membership of the system. And this
means completing the 32 accession negotiations currently underway without compromising the
system's basic rules, rights and obligations. The successful accession of countries such
as China and Russia would obviously enhance the WTO's ability to provide a stable
foundation for the global trading system - particularly during times of economic stress.
At the same time, WTO membership would help these countries secure some of their key
economic relationships in a rule-based system.
are approaching the WTO's Ministerial Conference and the 50th anniversary of the system -
an occasion which provides a valuable opportunity to lift our sights to the challenges of
the next fifty years. In addition to the negotiations already scheduled for the new
century in agriculture, services and aspects of intellectual property, some are already
looking to widen the scope of future talks. It could be argued that the current
difficulties in Asia provide a further rationale for injecting new momentum and confidence
into the international system by setting our sights on a new trade agenda - and the
prospects it can open up for reviving and sustaining economic growth.
All of this
underscores a broader and more fundamental role of the WTO - providing a foundation of
rules and structures to help manage our growing economic interdependence. Modern economies
work on a vast and complex network of interrelationships which in turn depend on an
infrastructure of rules, laws, and institutions to underpin and secure these
relationships. More and more, this fragile web is expanding across national frontiers -
through flows of trade, capital, technology, information, ideas, and people. More and
more, global stability will rest on the ease and security with which economic activity can
move across borders to the benefit of industrial and developing economies alike.
has described the multilateral trading system as a "constitution" for the world
economy. This constitution has always been expected to play two roles: To help move the
international economy consistently in the direction of freer trade. And to provide a
coherent and non-discriminatory set of rules, resting on the twin pillars of National
Treatment and MFN, to manage the interaction among distinct and often widely different
national economies and systems. It is this astute blend of principle and pragmatism that
gives the multilateral trading system its strength. These strengths will be even more
relevant to the emerging global age - as technology and economics continue to knit
together very different countries, with very different background, at very different
levels of development.
governance challenge of our new global age is perhaps this: whereas governments answer
mainly to national constituencies, increasingly the economic system must answer to global
needs. The experience of the WTO, and the way it works through binding commitments reached
by consensus, gives us some guidance as to how these systemic gaps might be bridged.
Building upon this experience - and expanding it to other policy areas which now transcend
borders - will of course not be easy. Yet if Asia's current turmoil is any indication of
the risks of inaction, then the challenge of building a more stable international system
is clearly well worth the effort.
problems notwithstanding, I remain optimistic about the future of the global economy. I am
convinced that there is a growing understanding of the importance of openness - especially
in this new knowledge-driven economy - and a strengthening consensus that open trade
offers the best available path to growth and modernization. Events in South East Asia are
of such immediate concern to the world precisely because of the remarkable economic
development of the region, a path on which other regions - including Africa -
are now launched. While no one should underestimate the challenges posed by globalization,
at the same time no one has yet found a rational alternative.
I believe we
are also coming to recognize the realities of interdependence. In 1950, only 7 per cent of
world output was trade related; today the figure is 23 per cent, and the OECD predicts it
could approach 50 per cent by 2020. And these figures cannot capture what is perhaps the
most powerful force for integration in the new world economy - the borderless flows of
knowledge, information and ideas. This level of global interdependence does not make
protectionism impossible. But it has transformed the world economy in ways that makes
turning inwards - retreating behind protective walls - infinitely more difficult and
immeasurably more costly.
have taken important steps towards building a post-Cold War international system, where
the WTO is a key element. Over the past twelve months alone, we have launched an important
initiative to integrate the Least-Developed Countries into the mainstream of the world
trading system. We have reached an historic pact on telecommunications representing 95 per
cent of the global market. We have agreed to remove tariffs on information technology
products, one of the fastest growing sectors of the world economy. And we have reached an
equally sweeping agreement to liberalize global financial services, bringing trade in
banking, insurance, securities, and financial information in the realm of multilateral
rules for the first time. Taken together, these achievements amount to the equivalent of a
major trade Round. In the face of economic turbulence and uncertainty, our members have
shown the vision and courage to pursue policies of liberalization - policies which are
essential to global stability, growth and development.
I began by
observing that this year marks the 50th anniversary of the trading system. I hope that
this will be an occasion for political leaders to come to Geneva and reflect together not
only on the system's achievements but also on its future directions and its place in the
international architecture. Looking at the multilateral trading system at fifty, it is
clear is that we have not reached the end of a process - rather we stand at the very
beginning of a whole new phase of internationalism. We are all of us living through a time
of deep and rapid transition towards a very different world. No doubt there will continue
to be periods of instability and turmoil. No doubt we will continue to feel uncertainty
and apprehension - in both advanced and developing countries alike.
This year, at
the fiftieth anniversary celebration, we have an occasion to send a political message
about the reality of global transition, but also about the unprecedented opportunities
this offers. An opportunity to reaffirm our political will to move towards a better system
of global governance - for developed and developing countries alike. And an opportunity to
be as creative in shaping the institutions of an increasingly borderless economy as our
forefathers were a half a century ago in building the postwar international system. The
great promise of the new global age demands nothing less.