WTO Public Forum 2006
National Foreign Trade Council Session
Remarks of Mary A. Irace, NFTC Vice President
Thank you, John, for the introduction of our panel session and for agreeing to serve as moderator. I would also like to extend my thanks to the panelists for agreeing to participate in what I hope will be an interesting discussion of the topic we have selected today on what the WTO needs to deliver for its continued relevance and viability in the 21st century. With the current suspension in the Doha Round, this topic is both timely and important.
Before I begin my presentation, I would like to say a word or two about the National Foreign Trade Council (NFTC). The NFTC is a broad-based business non-governmental organization of 300 American companies. We were first established in 1914 and our primary mission is to advance policies that support and strengthen open and rules-based trade. Like other NGOs, I am passionate about my work, and in my case, I am particularly passionate about the positive role of open trade and investment as a key driver of economic growth and opportunity. Once in a while I get carried away when making a reservation on the telephone by asking where the person at the other end is based. If that person is from overseas, I encourage them to weigh in with their government in support of important trade negotiations like the Doha Round because their job is tied to services trade.
As a leading US business organization, the NFTC has engaged proactively and demonstrated consistent US business support for an ambitious outcome to the Doha Round negotiations. Like many other NGOs, we have issued a set of comprehensive position and research papers on the benefits and importance of a successful Round and have communicated those views to WTO member governments.
The topic of our session – how to ensure a viable and credible WTO for the 21st century – is in my view the primary challenge before WTO members and the Doha Round. There are two overriding reasons for this – the rapid and revolutionary changes in the global economy and the proliferation of bilateral and regional trade agreements.
From the perspective of the NFTC and its members, the Doha Round is an enormous opportunity for the WTO multilateral trading system to keep pace and play a positive role in the global economy in several ways. Three stand out: 1) boosting global economic growth and living standards worldwide by opening up and updating certain rules to govern trade multilaterally; 2) more fully integrating developing countries, especially lesser developing countries, in the global economy to advance sounder and more beneficial development; and 3) creating a stronger foundation overall for the global trading system based on non-discrimination and greater certainty, predictability, transparency and openness.
I’d like to turn briefly to the rapid economic changes underway, and then provide a few comments on the current state of the Doha Round, as well as share a few thoughts about the WTO post-Doha Round.
There are two striking characteristics about the global economy today, in addition to its fast pace. First is the fundamental transformation in the way in which companies, workers and economies operate. The second striking change is the exciting global rise of emerging market players.
In this era of globalization and fast technological change, successful enterprises today are those which are integrated on a global basis. This means that both goods and services are produced, sourced and managed on a global basis. A key factor in competitiveness today is less about producing products in one country or another, but more about how to make and deliver goods and services in a globally integrated way by effectively managing and establishing complex supplier networks from many different economies. This transformation of production of goods and services provides a great deal more opportunity for economies to compete and thrive in global marketplace. For example, as Tom Friedman highlighted in his book The World is Flat, a Dell computer is made in at least 12 countries and possibly as many as 20, including several developing countries.
This brings me to the second remarkable change related to globalization – namely the rise of emerging markets or rapidly developing economies. A recent report by the Boston Consulting Group highlights how wide and deep this other transformation is. Just the name of the report explains it all – “The New Global Challengers – How 100 Top Companies from Rapidly Developing Economies are Changing the World.” According to the report, these advanced developing country companies from 10 countries have significant global activity, account for $715 billion in annual revenue, $9 billion in R&D activity and are growing at an average rate of 24% per year, with solid prospects for further growth.
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The growing and leading role of advanced developing country economic players was the subject of two recent cover stories in Business Week and the Economist. Again the titles tell the story – “Emerging Giants” and “Surprise! The Power of the Emerging World – the New Titans.” The NFTC’s own research has documented the growing involvement of developing countries in the global economy. Our recent services report, for example, found that 50 developing countries export $1 billion in services each year and four developing countries are four of the top ten service exporters. The study also found that more open and transparent services trade help establish more competitive agricultural and goods sectors. For example, access to information on climate trends and the prices of inputs and crops via cost effective mobile telecommunications systems has greatly enhanced the performance of farmers even in poor and remote areas.
On balance, these dynamic changes in the global economy are very positive. Developed and developing countries as a whole are benefiting from the global economy and the GATT and its successor the WTO deserve a lot a credit for it. As a former Director General of WTO stated in a recent report on the WTO, the GATT/WTO system has provided an equality of opportunity through open, competitive and predictable markets.
The GATT/WTO has opened markets and has kept them open based on the wider interests of the global community and has helped prevent narrow and vested interests from putting barriers in place to the detriment of consumers, development and global prosperity. It has served as a vital foundation for peaceful economic engagement based on the principles of openness, transparency, and common, market-oriented rules. In so doing, it has been a key ingredient of economic development, especially in those countries which have fully participated in opening and reforming their own economies.
The WTO foundation however is in need of strengthening and modernization. Much remains to be done, which is why the Doha Round is so vital. Moreover, many trade barriers remain in place on agriculture, goods and services. In key respects, the round will determine if the GATT/WTO continues to serve as a leading force for trade liberalization. The NFTC believes that the future credibility of the WTO is at the heart of this negotiation and an ambitious outcome to the Doha Round has the potential to achieve deep and lasting positive results for all WTO members.
Absent a successful Doha Round, WTO members will be forced to move forward more aggressively with alternative approaches, especially regional and bilateral negotiations. Many NFTC member companies like these other approaches because they achieve much more liberalization and contain WTO-plus commitments. There are downsides, however, to a trading system that is increasingly based on a range of different bilateral and regional trade agreements, including confusing and cumbersome proliferation of rules and tariff schedules. Small and medium-sized companies and lesser developed economies would face the most difficulty in dealing with a trading system increasingly based on bilateral and regional agreements.
The NFTC believes all members have a stake in a big outcome. It will not only provide the broadest good for the broadest number of people, it will also be more politically acceptable in many countries. In the United States, for example, there continues to be strong resistance to opening up trade and absent a big outcome, those forces will win the debate. Trade continues to be unpopular with a large number of members in the US Congress.
The suspension in the Round was very disappointing. Time is short. As many of you probably know, US trade negotiating authority expires next year and I don’t believe it will be extended for the Doha Round next year unless there is a major breakthrough and clear path forward toward a substantial Doha outcome worth fighting for.
What is the path forward? My views can be summed up as follows:
First, the NFTC believes it is time for a new mindset which gets get back to the basic reasons for and purpose of belonging to the WTO, namely to advance greater market opening and improved trade governance as a way to raise living standards worldwide. Frankly, from afar, the debate seems to be more about the opposite, namely, how not to open markets through exceptions and loopholes.
The WTO is not a panacea to solving the world’s problems, but it can make a positive and meaningful contribution to development and reducing poverty, especially by supporting more open markets. Even least developed countries, which are not obligated to any opening in this round, should want to engage as much as possible because it is in their own self-interest. This negotiation is about win-win outcomes, not zero sum mercantilism. With the fuller participation of developing countries in Doha Round, increased South-South trade could be one of the biggest results of the Round.
Second, there is a need for new alliances and stronger leadership and political will.
The G-6, G-20 and G-33 should not be the only primary vehicles and voices.
The G-2 – the US and EU — must both lead in breaking the logjam on agriculture. It is worth noting, however, that agriculture is less than 9% of world trade, and services and industrial goods are other core issues in this negotiation and deserve their due recognition.
Just as important is the role of emerging economic leaders, which have a critical stake in a healthy and vibrant WTO multilateral trading system, including China – the third largest trading nation today. If ever there was a time to show visible and clear leadership for a substantial market opening outcome in which they are full participants, it is now. For example, on NAMA, key developing countries should be prepared to state publicly that they will support an ambitious coefficient of 15%. Such a step would be a major catalyst and breakthrough.
Greater recognition also needs to be given to the specific pro-development elements in the pending Doha package, such as Aid for Trade, duty-free, quota-free treatment for least developed countries, and much more effective coherence between the WTO and developmental institutions, all of which may be lost if the Doha Round fails to conclude successfully.
I remain optimistic that the Doha Round will be restarted because the costs of failure are high and the benefits from success are widespread.
Assuming the Doha Round is concluded successfully, the WTO should not rest on its laurels. There are many important issues to address that are not on table now. Moreover, there will no doubt be plenty more room for deeper liberalization post-Doha. The WTO should move forward in a timely manner on a new agenda post-Doha. The trading system needs to keep pace with the dramatic changes in the global economy and I think the days are over when WTO members wait 10 or so years before launching major new multilateral negotiations.
At the very least, there should be a built-in agenda after the Doha Round. Part of this agenda should focus on implementation, particularly on the Aid for Trade package to ensure lesser developing countries have the tools and assistance necessary to secure the benefits of the WTO and new WTO commitments. The NFTC would also strongly support a “continuation clause” for negotiating the eventual elimination of tariffs, which are a tax on consumers and development, and complete the job begun on tariffs when the GATT was first created in 1947.
Other issues that should be high on the agenda going forward include the growing use of non-tariff barriers, particularly in the regulatory arena. There also will be a need for deeper and continued liberalization of agriculture and services post-Doha.
These are just a few of the issues that the WTO should take as soon as the Doha Round is concluded.
I will conclude here. I look forward to the other panelists’ remarks.