BICYCLE OF TRADE LIBERALIZATION HAS STOPPED, PANELLISTS TELLS ECONOMIC AND SOCIAL COUNCIL

7 July 1998

Press Release
ECOSOC/5765

BICYCLE OF TRADE LIBERALIZATION HAS STOPPED, PANELLISTS TELLS ECONOMIC AND SOCIAL COUNCIL

19980707 Council Continues 1998 Substantive Session Focusing On Developments in Market Access since Uruguay Round of GATT

There had been no forward movement in the process of trade liberalization since the close of the Uruguay Round of the General Agreement on Tariffs and Trade (GATT), the Director of the Institute for International Economics, Fred Bergsten, told the Economic and Social Council this afternoon during a panel discussion on market access prospective beyond the Uruguay Round.

Noting that "the bicycle of liberalization had momentarily stopped", Mr. Bergsten called for the initiation of a new process to prevent backsliding and the re-emergence of protectionism.

Panel participant J. Bhagwati, Professor of Economics at Columbia University, said while the international trading system had lowered trade barriers, tariffs could still be raised through other measures, including anti-dumping stipulations. The forward movement of liberalization would face real problems, he said, while questioning whether all countries were ready to take concrete steps beyond the commitments of the Uruguay Round.

The Secretary-General of the International Chamber of Commerce (ICC), M. Livanos Cattaui, said companies operating in the least developed countries faced barriers to market access, including export quotas, sanitary regulations and technical barriers. She called for the development of partnerships between governments and the private sector to address such challenges.

Deputy Secretary-General Louise Fréchette, panel moderator, said that despite the benefits of globalization and liberalization, the question of how to move ahead remained. The future of multilateralism was the core issue which would guide the evolution of international cooperation.

Also this afternoon, the Council continued its ministerial-level debate on market access developments since the Uruguay Round. Participating in that debate were representatives of Gabon, Mozambique, Romania, Russian Federation, Colombia, Croatia, Norway, Canada, Switzerland, Pakistan, Belarus, El Salvador and Senegal.

The Council will meet again on Wednesday, 8 July, at 10 a.m. to continue its ministerial debate.

Council Work Programme

The Economic and Social Council met this afternoon to hold a panel discussion on "Market access: prospectives beyond the Uruguay Round". The panel was moderated by Deputy Secretary-General Louise Fréchette and included the following panellists: Fred Bergsten, Director of the Institute for International Economics; J. Bhagwati, Professor, Columbia University; and M. Livanos Cattaui, Secretary-General, International Chamber of Commerce.

Following the panel discussion, the Council was scheduled to continue and conclude a ministerial-level debate on market access. During the debate, the Council would consider developments since the conclusion of the Uruguay Round of the General Agreement on Tariffs and Trade (GATT) within the context of globalization and liberalization. (For further background, see Press Release ECOSOC/5764, issued on 7 July.)

Panel Discussion

Deputy Secretary-General LOUISE FRÉCHETTE, opening the panel discussion on market access, said the future of multilateralism was the core issue which would guide the evolution of international cooperation. Despite the benefits of globalization and liberalization, the questions of how to move ahead remained, including: what was the next frontier; what was the new direction for trade liberalization; and how would the international community deal with the obvious concerns of developed and developing countries regarding the process of globalization. Other outstanding questions included the global impact of instability in certain markets, and how the international community could ensure that developing countries gained access to the unfolding market.

FRED BERGSTEN, Director of the Institute for International Economics, commenting on the evolution of the world trading system since the Uruguay Round, said that multilateral trade liberalization had continued. That process also was resisting pressures to backslide, unlike the backward movement seen in the process initiated at the Kennedy and Tokyo rounds of GATT. Since the close of the Uruguay Round, however, the bicycle of liberalization had momentarily stopped. A new process must be initiated to avoid backsliding and the re-emergence of protectionism. Any renewed closure trading system would adversely affect developing countries.

He said backlash against globalism was widespread and even prevalent in countries like the United States, the country with the lowest unemployment, the lowest inflation and good economic growth. United States policy had been stalemated since the Uruguay Round, and that backlash against globalism was holding up critical funds for the International Monetary Fund (IMF), and non- payment of United Nations dues. Studies had shown that the negative effects of globalism on the American economy were modest. A new global initiative that would offer additional benefits was essential to counter the backlash

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which could also be witnessed in the countries of the European Union and in Asia.

The backlash against globalism could also result in closed markets for some exports, he continued. One of the lessons that had emerged from the first 50 years of the World Trade Organization (WTO) and from GATT was that it was essential to maintain the forward momentum of liberalization. The second lesson was that large initiatives did much better than small initiatives, as they caught the imagination of domestic leaders and galvanized domestic political support for liberalization policies.

J. BHAGWATI, Professor of Economics at Columbia University, said GATT and the WTO were able to mend the effects of the Asian crisis where they had occurred and avoid outbreaks of protectionism. That international system not only lowered trade barriers, it also ensured that they could not be raised. Yet, tariffs could still be raised through other measures and standards, such as anti-dumping stipulations.

However, there were signs of problems regarding forward movement of the liberalization process, he said. He questioned whether all countries were ready to take concrete steps beyond Uruguay Round commitments. He said he was sceptical about the ability of United States Administration to move in that direction, noting a lack of leadership.

United States President Bill Clinton must contend with the widespread fear of globalization within his country, he said. Trade between developed and developing countries actually helped the poor workers. The political situation in the United States and resistance of workers' unions to trade with poor countries had created problems. There was also fear that trade would hurt the poor in the United States.

M. LIVANOS CATTAUI, Secretary-General of the International Chamber of Commerce (ICC), said she would address the experience of companies on the ground in the least developed countries. Before benefits were derived from market liberalization in those countries, companies must face serious structural challenges. Those challenges included: a stable political system; a sufficient comprehensive legal framework; strong macroeconomic policies; a dynamic market economy; and sturdy social infrastructure.

In a survey, ICC members continued to say that despite gains of Uruguay Round they were faced with concrete barriers to market access, she said. Those barriers prevented business from expanding and growing. A majority of members pointed to export quotas and other restrictive, quantitative measures, many of which applied to agricultural goods, textiles and footwear. Sanitary regulations, significant in agricultural markets, had restricted a company's ability to take advantage of markets. Technical barriers to trade involved compliance with national technical standards, including packaging and

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certification standards. Other members expressed concern over anti-dumping measures by developed countries and other developing countries.

There was a continued need for the WTO's to address tariff liberalization, including reducing tariff peaks and eliminating of other tariffs, she said. The ICC was also concerned about the future reform of agricultural policies, which was necessary for improved market access. There also should be a common approach in investment issues. Partnerships between governments and the private sector were needed to address the challenges highlighted by the ICC members.

She said anything that was done that put further constraints on trade was a cause of concern. Regarding the integration of the private sector into the world trade scenario, it had to be remembered that most corporate codes of conduct were business driven. She, however, welcomed more cooperation between the International Labour Organization (ILO) and the private sector to find solutions.

Mr. BHAGWATI said advancing free trade and social agendas were both valuable. However, attempting to advance both simultaneously would create obstacles. He expressed concern over social agendas being undermined.

Mr. BERGSTEN said it was necessary for developing countries to play a role in the further development of the trading system. It was also important to have a new round of negotiations to deal with the trade barriers that were subtle, underlying and still in existence.

Ministerial Debate on Market Access

ALFRED MABIKA, of the Ministry of the Environment, Planning and Tourism of Gabon, said market access related to a country's capacity to open outside markets and to open the outside to its own market. In recent years, Gabon had not changed its basic trade structure, but it had been involved in a series of reforms to diversity its economic system in terms of products, partners and markets. Gabon had consistently adhered to principles of international trade, including the WTO and regional agreements.

Since no country could ensure an investment when its labour force was poorly trained and housed, and if they did not have free access to primary health care, he said Gabon was engaged in projects to build schools and hospitals. It also continued to develop basic infrastructure. In addition, access to markets hinged on an appropriate solution to the debt problem. Restrictions on the economy could be alleviated through debt relief and better debt servicing. The traditional solution to rescaling debt was not adequate; in fact, it often exacerbated the situation. Debt rescaling for Gabon had become a highly expensive solution.

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Democratic openness in Gabon was visible, and the talents of its younger generation could put an end to certain prejudice, he said. Gabon had joined the WTO and reaffirmed the principles of free trade and the primacy of the multilateral trading system. His Government needed support in the form of coordinated and financial and technical assistance.

FRANCES RODRIGUES, Deputy Minister for Foreign Affairs and Cooperation of Mozambique, said her Government saw a future in which liberalized trade would function as an engine of economic growth and development. International trade was a powerful instrument in terms of development and poverty eradication. For the people in the developing nations to benefit from the multilateral trading system, market access had to be assured. Mozambique called on all the developed countries to join the developing countries in a new partnership to implement the commitments of the Uruguay Round.

Efforts of the developed countries to support developing countries towards integration into the world economy should take into account the promotions of value-added exports. At the same time, developed countries should identify targets and objectives, such as poverty eradication, improved access to markets and the reduction of disparities between countries. They should also build capacities through improved access to health care and education.

The adoption of unilateral measures which clearly violated the Uruguay Round agreements should be avoided, she said. Mozambique, like many other developing countries, and the least developed countries, in particular, had been victimized by such measures. Mozambique also recognized the crucial role played by regional trading arrangements. Such initiatives should complement the multilateral trading system and could represent constructive trading blocs. As a least developed country, Mozambique was concerned that trade remained a small share of those countries' economic activity. The external debt of developing countries continued to cripple all their economic and social development efforts, by depriving them of all the resources needed to develop infrastructure and an enabling environment for economic growth.

SORIN POTANC, Secretary of State in the Ministry of Industry and Trade of Romania, said market access was both a prerequisite and a consequence of a favourable environment for development. Establishing multilateral rules to be observed with no exception would make the international trade system predictable and give producers and exporters a stable and transparent framework for developing their activities.

The challenge for countries like Romania was to choose the best mixture of liberalism and national interest protection, he said. His Government had not found it easy to put the results of the Uruguay Round into practice. Yet, that process should be considered as part of the cost of opening the world markets for its products and services.

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The inexorable movement towards liberalizing world trade demanded that the rules and regulations for conducting business should be the result of a reasonable compromise, he said. Liberal trade had to be viewed as a way to greater prosperity and freedom of choice. It was also a method to ensure that the general interest prevailed over special interests. The benefits of liberalization should be distributed more equitable, both within and between countries.

SERGEY ORJONIKIDZE (Russian Federation) said since the close of the Uruguay Round, rates of tariffs and duties had declined overall. Nonetheless, the liberalization of trade in both traditional and advanced services would have a positive impact on global economic growth. Development of electronic trade could have a stimulating effect on easing market access. Serious complications in securing enabling conditions of market access for many traditional goods remained.

Those factors had, until now, significantly influenced the exports of many developing countries and economies in transition, he said. High levels of tariff maintained in some product groups did not suggest general liberalization of world trade. Practices of anti-dumping and countervailing measures were also being used as tools for continuing, and sometimes even enhancing, the protection of national markets.

He said the Russian Federation believed that further progress in the implementation of the Uruguay Round agreements depended on transforming the WTO into a genuinely universal organization. More than 30 countries, not members of the WTO, were not able to fully adhere to the rules of the game in trade markets or to enjoy the advantages of a multilateral trade regime. His country was one of those that worked intensively on the issue of accession to the WTO, proceeding from the understanding that requirements in that connection should not be stricter than those which were applied to other countries. Russia's system of trade tariffs had been moving towards gradual liberalization of the national foreign trade. The Russian Federation, recognizing the specific situation of the developing countries, continued to improve its national system of preferences to regulate its trade with those countries.

FELIPE JARAMILLO, International Negotiator for the Ministry of Commerce of Colombia, said the WTO dispute-settlement regime had become a system to which developing countries increasingly turned. At the same time, Colombian exporters had not recorded a significant improvement since the completion of the Uruguay Round. Anti-dumping measures and technical and environmental standards were increasingly becoming obstacles to trade. Sectors of particular importance to developing countries had been relegated to the final stages of trade liberalization, and many markets still featured high tariff and tariff peaks.

In response to such developments, he said his Government had devoted considerable efforts to liberalize trade with its neighbouring countries. Its

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efforts had focused first on the Andean community market, and then on trade with Chile, Mexico and the Caribbean. In the next stage, Colombia would negotiate with the countries of the Southern Common Market (MERCOSUR) (Argentina, Brazil, Paraguay and Uruguay) and Central America. Between 1992 and 1997, Colombia's exports to the Andean countries rose by a factor of three.

In addition to free trade, the "Andean Community", which soon would be joined by Peru, would negotiate as a block with MERCOSUR and the Caribbean Community (CARICOM), he said. Colombia and Chile expected all trade between them to be liberalized by 2004. Colombia had also signed an agreement with CARICOM allowing it free entry to Colombian markets for over 1,000 tariff headings. His Government was very aware of its undertakings at multilateral level. Yet, the only protective measures in the agricultural sector that could be employed by developing countries were tariffs.

Regarding services, Colombia recognized the work that had been done in the fields of telecommunications and financial services, but those areas were of interest only to industrial countries, he said. If Colombia were to expand its exports into other sectors, it would require technical and other assistance through the United Nations Conference on Trade and Development (UNCTAD) and other international organizations.

NEVEN MIMICA, Assistant Minister for Economy of Croatia, said that countries that were still not fully integrated in the global system had learned the hard way that persisting with isolated and self-sufficient national trade policies was not a sustainable option. However, although globalization and liberalization had resulted in an increase in trade, and financial and capital flows, a sufficient inroad of the gap between developed, developing and transitional economies had not yet been made. Further foreign direct investment, technology transfers and, above all, faster opening up of markets in developed countries to developing countries' products was necessary. The closure of those markets and their protection affected not only developing countries, but also economies in transition trying to break into new markets.

He said that the marginalization affecting the least developed countries required additional efforts to be made within the context of the multilateral trading system for those countries to share the benefits brought by liberalization. Due to war and aggression and the inherited structural problems typical to countries in transition, all sectors of the Croatian economy had not yet been able to adjust to a full competitive environment. As a WTO observer country, Croatia shared the concern of many acceding countries over the somewhat lengthy accession procedure and felt that its accession could be completed before the new round of multilateral negotiations began. That would enable his country to participate and contribute to the shaping of the new global agenda within the WTO.

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LEIV LUNDE, State Secretary in the Ministry of Foreign Affairs of Norway, said globalization encouraged the misconception that all countries were able to take part in the process as equal partners. Globalization made the world even larger and more complex, because the channels of information, communication and trade have increased in number, efficiency and speed. Those channels gave rise to many more questions and issues.

The least developed countries must not, yet again, be left on the sidelines when profound transformations were taking place in the world economy, he said. Market barriers were highest for the main products exported by those countries, particularly agricultural products, textiles, clothing, footwear and leather products. Norway was deeply concerned about the continued marginalization of the least developed countries in world trade, and that situation was worsened by the reduction of official development assistance (ODA).

He went on to say that improvements in trade terms and other market conditions would assist the least developed countries in breaking the vicious circle of underdevelopment, poverty and unrealized potential. Yet all efforts would fail unless the international community was able to solve the debt crisis. Many of the least developed countries suffered from paralysing debt burdens, which deprived them of the benefits of increased export earnings. Norway had recently launched a comprehensive debt relief plan. Unless all countries took strong, concerted action on debt, much of the work performed in other areas would have only a limited effect.

The growing prominence of the private sector had major implications for the least developed countries, he said. Without a dynamic private sector, a country would only achieve even limited development. The authorities in those countries and donor agencies must cooperate with the private sector to create a climate that attracted private investment. Norway was currently finalizing a strategy to stimulate private sector development in developing countries.

TED McWHINNEY, Parliamentary Secretary to the Minister for Foreign Affairs of Canada, said because trade was so closely related to prosperity and poverty reduction, there was a particular concern about enhancing the capacity of the least developed countries to take better advantage of the world trading system and the advances made during the Uruguay Round. It was unlikely the least developed countries would achieve sustainable development until they were able to play a more active role in the international economy. New multilateral negotiations must focus on their needs and concerns. Canada's new customs tariff had resulted in the acceleration of most of the final Uruguay Round reduction, he added.

He said Canada was an active player in several regional arrangements and was engaged in efforts to facilitate market access on many fronts. Recent studies had shown that few least developed countries had been able to take advantage of the preferential treatment offered to them by the developed

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world, let alone capitalize on the opportunities created during the Uruguay Round. Sound macroeconomic policies, and a legal and economic framework that enhanced the growth of a dynamic private sector and encouraged the development of small and medium-sized enterprises, were essential for improving countries' capacity to trade. Equally important was an enabling environment for investment, good governance and sound competition policy. Turning to the wider international environment, he said that Canada was convinced that reforms at both the domestic and international level were required to make the international system run more smoothly.

He took the opportunity to underscore the need for UNCTAD to ensure a continuum in its work programme between research activities and its capacity- building and technical cooperation function. The UNCTAD must also continue to devote a large part of its work to build the trading capacity of developing and least developed countries, and to strengthen its information and training services. It must also increase technical cooperation and expand the export supply capabilities of developing countries.

NICOLAS IMBODEN, Permanent Observer for Switzerland, said his Government had been negotiating for years to reduce tariffs. Yet, the relative competitiveness of a country's product was much more affected by changes in exchange rates than by tariffs. Countries talked about trade and exports, while what matters in a global economy was investment, value added, and improved competitiveness of national production through technology transfer. The international community continue to act and think about trade of products, but the world was now characterized by the mobility of the factors of production. Global markets meant opportunities and competition, and competitiveness was more important than market access.

Globalization tended to exclude segments of a society and countries from the benefits of the world market, he said. It was the obligation of national governments to assist the poor, and it was the obligation of the international community to help countries that were marginalized through globalization. Only under those conditions was globalization acceptable and sustainable, both politically and economically.

The WTO's new dispute settlement mechanism, the strengthened rule for the application of anti-dumping and safeguard mechanisms were essential elements of a functioning international system, he said. Yet, the world trade scene was moving fast and many countries had trouble keeping up with it.

The system must be renewed constantly to avoid new types of discrimination and pressures. In addition, the international community must ensure that laws applied to everyone. Switzerland supported various initiative to help the least developed countries gain access to the rules of law. The law had to take account of the evolution of the market place. His Government also urged all countries to place the establishment of agreed

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standards on the international agenda. That was the only way to avoid standards that were defined nationally and unilaterally.

AHMAD KAMAL (Pakistan) said gains from trade liberalization had been disappointingly asymmetrical. Market access of particular interest to developing countries was still impeded by barriers, especially in the areas of textile, agriculture and services. Provisions on special and differential treatment for developing countries were not being implemented in any meaningful way. The WTO dispute-settlement procedure was marked by serious limitations.

The universality of WTO was an important goal, he said. To meet the challenges of the multilateral trading system, WTO should focus on rectifying problems faced in implementing the Uruguay Round agreements. A broad economic and political evaluation should be undertaken to identify problems encountered in implementing agreements and to suggest ways and means to redress problems and anticipate others.

Further, UNCTAD had to play a more active role in helping developing countries, he said. It should provide objectives and in-depth analyses and strengthen the capacity of developing countries to participate in trade negotiations. It should strengthen the supply capacity of developing countries to ensure they benefit from opportunities, and take a lead in ensuring coherence between global economic policies. Finally, it should ensure that structural factors -- such as debt and inadequate concessional development finance, or restrictions on transfer of technology -- did not impede developing countries in availing of opportunities presented by the multilateral trading system.

ALYAKSANDR SYCHOU (Belarus) said that the condition of the multilateral trading system had a powerful influence on the nature of international economic relations, since it was the connecting link between all sectors of the world economy. The Asian financial crisis showed the absence of effective preventive mechanisms to regulate international market crises. Due to the Uruguay Round agreements, market access conditions had been considerably improved.

He said the present multilateral system was far from perfect and that confirmed the necessity for further harmonious measures by governments and relevant international organizations. It was necessary to note that currently, more than 60 countries were still not members of the WTO. Those developing countries and States with economies in transition were unable to take advantage of the present multilateral trading system. Belarus was among those States. It was also necessary to note that the country was not in a position to utilize all its export potential because its two main export items -- textile goods and mineral fertilizers -- were under the anti-dumping sanctions and other restrictions of many European countries. Belarus was ready to liberalize its foreign trade regime, but, at the same time, had the right to expect reciprocal steps from its trade partners.

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RICARDO CASTAÑEDA-CORNEJO (El Salvador) said that the three years since the birth of the WTO had shown a marked increase in stability, but liberalization had not benefited all countries equally. Developing countries were seeing themselves passed over by globalization, especially in the agricultural sector and textiles.

El Salvador took a central role in the Central American trading system by trading with other countries in the area, he said. However, it was important to trade with all countries. Future WTO negotiations should work to strengthen the position of developing countries and remove barriers to their trade, such as non- tariff barriers.

OUMAR DEMBA BA (Senegal) said agreements of the Uruguay Round should have improved the economic future of all countries, especially the developing ones. The reality, however, indicated that a more critical view of the multilateral trade framework needed to be taken. The opening of the global trading system seemed to be a one-way street because numerous barriers had hindered the entry of developing world products into the marketplace.

The progressivity of taxes applied to processed raw materials was one example of the hindrances to developing countries, he said. Among priorities for WTO were to effectively integrate all countries, open all markets to the export market, and improve the trading effectiveness of all countries. It should focus on dismantling protectionist measures and raise "moral consciousness" in international trade.

Particular attention should be given to provisions related to developing countries and those associated with food-import countries, he said. More extensive collaboration between the United Nations and multilateral trade organizations was needed because export earnings were an essential element for development.

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