DIRECTOR-GENERAL SAYS WORLD TRADE ORGANIZATION IS "BACK ON TRACK" FOLLOWING RECENT FAILURE OF ITS SEATTLE CONFERENCE

Press Release
TAD/1912

DIRECTOR-GENERAL SAYS WORLD TRADE ORGANIZATION IS ‘BACK ON TRACK’ FOLLOWING RECENT FAILURE OF ITS SEATTLE CONFERENCE

Tells UNCTAD X That despite ‘Mellowing’, He Does Not Foresee Prospects for Renewed Negotiations in Near Future

(Received from a UN Information Officer.)

BANGKOK, 16 February -- Mike Moore, Director-General of the World Trade Organization (WTO), presented the keynote address this morning at a meeting of the tenth session of the United Nations Conference on Trade and Development (UNCTAD X). Member States of UNCTAD held an interactive dialogue on matters raised by Mr. Moore, before returning to their ongoing general debate. Representatives of 12 States spoke in the debate.

He said he brought a message of hope from a WTO -- now back on track following the recent failure of its Seattle conference. A rules-based trade system was a key to peace and development, and negotiations had progressed, as they must. However, there were no prospects for a WTO conference in the near future, because despite a mellowing since Seattle, there was not yet enough progress. The “f- word” -- flexibility -- needed to be heard more often.

Development issues are at the forefront of the new WTO work programme, Mr. Moore told the Conference. The distinction between inclusion of States and their marginalization is between those that are inside and those outside the world economy. The slower pace of trade liberalization for agricultural products was a handicap to developing countries, but negotiations to open up agriculture were under way at the WTO.

In the interactive dialogue which followed, UNCTAD was told that for world trade to be governed effectively, it must have a global governing body, and so the WTO must become universal. UNCTAD member States explained why they thought the WTO was unpopular, and explained their difficulties with its decision-making processes. Many speakers acknowledged that developing countries needed massive investments in infrastructure, and that could only come from private sources.

Concern was expressed that developing countries might resist another round of trade negotiations, when what was needed was a comprehensive round.

In its continuing general debate, the Conference heard statements by the Minister for Foreign Affairs of Myanmar, the representative of Lebanon, Ghana’s Trade and Industry Minister, the Deputy Foreign Minister of Peru, the Minister of Trade and Industry of Ethiopia, Gabon’s Minister for Commerce, Tourism and Industrial Development, the Minister for Foreign Affairs of Finland, the representatives of the Holy See and Malta, the Minister of Commerce, Industry and Handicraft of Burkina Faso, and the representatives of Austria and Denmark.

The Conference will convene again at 3 p.m. today to hear an address by James Wolfensohn, President of the World Bank, conduct another interactive dialogue and then resume its general debate.

Keynote Address by WTO Director-General

MIKE MOORE, Director-General of the World Trade Organization (WTO): I bring you a message of hope from a World Trade Organization that is back on track. There has been progress, as there must be, in our negotiations in Geneva, as a rules-based trade system is a key to peace and development. The world is complex, but it is clear that the distinction between inclusion and marginalization is between those that are inside and those outside the world economy. This is a world of possibilities, but some Sates have clearly been passed by. Trade and trade policy must play a part in creating a favourable environment for development, as part of a wider scenario.

Development-related issues are at the forefront of the new WTO work programme. Developing countries have clearly said that more needs to be done to liberalize agricultural trade. Improved market access and reduced competition from subsidized agriculture are crucial for them to develop their present trade structure and to diversify into products with new potential. It should also benefit the rural poor. The slower pace of liberalization in agriculture is a severe handicap to developing countries. Negotiations to open up agriculture are under way in the WTO. Although not a classic North-South issue, service trade development and diversification can also bring gains to developing countries, especially given the already remarkable progress in this sector from some States. Liberal, coherent and more stable policy conditions in services are likely to produce economy-wide benefits and are an essential ingredient for a successful economic development policy.

A priority of the WTO is to produce a package of measures to assist least developed countries, which need both access to markets and assistance to build institutional and human capacity. Seattle was a setback for this package, but we expect to report on the work done by Easter.

Another priority is to regularize funding of WTO technical assistance capacities. A third priority -- the issue that took the most time at the WTO General Council -- is to address the problem of implementation. We are experiencing transition problems with WTO agreements, but we are committed to finding a prompt solution to these problems within a multilateral trade framework. Implementation is a sensitive and important area, and we were close to an agreement in Seattle, so I think there is a collective willingness to engage on it.

The culture of the WTO is changing. The last priority is to update our decision-making processes. One part of this priority that is not negotiable and never will be is the issue of consensus. However, there can clearly be improvements, and I seek suggestions from member States for this. I assure you, the WTO will approach transparency in a transparent way. One of the side effects of increased participation is increased dissatisfaction, and we must and will change to accommodate the priorities of new members. The WTO has made sensible advances in the last few months, and the necessary confidence-building measures are working. If we are serious about development -- and we are -- we must integrate development into all our work on trade. The nations of the world want reform and change. The poverty-alleviation aims established at the World Summit for Social Development in Copenhagen can be met.

How do we make trade work for the poor? First, we need rules. The economies of those worst hit by the crisis are projected to grow strongly this year, because exports have grown by nearly 9 per cent last year, which is a credit to the regions' leadership and the system, but also demonstrates that the system works. The markets of the North have stayed open, despite pressure, and credit should be given both to their leaders and the system. Clearly the system works.

However the status quo -- the compromise of the last round of multilateral trade negotiations -- is not enough. If developing countries are to grow their way out of poverty, more barriers to exports must be removed, which makes sense for all countries. It makes no sense to spend billions on debt relief or official development assistance (ODA) and, at the same time, impede the sustainability and exports of developing countries with trade barriers.

Much effort has been wasted lately in attacking globalization. Globalization is not a policy option. It is a part of an economic process, and one that is not new, but has only accelerated recently. Some say developing countries should reject the global economy. The absence of participation is the real threat to the poor. Perhaps the gap will be between those that can get information and those that cannot.

I urge that we refocus and reassert the relationship between UNCTAD and WTO, which is central to trade and development questions. We serve the same taxpayers and governments. There are many potential areas of cooperation. The false choices of the past are gone, and only one choice remains-- cooperation.

Architecture is important but, as a former builders' labourer, I can tell you that solid practical foundations are essential to any building. No one has yet adapted fully to the new age on integration, and the WTO must make some changes to do so, like all others. Sometimes it seems the walls between institutions are more durable than the Berlin Wall.

We are all in the same boat, and no sane person can be complacent about the other end of the boat sinking. The voyage is not just for the first class passengers.

Questions and Answers

During this morning’s interactive dialogue, one of reasons advanced for the negative perceptions about the WTO was that it was responsible for many developing countries’ undertaking commitments in many areas without first examining whether the social, political and economic conditions in those countries could sustain such commitments.

In addition, it was felt many of the policy instruments used by industrialized and advanced developing countries to achieve development were now treated by the WTO as inconsistent. This prevented many developing nations from using those same policies to achieve development.

Another negative perception of the WTO was that there were continuous attempts to broaden the organization’s agenda even before developing countries were able to come to terms with the commitments undertaken in the Uruguay Round. Continuous attempts to overload the WTO agenda showed a certain amount of insensitivity to the problems of developing countries. The problem was exacerbated when attempts were made to bring into the organization’s agenda non- trade issues such as the environment and labour standards.

Yet another factor identified in the negative perceptions of the WTO was the fact that the organization’s agenda seemed driven more by the interests of multinational corporations rather than equity considerations. Still, another negative perception was that the WTO, essentially a political organization, was becoming increasingly legalistic in its approach. That dichotomy came into very sharp focus when the highly legalistic dispute-settlement system and the political framework in which agreements were negotiated and trade-offs decided on were examined.

It was stressed that for globalization to be governed effectively, the governing body must be global. Action was, therefore, needed to ensure the universality of the WTO. An excluding organization could not lead to an inclusive globalization.

It was underscored that the current consensus decision-making process practiced by the WTO sometimes amounted to vetoing by every member and the barring of countries outside of the organization’s membership. In that context, it was emphasized that article 12 of the organization’s charter sought to establish universality of the body and stated quite clearly that no State should be barred from the organization and its negotiations. There should also be no scope for WTO members to impose conditions on those seeking membership beyond what existing members faced -– that was discriminatory.

Commenting on that issue, Mr. MOORE said the main message of Seattle was the need to restructure the WTO, particularly the decision-making process. Consensus had some advantages and some disadvantages. However, in procedural matters, the consensus method failed.

Other participants felt that the opposition to a new trade round was antagonistic to the interests of developing countries -– many of them were in effect “trying to save the developing world from development”. Such voices could not be allowed to claim to speak for the developing world.

Speakers also asked how conditions could be created to increase investment in Africa and south Asia and other countries where poverty was concentrated, and where gains from the next trade round could be made that would speed up that process.

It was widely acknowledged that developing countries needed massive investment in infrastructure. The necessary investments, however, could only be funded by private capital. Such capital would only be attracted if the public sectors could create the right conditions for beneficial private sector investment. The big challenge identified, in that context, was to use the next trade round to create the conditions in developing countries.

Concern was expressed that the mood among some developing countries was to resist another trade round as though all was well in the status quo. However, all was not well when one in five of the world’s population was living in poverty. A comprehensive round –- one that would enable all countries to make gains so that an agreement that would promote poverty reduction globally could be reached –- was the goal.

Other speakers advocated that development be demand-driven with least developed countries (LDCs) in the driver’s seat. They urged acceptance of the comprehensive new plan of action that had been presented by those countries to the international community. The thrust of that plan was a request for duty- free market access for all LDC products. Progress on wider market access for textiles and clothing was stressed as well.

Participants called for a genuine response to the suggestions put forward at the Ministerial Conference in Seattle by the developing countries on textiles, agriculture, anti-dumping and implementation.

In a response to the issue of the Seattle conference, Mr. MOORE said Ministers were unanimous that they will not attend another conference unless there was prior agreement. He noted that there has been a mellowing since Seattle, but not enough progress yet. The “f- word” -- flexibility -- needed to be heard more often.

He said there were 300 hours of open-ended negotiations before Seattle. Capitals did not give their delegates flexibility. Seattle failed because the States were too far apart on a number of issues -- labour, agriculture, anti- dumping, investment and implementation. Until positions were much closer, “we will not be able to reconvene”, he warned. Confidence-building was critical -- not just North-South confidence-building, but also trans-Atlantic.

There were improvements in the mechanisms that could be made, he continued. “I am open to suggestion. But the truth is too far apart”, he said. “The problem is cultural. If we build confidence and have faith, the house will be happier.”

Concern was also expressed by participants that small island developing States, with their acute vulnerabilities, were expected to trade on an equal footing. The special circumstances of those countries needed to be recognized and the international trading system needed to go beyond rhetoric and take concrete measures.

Statements in General Debate

U WIN AUNG, Minister for Foreign Affairs of Myanmar: We placed high hopes in the process of globalization as a force to strengthen cooperation and accelerate growth and development. However, over the past four years, while there has been progress in developed countries, developing countries have gone through difficult and turbulent times. The benefits of globalization have clearly not been shared equally, and the time has come to map out strategies to ensure the equitable integration of all countries into the global economy. The problem is not globalization, but how it is regulated and managed. The international financial architecture must be reformed, with stronger roles for developing countries and provision to create space for their autonomy.

Liberalization of trade is a powerful instrument for growth, but the pace and level of it must account for States’ priorities and levels of development. WTO agreements are yet to spur development, and existing trade rules have serious imbalances with adverse impacts on developing countries. Progress towards liberalization is lagging in precisely the sectors of most interest to these countries, such as agriculture, textiles, clothing and movement of labour. The developed countries should demonstrate their commitment to open markets by opening their markets to developing country goods.

At Seattle, developed countries attempted to bring trade and labour standards to the fore. Labour standards are laudable, but the International Labour Organization (ILO) is the appropriate forum to discuss them, and linking them to trade would do nothing for labour and only add barriers to trade. Unilateral economic and trade sanctions are coercive measures against developing countries and break WTO rules and international law. Similarly worrying is the linking of preferential trade access to conditions that have nothing to do with trade. We call for increases in ODA and for it to be given without conditions. Debt relief and the search for strategies to eliminate the structural causes of indebtedness are also required. We would also welcome initiatives and effort from UNCTAD to promote foreign direct investment (FDI) in developing countries.

FAKHRI SAGHIYYAH (Lebanon): A fair assessment of the recent Asian financial crisis does not suggest a failure of macroeconomic policy; rather that there are strong linkages and interactions between financial and capital flows and banking, financial, balance of payments and currency crises. The crisis has shown that unfettered capital-market liberalization can lead to economic instability and panic, and to social collapse, with far-reaching implications. There are social, political economic and political risks involved in the process of globalization, and they should be addressed as top priorities.

Economic success in a globalized world largely depends on the rapid acquisition of skills, as well as the creation and effective utilization of technology and information and their exploitation through markets. Policy instruments for the transfer of technology should also be developed with particular attention to the means of facilitating access on favourable terms to environmentally sound technologies and the corresponding know-how. In view of the worldwide nature of investment flows and their significant impact on the global economy, the focus should be on how to formulate national polices related to investment issues, FDI, technology and enterprise development.

Success in national efforts requires supportive international frameworks. Greater coordination, coherence and concerted action are needed among international institutions, particularly in times of crisis, to promote growth in development in developing countries, which in turn will have implications on the improvement of consumption and investment of industrialized countries.

DAN ABODAKPI, Minister of Trade and Industry of Ghana: The Special and Differential treatment provisions in several agreements are not being faithfully implemented. Tariff reductions on industrial products do not cover a number of products of export interest to developing countries. Goods such as textiles and garments, leather and footwear in which developing countries are most competitive, but which are deemed sensitive, continue to attract high duties.

In spite of such limitations and anxieties about globalization, Ghana is not only optimistic about its immense benefits, but also believes that the phenomenon of globalization will facilitate Africa’s ultimate development. The task facing our countries as the weaker partners in the global economy, therefore, is how we can harness globalization to strengthen our capabilities ate the national, sub-regional and international levels in order to share in its benefits. While the primary responsibility is ours, we need the complimentary support of the international community, since our marginalization restricts commercial opportunities for all.

Areas of concern include the declining trend of ODA and the debt burden, which remains the single most serious constraint on development efforts. There is need for a new development paradigm that adapts to the circumstances of each country and goes beyond liberalization, stabilization and privatization to provide for an institutional infrastructure which is an essential prerequisite for a social transformation that leads to integration into the world economy. Future WTO negotiation should go beyond issues of interest to the developed countries to cover the problems of developing nations.

JORGE VALDEZ, Deputy Foreign Minister of Peru: The Uruguay Round gave greater legal assurances of market access. The rest was that economic liberation went hand in -hand with the agreements established. This has led to more global trade and investment flows and more interdependence. It, therefore, makes it essential to make adjustments to the multilateral system if we are to prevent the fluctuations that affect financial markets.

Economic markets should not be obstacles to implementing sustainable growth-oriented policies in the developing countries. In addition, we need to look at competitiveness in smaller and medium sized enterprises. The worldwide situation has unusual, unforeseen and unprecedented features and characteristics that cannot be omitted from the sustainable development policies that have been and are being considered.

Technical change has led to a knowledge-driven society. We have to keep pace with the latest developments to keep abreast of change. Labour forces thus need greater skills than they have traditionally required in the past. The technological leap to a form of manufacturing that is not based on raw materials also means different forms of education. In the context of our current new circumstances, we therefore need to reshape ideas on development. Institutional social variables also needed to be incorporated in new development plans.

KASSAHUN AYELE, Minister of Trade and Industry of Ethiopia: It is ironic and perplexing that amid unprecedented global prosperity and connectivity of peoples driven by globalization, extreme poverty, inequality of income and opportunity, social exclusion and marginalization of the poor characterized the world today. Any future development paradigm must go beyond the existing and dominant market principles to correct the distortions of past policies and to ensure the transformation of our societies.

While we are committed to further deepen our political and economic reform programmes, the international community should devise practical ways to assist developing countries, especially those in Africa, to benefit from the opportunities created by globalization while minimizing its adverse consequences. The full integration of these countries into the rapidly globalizing world economy is key to achieving economic growth sufficient to recover the ground lost in recent decades. It is a moral obligation for the international community to continue to improve market access conditions for the exports of the LDCs.

Despite the various policy measures undertaken by Ethiopia, the supply response of its economy remains below expectations; extensive investments are required to keep the economy on the path of sustained economic growth and sustainable development. It has become evident that in order to secure sustainable supply response, our ongoing efforts have to be complemented by commensurate foreign resource inflows in the form of official development assistance and foreign direct investment.

ALFRED MABIKA, Minister for Commerce, Tourism, Industrial Development and Handicrafts of Gabon: In an attempt to retain control of development, Gabon has embarked on its own strategy for development - a seven-year vision. A macro- economic forecasting model has been used to help planning. It forecasts very low growth over the next seven years, because of debt repayment. Public investment will also be low, because of declining public income. Private investment will not rise to previous expectations, as basic infrastructure will not improve. What development can we expect from such circumstances?

Creditor countries should give up any idea of debt servicing. By refusing to do this, they are contributing to the ruin of developing countries. They are blocking the expansion of the private sector in developing countries, and thus preventing States from resourcing basic infrastructure. Thus they end up stifling international trade and investment. Debtor States must also work to establish frameworks conducive to development. Debtors and creditors must “do good economics” together and then the resources will exist to do good politics.

Despite initiatives from both sides, the debt of medium-income debtor countries must be examined, as they are having serious payment difficulties. The mechanism of the Heavily Indebted Poor Countries debt relief programme needs to be improved, and lasting solutions must be found for a set of measures which will tackle structural causes of indebtedness. Gabon calls for an international conference on debt to find a lasting solution. It could include international political and economic experts, chosen through common agreement of creditors and debtors. It is perhaps an African vision to say that it is better to be three than two -- that an umpire is useful.

KIMMO SASI, Minister for Foreign Trade of Finland: We need to reach an understanding on how to make globalization an instrument that provides growth, sustainable development and poverty alleviation. One effort on the part of the European Union has been the post-Lome process. During negotiations with the Africa Caribbean Pacific countries, Finland strongly supported regional economic integration. In general, we find such integration among the developing countries an important way to strengthen their economic and social structures. Several efforts to improve multilateral cooperation have been launched. In the follow-up to major United Nations conferences, the emphasis should be placed on the implementation of the agreed plans of action at the field level.

The Comprehensive Development Framework initiated by the World Bank can be helpful in bringing together multilateral and bilateral development actors at the national level. Increasing global interdependence underlines the importance of a clear and predictable framework for the multilateral trading system, namely, “same rules for all”. Recent regional crises have shown the importance of a strong multilateral rules-based system. The UNCTAD should, through its analytical work, aim at providing support and options for decision makers in developing countries.

As the last decade has shown, macro-economic analysis has proven valuable to all countries in making the necessary policy choices. These choices should be conscious and ambitious in order to strengthen the ability to take part in the ongoing liberalization and globalization process. UNCTAD should assist particularly the LDCs to decrease their excessive dependence on only a few basic commodities. It should further assist them in analysing obstacles to their participation in technologically advanced, knowledge-based growth and production.

GIUSEPPE BERTELLO (Holy See): World wealth has expanded, according to United Nations reports, but at the price of growing inequality. Despite programmes to assist LDCs, they suffer growing impoverishment and the consequent increases in social unrest. The disproportionate growth of the financial sector against the rest of economy is a cause of concern. Finances should not be uncontrolled in their movements, and politicians must establish standards. Unregulated activity neither allows for fair pricing or for long-term investment.

The new economy is more intensive due to technology. The fight against poverty and trade are now more closely linked than ever before. Globalization must help the human being -- the whole human and every human -- or it will become another means of enslavement. Competition is a game and needs rules and an umpire.

A realistic system of development and poverty reduction is needed, and LDCs will need new capital to prepare for the new world. The constant and gradual reduction in ODA has left them in a precarious situation. Not only does every person have the right to work, education and health, but the greatest success in development and poverty reduction have occurred when investment is made in human development. The Holy See supports making UNCTAD a real think- tank for trade and development issues, and for training men and women to manage the globalization process.

MICHAEL BARTOLO (Malta): Problems experienced recently by the developed countries have raised doubts about the benefits to be gained from openness and as to whether globalization would not, in fact, increase vulnerability of developing countries to external shocks. Developing countries recognize that they have the primary responsibility to create the political and economic conditions necessary for their growth and development.

Malta has been part of this trend, removing barriers to trade and capital movements, encouraging savings and investment and promoting an equitable distribution of income. It is continuing a series of reforms, which have included legislation gradually deregulating interest rates, liberalizing exchange-rate policy and financial services in line with current practice in the European Union. These trends will continue as Malta embarks on negotiations with the European Union in preparation for membership.

UNCTAD’s analytical work should inform the process on intergovernmental deliberation and the related consensus-building. Its technical assistance activities should derive ideas from these deliberations.

ABDOULKADER CISSI, Minister of Commerce, Industry and Handicraft of Burkina Faso: The keynote of UNCTAD X is globalization. The question to be asked is how can we use the lessons of the past to make the process an effective instrument? The UNCTAD remains the framework through which the integrated issues of development can be properly addressed and resolved. However, competence is increasingly required as relationships become more and more complex.

New guidelines need to be drawn up so that poverty can be combated. The battle can only be waged in partnership. There is a need for more ODA, which has plummeted in the last few years and is now well below agreed targets. There is also a significant need for an increase in FDI, which is still awaited by Africa. This particular trend has to be corrected in light of the role played by this investment. Yet another handicap is the reticence of the markets of the North to accept products from the South. LDCs must be helped to meet the challenges of globalization, since the liberalization of international trade has become a necessary prerequisite in the pursuit of growth and development.

The UNCTAD has been helpful in assisting LDCs prepare for conferences such as the one held in Seattle. Burkina Faso, as a founder member of the WTO, intends to play its part in improving the multilateral trading system. Because of its trust in the WTO and UNCTAD, Burkina Faso took part in the failed Seattle Conference. It is now up to the differing parties to see how they can re-launch the negotiating process. Today, our duty in Bangkok goes hand-in-hand with this responsibility.

HARALD KREID (Austria): A major challenge for all countries is to strike the right balance between a socially and environmentally sound economic policy with a strong commitment to openness, to a more efficient and competitive financial system and a new role of the State which works more to complement markets than to exclude them.

In today’s “hyper-speed” world, rapid communication is a basic ingredient of successful integration into a global system. The emphasis on speed can be both virtuous and vicious. It can shift enormous amounts of capital onto a country’s stock and bond markets, as well as into plants and factories. However, if markets become unstable or weak, it can transform what otherwise might have been merely a market adjustment into a full-fledged crisis, painful and exaggerated.

Because of globalization and the increasingly openness of borders, the quality of government organization matters more, not less. The ability of an economy to withstand the inevitable ups and downs of the globalization process depends in large part on the quality of the legal and financial institutions and macro-economic management –- all matters still under the control of governments and bureaucrats. Also, there seems to be a growing awareness among the leaders of developing countries that what they need in order to succeed is not just a functioning market, but a well-organized and resilient society.

TORBEN BRYLLE (Denmark): The Danish Government believes the upcoming WTO Round should devote attention to four areas of interest to developing countries, including duty-free and quota-free market access for LDCs. The special needs and concerns of indigenous populations should be taken into consideration as well. We must also be able to respond adequately to requests for technical assistance. The newly established WTO Global Trust Fund is important in this regard. While the Danish Government has announced a contribution to the Fund of $1 million, present funding is not sustainable. Technical assistance should be financed as part of the regular WTO budget.

The area of dispute settlement presents a clear need for increased technical assistance. All countries should have genuine access to the organization’s dispute-settlement system. Another area that should be addressed in the upcoming round is the clear and urgent need to modernize the special and differential treatment for developing countries’ provisions and make them more efficient. The Round should also focus on the implementation of the Uruguay Round results. Denmark calls for coherence between trade and development policies as well.

In addition, the neglect or repression of fundamental rights can never serve the promotion of trade for development. Fundamental standards for children, women and men should be a natural part of a free, open and competitive international trading system. The role of women as agents in development is crucial. Their share in the benefits of the process is however, not commensurate to their contribution. Investment in human resources and full participation of men and women in economic, social and political activities are essential factors in the fight against poverty, inequality and social injustice.

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