1 WTO NEWS: SPEECHES DG ROBERTO AZEVÊDO 24 March 2015 Regional initiatives cannot substitute for the multilateral trading system Azevêdo Director-General Roberto Azevêdo, in a lecture at the Stockholm School of Economics in Riga, Latvia on 24 March, noted that bilateral and regional trade agreements have been growing rapidly but stressed that there are many big issues which can only be tackled in an efficient manner in the multilateral context through the WTO, citing as a good example the Trade Facilitation Agreement struck in Bali. He said that most of the big challenges facing world trade are global problems demanding global solutions. This is what he said: MORE: > Director-General > Information for students and young professionals > Regional trade agreements > Roberto Azevêdo s speeches Rector Paalzow, Ladies and gentlemen, Good afternoon. It s a real pleasure to be here at the Stockholm School of Economics and to be here in Latvia. This is my first visit as Director-General of the World Trade Organization. In fact, this is my first visit to Latvia full stop! So I m very glad to be here. Besides, this year the WTO is marking its 20th anniversary and so it seems like an ideal moment to take a look at the future of this organization. That s what I want to talk about this afternoon and to explain why this organization will continue to play a crucial role in securing growth and development for Latvia and the WTO Director-General Azevêdo meets with Latvian Prime Minister Laimdota Straujuma. Credit: Toms Norde, State Chancellery WTO Director-General Azevêdo meets with Andris Bērziņš, President of the Republic of Latvia in Riga. LETA Latvian Information
2 rest of the world. Agency But, in doing so, I think it is useful first to consider the roots of the multilateral trading system as we know it today. At 20 years of age, the WTO is a relatively young organization. But actually our story extends back much further all the way to the Bretton Woods conference of As part of the post-war desire to build a better, more stable world, it was proposed there that an International Trade Organization be created. This organization, alongside the IMF and World Bank, would complete the framework of global economic governance and cooperation. RSS news feeds > Problems viewing this page? Please giving details of the operating system and web browser you are using. It was conceived on the basis that trade is not just a force for growth and development, but also for stability and peace. However, the vision of an International Trade Organization could not be fully realised at that time, and instead the General Agreement on Tariffs and Trade was signed in Rounds of negotiations followed to lower tariffs and increase the scope of the Agreement and bring in more members until, finally, the WTO was created in 1995.
3 Our role today is essentially to: agree global trade rules, monitor adherence to those rules, and help to resolve disputes between nations when they arise. And, running through all of this, we work to help developing countries to integrate into the global trading system. I think the value of this work is clear. For example, exports have grown thirty-five fold since the Second World War, thanks largely to a reduction in average tariffs from around 40% to 4% under the auspices of the multilateral trading system, now embodied in the WTO. Another example can be found in the response to the recent financial crisis, the effects of which we are still living with today. Contrast this experience with the crisis of the interwar years. In the 1930s governments responded by throwing up trade barriers, such as the Smoot- Hawley Tariff Act, which pushed the world into a spiral of protectionism. Between 1929 and 1933 retaliatory trade restrictions wiped out two thirds of world
4 trade. But the mistake was not repeated in After the financial crisis hit seven years ago the value of world trade did fall, but the decline was only a fraction of that seen in the 1930s and it rebounded straight away. Instead of a protectionist panic the response was one of restraint and caution. So why was the response so different? One key reason was the multilateral system that had been painstakingly constructed in Geneva and which covered the vast majority of the world economy. Despite mounting domestic pressure to adopt protective measures, governments knew that they were bound by rules and obligations that were common to all, and this gave them confidence that others were going to play by the rules as well. Any improper unilateral trade action could have significant legal and economic consequences. And so we avoided turning a damaging financial crash into an economic catastrophe. So I think there is great value in the system. And it continues to evolve. We have welcomed 33 new
5 members to the WTO over the last 20 years, ranging from some of the world s largest economies including China and Russia to some of the least developed. Today our 160 members account for approximately 98% of global trade. We welcomed Latvia to the WTO in Today Latvia is noted for its openness to trade outstripping many of your European partners. Latvia has proved to be a very proactive member of this organization and one that is not afraid to show leadership. This is something which we are seeing now through the Latvian Presidency of the EU. We also saw Latvia s support during another key moment in our recent history. At our 9th Ministerial Conference in Bali that year, we took our first big step forward to update global trade rules. This was an historic breakthrough as it was the first such agreement since the WTO was founded. And Latvia was there throughout the negotiations, as part of the EU delegation, playing a crucial role. The decisions which members took in Bali have economic significance by themselves, but together they also opened a new chapter for multilateral trade
6 negotiations. After many years without multilaterally agreed outcomes, the success of Bali created new momentum for further negotiations. It has the potential to change the game. A key element of this was the Trade Facilitation Agreement. Once implemented, this agreement will help to cut red tape and streamline border procedures in all WTO member economies, reducing the time and cost of trade operations worldwide. Indeed, it is estimated that the agreement could cut the costs of trading in developed countries by up to 10%. The overall benefits of the agreement have been estimated at up to a trillion US dollars a year. This could create 21 million additional jobs worldwide the vast majority of which would be in developing countries. Indeed, the Bali Package had real developmental significance and this was clear in its advocates. There was no developed country against developing country divide over this package. Everybody was involved in the negotiations and everybody wanted to deliver a successful outcome.
7 We are a truly global organization today. Everyone has a seat at the table and all voices are heard. Ultimately, by widening the membership and bringing all of the major trading powers, as well as the smaller economies, together in an open, rules-based system, I think the WTO has finally delivered the vision of But of course the creation of the WTO was not the end of the story rather it was the beginning of a new chapter. And I want to be clear that there is no complacency here. We still have a great deal to do and real challenges to overcome. CHALLENGES One such challenge is the pace of progress in negotiations. While Bali was a major success, it is clear that we need to deliver more. It is sobering to reflect that the bulk of our current trade rules were agreed 20 years ago when the organization was founded. Despite the fact that many of those rules embody basic and perennial principles, the reality is that our legal texts are yet to properly enter the 21st century.
8 I am conscious that we need to deliver more outcomes, more quickly and we will do everything we can to work with members to make this happen. The frustration with negotiations at the multilateral level is often cited as a contributing factor to the increase in bilateral and regional trade negotiations that we have seen in recent years. Of course these types of nonmultilateral trade agreements are not a new phenomenon. In fact they pre-date the multilateral system because, in a sense, they were the seeds which grew into the General Agreement on Tariffs and Trade. These initiatives co-exist with the multilateral system. They can bolster it in a significant way. And, at the same time, it is the global system of rules which forms the basis of each of these agreements. Indeed, members of these regional agreements still and mostly rely on the WTO s dispute system. Moreover, we should remember that the WTO provides an important backstop. Because of the multilateral system, countries cannot fall back into bad practices and raise new barriers.
9 Nevertheless it is clear that these bilateral and regional agreements have been growing rapidly in recent years. TPP and T-TIP are often in the headlines but there are many others. The WTO has already been notified of over 250 RTAs that are in force today. These initiatives are important for the multilateral trading system but they do not substitute it so countries need to remain engaged at all levels. And let me explain why. Of course it is simpler and less sensitive to strike market access deals bilaterally. This is never going to change, so the bilateral or regional market access negotiations will continue to be - as it has always been the most obvious approach. However, there are many big issues which can only be tackled in an efficient manner in the multilateral context through the WTO. The Trade Facilitation Agreement that we struck in Bali is a good example. That agreement was negotiated successfully in the WTO because it makes no economic sense to cut red tape or simplify trade procedures at the border for one or two countries if you do it for one country, in practical terms you do it for everyone.
10 And this is not the only issue that s inherently multilateral. Financial or telecoms regulations can t be efficiently liberalized for just one trade partner so it is best to negotiate services trade-offs globally in the WTO. Nor can farming or fisheries subsidies be tackled in bilateral deals. Disciplines on trade remedies, such as the application of antidumping or countervailing duties, cannot significantly go beyond WTO rules. The simple fact is that very few of the big challenges facing world trade today can be solved outside the global system. They are global problems demanding global solutions. Indeed, it seems clear that global companies operating in global markets will inevitably demand global rules. Overlapping agreements can sometimes increase the costs and complexity that businesses have to deal with which can prove a barrier to doing business, particularly for SMEs. So we need global rules. And we should recognise that multilateral agreements can deliver much more than non-
11 multilateral agreements. For example, regional or bilateral agreements tend to deepen existing trade connections. In contrast, multilateral reforms support the creation of newtrading relationships and thereby bringing new players into the trading system and creating new trade flows where they did not exist before. Indeed, the evidence shows that by bringing developing countries into the world economy in a fair and progressive way is the best way to boost their development, and it is the best way to maximize the contribution that trade makes to global growth. Yet, as I indicated earlier, it is a long time since the world has come together to overhaul trading rules. We are living off the liberalization of the past, and the reforms negotiated by the last generation. So we need to be more ambitious. THE WTO AGENDA This brings me to what is happening at the WTO today. We showed with the Bali Package in December 2013 that
12 we can deliver outcomes which have real economic importance. We hit an impasse in implementing the Bali Package last summer, which had a freezing effect across all of our negotiations. But we worked hard to resolve the issue and so, again, at the end of last year we delivered and we put our work back on track. Members committed not just to implementing all aspects of the Bali Package but also to agreeing a work programme on the remaining issues of the Doha Development Agenda by July this year. This means that the big, tough issues of agriculture, services and industrial goods are all back on the table. And it means the opportunity to advance negotiations which have been stalled for some years. We want this work to be the springboard for success at our next Ministerial Conference, which is being held in Nairobi in Kenya this December. This is the first time that a WTO ministerial meeting has been held in Africa and so expectations are high. There is a lot at stake here and I think we have real
13 momentum behind us. We started an intensive process of negotiations in January and so far we have seen good progress and strong engagement. In fact I think we made more progress in the first weeks of these talks than we did in all of And we have continued to make steady progress since then. Members are engaging on the detail and are beginning to bring some new proposals to the table. There is a clear sense that they are moving into a solutionfinding mode. This doesn t mean that our work is done. Moving the Doha Development Agenda forward is still going to be incredibly difficult. There remain many challenges to overcome before we can find solutions but at least now we are looking for them. And we will continue to push these efforts forward. CONCLUSION The world is watching the WTO this year. Not only because it s our 20th anniversary.
14 Not only because of our success in Bali. Not only because we re implementing the Trade Facilitation Agreement and the other Bali decisions, with all the benefits they will bring. The world is watching because all members developed and developing are again engaging in broad and meaningful negotiations that had been firmly stuck for years and that can boost global economic growth precisely when we most need it. I will do everything I can to ensure that we succeed. And I know that Latvia will be an important partner in this effort. Thank you for listening. The World Trade Organization (WTO) deals with the global rules of trade between nations. Its main function is to ensure that trade flows as smoothly, predictably and freely as possible. World Trade Organization 2015 Disclaimer