We are living
through a very difficult moment in the world economy. The concern is not just with the
damaging economic effects of the current crisis – and the unemployment, poverty, and
human suffering that has followed in its wake. The concern is also that this particular
crisis may be part of a larger pattern of uncertainty and instability in the global
economy. The challenge, in other words, is not just to contain this crisis, but to try to
prevent other, perhaps more damaging crises in the future.Clearly the financial
crisis has not disappeared, but at least today – eighteen months after it first
appeared - there are signs of improvement. Korea and Thailand seem to be on the road to
recovery - though the road will be a long one. The US Congress has recently approved new
funding for the IMF. Brazil's economy has been backed by a US$ 41 billion loan. And the G7
has strengthened the financial base necessary to contain the current crisis, and laid out
an agenda for reducing future risks.
Yet if the
world's financial situation appears to be improving, the trade implications of the crisis
remain a serious concern. Trade volume growth is expected to reach only about 4 per cent
this year, less than half the rate recorded in 1997. And forecasts for 1999 suggest the
worst is not behind us. Imports have contracted dramatically in the crisis-hit countries,
while the United States' and Europe's exports to Asia are declining sharply. It must be
clearly understood that if the crisis is prolonged - or worse still deepens - there is a
real risk of major damage to the multilateral trading system.
All of this
underlines the reality that in today's global economy trade and finance are two sides of
the same coin. We will not find a lasting solution to the financial crisis without keeping
markets open and trade flowing. At the same time, we will not maintain an open and secure
trading system without restoring financial stability.
With
one-quarter of global output now exported, international trade in goods and services is
one of the main motors powering the real sector of the global economy. This means that the
multilateral trading system is deeply implicated both in containing the effects of the
crisis, and in returning the world economy to the path of growth.
The past
eighteen months have tested the resilience of the trading system, and our Members'
commitment to it. So far the architecture has tested sound. There has been no backtracking
on obligations under the WTO Agreements. Even at the height of the crisis, we concluded a
far-reaching agreement to liberalize trade in financial services - an area where the WTO
is making a direct and immediate contribution to restoring financial stability by
fostering the need for prudential and other regulatory measures in a climate of increased
openness and competition.
The future
trade agenda can also provide an important framework for restoring sustainable growth -
and in particular for helping the crisis-hit countries to export their way out of
difficulty. That is why the success of the WTO's Third Ministerial Conference next year is
so important. Governments are already committed to start new negotiations in agriculture
and services. And Members have begun considering whether to broaden that agenda - possibly
into a negotiation which could be as far-reaching as the Uruguay Round. At the same time,
there is a new urgency to accelerating the accession process – to bring China,
Russia, and the 28 other candidates into the security of the trade system's rules on terms
which maintain the integrity of those rules.
But the
global trading system does not – and cannot - operate in a vacuum. Unless we restore
a climate of confidence and stability in the international monetary and financial system,
it will be difficult for our Members to contain protectionist pressures, let alone to move
the trade agenda forward. That is why I strongly believe it is necessary to hold a joint
meeting of trade and finance ministers in the course of preparing for the next WTO
Ministerial Conference in 1999. Here are some of the questions that might be addressed:
First,
currency misalignments and excessive volatility. Calming uncertainties about exchange rate
movements is a key factor in restoring confidence among producers and investors
world-wide. In this regard, the introduction of the Euro will be a defining event. It is
critical that the Euro act as an additional anchor of stability for the international
monetary system.
Second,
macroeconomic imbalances. It is of enormous importance that macroeconomic imbalances in
the world economy are addressed quickly - and at their source. The chronic
under-performance of Japan's economy at such a critical time for the Asian region remains
a source of serious concern. Likewise, a sharply deteriorating current account in the
United States – and persistent surpluses in Europe - are generating deeply worrying
tensions. Past experience tells us these tensions will only intensify if nothing is done
to correct the fundamentals.
Third, the
global governance. We must begin thinking about how to improve the existing international
institutions – created at the end of the Second World War – in order to meet the
needs of the 21st century. We have to take into account that the current
institutions were designed primarily to regulate and discipline the actions of
governments. But today's global economy is being shaped more and more by the actions of
the private sector – by transnational corporations, huge institutional investors, and
millions of consumers. The real question now is whether we need new rules adapted to
govern private sector behaviour.
Above all, we
need a co-ordinated strategy of growth for the global economy – and here trade,
fiscal and monetary policy must play a coherent part. In a certain sense, we are
having to revisit today the same fundamental questions which preoccupied the architects of
the post-war economic system - but on a broader and more complex scale: Can we maintain an
open and stable global economy – with rising trade, employment, and growth for
developed and developing countries alike – without a stable global financial system?
Can we achieve an integrated global economy without greater coordination of trade with
other policies – in particular, to promote a coherent macroeconomic framework and to
avoid major imbalances in domestic and international markets?
The next
months will be decisive in answering these questions – and in signalling whether the
international community has the resources and vision necessary to tackle the economic,
environmental, social and political priorities of the 21st century. Shared
leadership has never been more necessary than it is today. Thank you. |
