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.
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