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The report notes that trade has slowed and confidence is weak. A broad
negotiating agenda is essential for continuing policy reform and trade
liberalization; it would do much to build confidence and ensure that
the WTO’s trading system plays its full part in promoting recovery
and growth.
Merchandise
output growth in 2000 at 4% and trade growth at 12% were “outstanding”,
the report says, the strongest in more than a decade. But “the
contrast between the figures for 2000 and the available figures for
the first half of 2001 could hardly be greater.”
The
report, which also contains summaries of activities in the WTO and
actions member governments have taken in policy areas that come under
the organization, describes how governments’ good sense and WTO
rules helped reduce the impact of the Southeast Asian financial crisis
that began in 1997.
“Trade
became part of the solution and was integral to a return of confidence
and to recovery. Seldom have the gains from trade been so evident,”
the Director-General’s report says. New negotiations would do the
same for the current global economic slowdown, it concludes.
The
annual report on major WTO activities and significant policy issues
affecting the trading system is prepared for WTO member governments to
discuss. Mr Moore has decided that this year’s report should be
publicly available as a WTO publication.
This
is the introduction and summary:
Introduction
The
World Trade Organization provides an agreed set of rules for the
orderly conduct of trade between its Members. These rules serve well.
The recent financial crisis that originated in South-East Asia is a
stark, telling example. Sixty years ago a financial crisis led
inexorably to a great depression; there were many causes for this, not
the least that in a knee-jerk reaction of economic nationalism
countries moved to close their markets to protect domestic producers
from “cheap” imports. Trade became part of the problem. In
mid-1997 the difficulties of a South-East Asian bank sparked a severe
regional downturn in output, and world markets trembled as confidence
in the financial order was drawn into question. The good sense of
governments and WTO rules kept markets open; excess production in the
crisis economies, where hard decisions were taken, found a ready
market in healthy economies. Trade became part of the solution and was
integral to a return of confidence and to recovery. Seldom have the
gains from trade been so evident.
Trade
enhances consumer choice, raises national incomes, and gives signals
for an appropriate allocation of resources, thus promoting employment,
development, and growth. The multilateral trading system embodied in
the WTO safeguards these gains. Chapter I of the Report shows clearly
the turn to a global economic slowdown. Trade has slowed and
confidence is weak. A continuation of the process of reform and
liberalization of trade policies, particularly by initiating a broad
agenda of negotiations at the Fourth Ministerial Conference, would do
much to build confidence and to ensure that the system plays its full
part in promoting recovery and growth.
The
raison d’être of the WTO is to allow its Members to enhance and
efficiently reap the gains from trade. It fulfils its role by Members’
adherence to the fundamental principles, grounded in economic sense,
of non-discrimination, stability and predictability, and transparency.
These building blocks of the WTO serve to reduce costs and to promote
certainty, thus enormously facilitating trade, allowing a freer flow
of goods and services. Chapter II reports on the recent activities of
Members in their ongoing work to maintain and strengthen the WTO. Part
A of the Chapter reports in particular on the continuing mandated
negotiations on agriculture and services, which have now successfully
entered their second phase; on issues and concerns related to the
implementation of WTO Agreements, an area of considerable weight to
the Membership; on the preparations for the Fourth Ministerial
Conference, for which the political momentum on the adoption of a
broader negotiating agenda has been building throughout the year; and
on other matters of vital concern to the system, including accessions
to the WTO, trade-related capacity building, technical assistance, and
the dispute settlement mechanism, which ensures that trade conflicts
are settled in accordance with the rule of law, not power, and on a
timely basis.
Part
B of Chapter II of the Report provides information on trade policy
trends in WTO Members. Importantly, it notes that fears that the
failure of the Third Ministerial Conference in Seattle to agree on an
agenda for a new round of multilateral trade negotiations could lead
to a resurgence of protectionism have not, by and large, materialized;
the trend towards more liberal trade policies has been maintained.
Nevertheless, significant barriers to trade remain; there continues to
be ample scope for a lowering of tariff protection, subsidies are
still an issue — especially in agriculture — and the elimination
of restrictions in textiles and clothing has been modest. The rising
trend in the use of trade defence instruments, particularly
anti-dumping, slowed in 2000 but the number of measures in force is
still considerably higher than in 1997 and more Members are using
them. The section also notes that there has been an acceleration in
the pace of autonomous liberalization in services, a sector with an
important bearing on economic performance and development; that, in
view of the WTO Agreement on Trade-Related Aspects of Intellectual
Property Rights (TRIPS), many developing and transition economies have
taken steps to adopt new intellectual property legislation, but that a
number of Members face difficulties on implementation; and that the
trend towards regional trade agreements continues apace.
Chapters
III to VI of the Report deal with selected topics. Chapter III, on
developing countries’ participation in world trade and WTO
activities, notes that the WTO has got a key role to play in promoting
development prospects. But further action is needed to enhance the
benefits developing countries can derive from the WTO. This will
certainly require tackling persistent trade distortions, including the
tariff peaks and escalation, in both developed and developing
countries, that affect a number of the products of main export
interest to developing countries. It is also important that emphasis
continues to be placed on building capacity in developing countries
and on supporting reform to mainstream trade policies into their
overall development objectives.
Accessions
to the WTO is the subject of Chapter IV of the Report. The Fourth
Ministerial Conference will complete the accession procedures for
China and Chinese Taipei, and 28 other governments are in the process
of accession, a vivid reminder of the value countries attach to a
rules-based multilateral trading system. Each accession to the WTO has
a “win-win” quality for the system. The acceding Government
operates a more predictable and transparent trade regime, opens its
markets to its trading partners, and often locks in reforms aimed at
fostering growth and development. The new Member gains similar rights
and terms of access, and commitments are enforced — on both sides
— by dispute settlement. Domestic reform and integration into the
world economy thus go hand-in-hand to promote the growth prospects of
the acceding Government and of the existing Members.
Two
issues singled out by critics of the WTO are considered in Chapter V
of the Report: access to essential drugs in low-income countries and
the TRIPS Agreement; and the potential impact of the General Agreement
on Trade in Services (GATS) on the quality and availability of health
and education services. On the first issue, of prime importance to the
health of people and to achieving sustained development, the Chapter
is clear that the TRIPS Agreement provides — and Members have used
— flexibility that can mitigate the exclusive rights of patent
holders. The precise nature and extent of the flexibility provisions
of the Agreement are under discussion and may lead to action by
Members to ensure that the Agreement is implemented in a way that
contributes to access to drugs, especially for the poorest. On the
second issue, critics charge that GATS constrains the ability of
governments to protect public health and education services and/or to
apply necessary quality standards. It is also said that the ongoing
services negotiations have got free trade in health and education
services as their objective. This objective has not been endorsed by
Members. Further, under GATS, governments have complete discretion to
make commitments in covered services, including health and education.
In fact, some developing countries have taken such commitments, in the
hope of attracting investment into these sectors and with a view to
improving the quality and availability of these vital services. The
Chapter is clear that negotiations will not affect Members’ rights
to pursue the regulatory objectives they deem appropriate within their
jurisdiction.
Non-discrimination
is the cornerstone of the WTO. It is a principle embodied in the
most-favoured-nation (MFN) provisions of the GATT, GATS, the TRIPS
Agreement, and is fundamental to all WTO Agreements. At the same time,
the WTO allows Members to conclude customs unions and free-trade
areas, which by definition establish an element of preference in the
trade between parties to the agreement vis-à-vis the rest of the
world. Such regional trade agreements (RTAs) have become the most
important exception to the MFN principle. The Secretariat has
identified some 170 RTAs and estimates that their number could grow to
250 by 2005; about 43% of world trade is intra-RTA trade, and this
could rise to over 50% by 2005. Chapter VI examines some of the issues
that arise for the WTO as a result of RTAs.
The
Chapter notes that the proliferation of RTAs poses systemic risk. This
lies less in the potential for trade diversion in each RTA than in the
collective impact of a large number of RTAs, each with its own
mini-trade regime, on the smooth functioning of the rules-based
multilateral trading system. This risk is smaller, and RTAs and the
WTO are more likely to be mutually supportive, when the WTO is
functioning well and is responding to the needs of the Membership.
Options for the WTO to respond effectively include continued
multilateral trade liberalization and a strengthening of relevant WTO
rules and procedures. The Chapter warns that, given the recent and
prospective growth in the number of RTAs, time may be short. This adds
urgency to the importance of adopting a broad agenda of negotiations
at the Fourth Ministerial Conference.
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