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WTO NEWS: 1995-99 SPEECHES - RENATO RUGGIERO, FORMER DG

30 October 1998
"A Global System for the Next Fifty Years"

Address by WTO Director-General Renato Ruggiero given today (30 October 1998) to the Royal Institute of International Affairs at Chatham House in London

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Mr. chairman, ladies and gentlemen,

This year we marked the 50th anniversary of the multilateral trading system – a system which, together with the United Nations and the Bretton Woods institutions, emerged out of the tragedies of the Great Depression and the Second World War. Certainly our world today is in many ways still unacceptable. Poverty and hunger remain with us. The promise of development has yet to be redeemed for much of the emerging world. Civil war and ethnic strife mar the global peace. And yet in contrast to the dark history of the first half of this century, the second half has shone immeasurably brighter – in no small part because of the vision and contribution of the post-war international system.

Now, on the threshold of a new century and a new era, we ask what the next fifty years will bring: Will it be a time of conflict or cooperation? Stagnation or progress? Another dark age, or one filled with light? Today I want to comment on the realities of this new globalized age – and what these realities mean for the evolution of the international system in the time ahead.

II

The current financial crisis marks an important turning point in the process of globalization – but not in the ways that its critics now predict. As difficult and destabilising as the past sixteen months have been, the crisis has reinforced – not weakened – the reality of globalization. It has underlined in a stark and powerful way just how interconnected we are – financially, socially, politically, as well as economically. It has further blurred the distinction between domestic and foreign issues – fatally undermining the notion that a country's internal policies or practices are the concern of no one else. And it has created new pressures for more – not less – international cooperation, across a much broader policy front.

This is because globalization is about much more than trade and capital flows. Technology is linking us together to an unprecedented degree – through communications, information, and ideas, as well as trade, services and investment – shrinking distances and time. And this process is, in turn, creating an awareness of interdependence on a planetary scale. Television, fax machines, mobile phones, and the Internet are erasing barriers, not only between economies, but between people - allowing us to see and comprehend how inter-linked we have become. There is a globalization of our consciousness, as well as of our economies. And this dimension of globalization – more than any other - will prove impossible to slow down or reverse.

The financial crisis has dominated our discussions over the past year – with its moments of pessimism and moments of renewed hope. It is clear that this is first and foremost a financial crisis – and the solutions must be found from within the financial and monetary systems. But it is now equally clear that continued financial and exchange rate instability can – and will - have a negative effect on world trade, investment, and development. Declining commodity prices, weakening imports in the affected countries, excessive export competition in the advanced markets, and the threat of further devaluations – all of these forces are introducing new uncertainties, new risks, and new protectionist pressures into the global economy.

The reality is that the questions raised by the financial crisis go to the heart of the major challenge of our time - the challenge of global governance in this complex and interdependent era. Can we maintain a stable and increasingly borderless global economy – with rising trade, employment, and growth - without a stable global financial and monetary system? Will the integration of our economies require a more coordinated approach to fiscal, monetary, development, and environmental policies, as well as trade policy? Does the logic of globalization force us to re-examine the global architecture?

A new international consensus will have to develop for improving the management of the global economy if we are to continue to liberalize markets, and if globalization is to fulfil its promise.

First, we need to open up the international system to wider participation at the highest level of the decision-making process. This implies that we must move from a predominantly unilateral leadership to a more collective leadership – and with a more balanced share of responsibility. This does not mean that US leadership is any less important. What it means is that Europe, Japan, the transition economies, and the developing countries that make up a growing share of the world economy, must be prepared to play their part. The recent G-22 meetings are good initial steps in this direction.

And this in turn means that the nature of international leadership must change. During the Cold War, leadership was about solidarity, discipline, the possibility of force in the common defense of our values. By contrast, leadership in an interdependent world is the art of cooperation and consensus. It is about recognizing that our national interests are increasingly global interests; and that our national security increasingly hinges on the security of others. I do not suggest that the voice of internationalism is an easy one in the present climate – only that it is essential in our globally interdependent world.

Second, we need to broaden the scope of issues which are part of the international agenda at the highest level of the system. We can no longer afford to view issues through a sectoral lens. We need to look at the challenges we face from a broader perspective, and as pieces of a larger, interconnected puzzle. Globalization has given rise to a lengthening list of issues that now cross borders – from environmental standards and development concerns, to the distribution of resources, labour standards, health issues, human rights, education, technological empowerment, even foreign security. More and more, we are dependent on each other's financial stability, economic development, environmental security, and political reform. More and more there is pressure to widen the scope of international coordination – and to define institutions which can bridge the gap between an economic and technological system which is increasingly global, and a political system which is still predominantly national.

III

In this widening of the international agenda, the environment will occupy a very important part. Environmental challenges - such as acid rain, deforestation, global warming, or the protection of endangered species - clearly demand approaches which are global in scope, rather than national. The recent Shrimp-Turtle Appeal is the clearest sign yet that the world trading system is fully supportive of policies to protect endangered species or the environment - but that it is up to the environmental community itself to provide this policy framework, or to implement their policies without discrimination. It strongly reinforces the growing need to negotiate global environmental rules and standards – and to reach a global consensus about environmental issues. And it underlines the need to strengthen existing bridges between trade and environmental policies - a task that would be made immeasurably easier if we could also create a house for the environment to help focus and coordinate our efforts.

This Shrimp-Turtle Appeal is extremely important because it clarifies one essential issue in the debate between the trade community and the environmental community – that there are no political, economic, or legal obstacles to the harmonious development of both environmental objectives and free trade objectives. I am sorry to read you a long quotation, but I think it is absolutely necessary to put on record for this conference – which is mainly devoted to trade and the environment - the conclusions of the Appellate body in this case:

"We wish to underscore what we have not decided in this case. We have not decided that the protection and preservation of the environment is of no significance to Members of the WTO. Clearly it is. We have not decided that the sovereign nations that are Members of the WTO cannot adopt effective measures to protect endangered species, such as sea turtles. Clearly, they can and should. And we have not decided that sovereign states should not act together bilaterally, plurilaterally or multilaterally, either within the WTO or in other international fora, to protect endangered species or to otherwise protect the environment. Clearly, they should and do."

This Appeal makes it even more impossible to say that trade policy does not consider environmental issues. It is clear that the trade system not only takes environmental concerns into account, but – if they are implemented without discrimination – these concerns prevail over free trade objectives.

This is of fundamental importance because if we want to succeed in defining our objectives – both the trade community and the environmental community – we have to define the real challenges we face; and not create false obstacles. To pretend that environmental concerns stand in the way of free trade is to create false obstacles. To pretend that free trade stands in the way of environmental concerns is also to create false obstacles. And if we focus our attention on these false obstacles instead of on the real problems we face, we are only losing time and resources without coming any closer to reaching our shared goals.

One message must come out from this conference loud and clear. The WTO is a strong institutional friend and supporter of the environment. And we must proceed – the trade and environmental community hand-in-hand – to improve and strengthen this alliance. This is also the message that must be sent from the High-Level Dialogue – proposed both by President Clinton and Sir Leon Brittan, and strongly endorsed from the outset by me. I can inform you that in the preparations of this dialogue we are making substantial progress; and that we are not far from launching this initiative – probably together with another High-Level Dialogue on Trade and Development at the beginning of next spring. There is still a lot that we must do together to improve and clarify the relationship between trade and environment.. But this task will be much easier if we move forward as friends, not as opponents.

To characterize the WTO – as we have read recently - as an organization that "refuses to reveal its deliberations to the public, or be held responsible for the social, political and environmental costs of its decisions" is a false representation. No one can claim it. Certainly there is more that we can – and must – do to improve transparency, and our alliance with environmental, social, and development policies. But those who follow the activities of the WTO, know that we are strongly committed to that course - and that we are already moving towards these objectives within the rules which have been adopted by consensus by all our Members and ratified by each of our Parliaments.

A second important issue is the social dimension of globalization. At the WTO's first Ministerial Conference in Singapore, we emerged from a difficult debate with a clear and strong consensus on the issues of labour standards - a consensus first, that members were committed to the observance of core labour standards; second, that the ILO was the relevant body to address these issues; third, that standards are best promoted by growth and development, fostered by trade liberalization; and fourth, that labour standards should in no way be used for protectionist purposes or put into question the comparative advantage of countries. It is this consensus which has opened the door for the International Labour Organization and its declaration to make real progress on the issue of the social clause. Perhaps not everyone is fully satisfied with this progress. But the reality is that we would have made no progress at all if we were still fighting over the issue of the ILO's or the WTO's competence.

The third step was the WTO initiative last year to provide assistance, in collaboration with UNCTAD, UNDP, the World Bank and others, to address the needs of least-developed countries. The proposed High-Level Dialogue on Trade and Development has to give priority attention to this urgent problem. One objective is to give least-developed countries better access for their exports in advanced markets, and here I have strongly advocated that we provide bound duty free access - a call which has now also been taken up by many world leaders, and that must be answered during the next multilateral negotiations in 1999. In addition, we must continue to work towards a more integrated approach to capacity building in these countries. And we must build upon our efforts to link the Least-Developed Countries via the Internet to all the resources and expertise of the WTO - a powerful symbol of the new kind of dialogue that is needed in our global electronic village.

IV

We need to define a vision for the post-Cold War era. For four decades, the strategic imperatives of the Cold War created a degree of cohesion and singleness of purpose which helped sustain the international system. But we have lost the "cement" of the Cold War. And no one has yet articulated a clear vision of what the post-Cold War order should be. Instead of one common enemy, we face thousands of complex problems. We need to define a new global vision to match the realities of a new global age – a technology-driven age which is shrinking time and space.

To sum up, if we consider the present financial turmoil it seems that an answer cannot be found unless we keep our markets open. At the same time, it will be increasingly difficult to resist protectionist pressure without restoring stability to the financial and exchange rates systems.

If we look beyond the financial crisis then we see that there is a new global reality – and even a new global economy – emerging which is much more complex than trade or capital flows. What we need is an architecture which will take into account, at the highest political level, a number of players which goes beyond a few industrialized countries – and includes developing countries and economies in transition.

And just as we have to increase the number of players in the highest international decision-making process, so too must we increase the number of issues which have to be taken into account in this globalized world – to develop a more balanced and global vision to accommodate our more complex and technology-driven global system.

If the challenge of the past fifty years was to manage a divided world, the challenge of the future will be to manage a world of deeper integration. It is a challenge which will in many ways be much more difficult and more complex. We find ourselves in a new world today – and in a new economy - whose characteristics are not fully understood even by its most prominent actors. And yet the choices we face are enduring ones: between moving into the next century on the basis of shared global rules, or on the basis of power; between stability or uncertainty; consensus or conflict. How we manage these challenges in the months and years ahead will depend on the choices we make today, not on globalization.

Globalization has enormous potential to generate growth, to spread the benefits of technology, and to weave a more stable planet. But it also challenges the status quo. It demands that we adapt. This is not the moment to retreat from the future and to turn back to the past – a past which has shown us with such stark clarity how building barriers to one another can only make our economies poorer and our world less secure. Thank you.