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

23 March 1998
"A New Partnership for a New Century: Sustainable Global Development in a Global Age"

Address given by WTO Director-General Renato Ruggiero to the Bellerive/Globe International Conference entitled "Policing the Global Economy"

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"At a conference in Washington, two weeks ago, I heard some fascinating commentaries on how far the trading system's horizons have expanded since the Tokyo Round. Just twenty years ago the challenge was to bring subsidies, antidumping, or technical standards fully into the rules of the system. Today the trading system is called on from one side or another to take account of environmental policy, financial instability, labour standards, ethical issues, development policy, competition law, culture, technology, investment, marginalization, security, health - an ever-lengthening list of issues which can be associated in one way or another with trade.

This underlines the degree of interdependence we have reached in our world. Clearly, the implications of trade liberalization go much beyond trade and economics. By lowering barriers among nations, economies and people, it helps create interdependence and solidarity. Trade liberalization is not just a recipe for growth, but also for security and peace, as history has shown us. Likewise, globalization is about much more than trade or capital flows. It is about a world linked together by information, knowledge, and ideas as well. Economic and technological integration is reinforcing the global web of interdependence which gives us a shared interest in our civilization and our planet, as well as our prosperity. To talk only about managing a global economy is to miss the point that we are really dealing with a new kind of global system with an ever more important human dimension.

I want to make three basic points about how we approach and manage this new system. Firstly, that we should be careful that the concept of "policing" does not lead us to think that solutions can be imposed, or just transferred from one situation to another. Each global issue has to find its own best path - environmental, ethical, social, health, financial and all the other aspects of an integrating world must be dealt with first and foremost in their own terms and according to their own specific needs. We cannot pretend that one policy sector can provide all the answers in another, and certainly not that the trading system can provide a sort of universal response. Seeking a single answer to a widely-varying set of problems would be as unrealistic in international as it is in national politics.

The need instead - and this second point flows naturally from the first - is to work patiently and carefully to build international consensus in each of these areas. The history of the multilateral trading system - which is fifty years old this year - shows us that there are no short cuts. The exercise of power is unlikely to produce equitable or durable solutions unless it is tempered by the rule of law. Only by encouraging the organic growth of consensus in all the areas that concern us will we find genuine answers to these concerns for the long term.

Thirdly, the clear implication of the previous points is that we need a global architecture which will provide a framework for building and strengthening global consensus in an integrating world which will fill the gap between politics, still based on national constituencies and needs, and economics and technologies more and more borderless and based on global objectives.

II

With these three points in mind, I would like to consider more closely what globalization means and how the trading system can help us to respond to its challenges and opportunities.

Certainly there are real and justified concerns about many aspects of the world we live in. It is equally clear that people are apprehensive about the speed of change, and that it is sometimes easier to blame all the insecurities and anxieties this can induce on globalization. Globalization can then become shorthand for everything we might not like about the world as it is. The risk attached to demonizing globalization is not just that it obscures and distorts the real, complex, issues - it can also lead us down false and possibly dangerous political paths and actually obstruct the search for durable answers. We all hear many criticisms of globalization, but I have never heard a rational alternative to the search for peaceful global development.

Of course the world we live in is still unacceptable in many respects. Far too many people lack proper access to food, water, health care, education or justice. The benefits of development are not evenly shared, and marginalization remains a real threat for too many. To deny these realities is not an option. But it is equally not an option to deny the reality of globalization, or the reality of the great opportunities it opens up to find answers to our shared global problems.

The reality of globalization is the reality of interdependence, an interdependence that, as I said at the outset, extends far beyond trade or strictly economic criteria. But trade remains a key element in sustaining and spreading the benefits of interdependence.

By way of example, let me first outline its contribution to generating growth. Over the past 50 years, trade has been a powerful engine for growth. In 1950 its ratio to global GDP was 7 %. Now it represents 23 %, and a third of the 25 largest trading countries are now developing countries. Between 1948 and 1997, merchandise trade increased 14 times, while world production increased 5 ½ times. In the same period world GDP increased by 1.9 % per year at constant prices and taking account of overall population growth. Seen in an historical context, this figure is extremely high.

In particular, over the past 10 to 15 years, when developing countries have more and more embraced trade liberalizing policies, the benefits have been clear. The share of developing countries in world trade overall has increased from 20 to 25 %. For the manufactured sector it has doubled from 10 to 20 %, and on current trends could exceed 50 % by the year 2020. Furthermore, in this same period of time, 10 developing countries with a combined population of 1.5 billion people have doubled their income per head.

And while the gap between countries is in some cases widening, it is also true that from 1990 to 1996, developing countries recorded an average growth of 5.4 %, three times more than advanced economies. In this same period of time, exports from the industrialized countries to the developing countries grew each year by an average of 10.1 %, while exports from developing countries to the industrialized world grew an average of 7.3 %. This is the virtuous circle of globalization.

Secondly, the trading system is helping to bring the world together through its rôle in liberating the new borderless technologies which are shrinking the constraints of time and space. An intercontinental telephone call between Europe and the United States now costs only 1.5 per cent of what it cost 60 years ago. Forecasts indicate that within the next few years the actual cost could decrease by a further two thirds. The cost of computers has also fallen by almost 100 per cent since 1960, and every year the coverage of the Internet doubles so that by the year 2000 10 per cent of the world's population may be linked up. In 1997, trade transactions through the Internet amounted to $8 billion and should rise to a figure between $200 and $300 billion in the year 2002. Many experts believe that electronic trade will become the principal catalyst for global economic growth in the next century.

The technological revolution will open up horizons that were totally unthinkable until a few years ago. The liberalization of telecommunications and information technology products at the global level will make it possible for people in all parts of the world to have access to information and education. Together with the World Bank, the Organization I represent is connecting the poorest countries in the world through a computer network for which we are providing the computers and professional training. Through an Internet site we have opened, we are now able to provide in real time all the information and documents they could have in Geneva. Within a few years, every village in the world could have a mobile telephone. This can make the difference between life and death, and it also implies the end of physical marginalization.

Never before has a generation had so many resources for human development. Let us work together to open new horizons for all nations and peoples to promote education, to improve health care, to advance agricultural development in the poorest regions of the world: in one word, to enhance human development throughout the world. This is an explicit aim of the World Trade Organization.

III

So, as both the Brundtland Commission and the Rio Earth Summit recognized, economic growth is one of the most powerful allies of sustainable development. But this positive impact of globalization in no way reduces the need to find appropriate solutions to specific problems. There is a rational and durable approach to the lengthening list of environmental, social and ethical challenges that now transcend borders, jurisdictions and cultures. It lies in building a global consensus in these areas, reaching enforceable global agreements, and building the kind of global institutions needed to manage them.

Let me give one example of the kind of progress we need. The Committee on Trade and Environment, in its report to the WTO's 1996 Ministerial meeting in Singapore, encouraged the international community to tackle shared environmental problems through shared solutions. The approximately 185 Multilateral Environmental Agreements, 20 of which include trade measures, represent the best means of tackling global environmental problems. In recent years, the ozone layer depletion has shown encouraging signs of being repaired, thanks to the remarkable achievements of the Montreal Protocol. CITES has done much to help endangered species - though much more remains to be done. The Basel Convention has limited internal flows of toxic wastes. And, of course, the most ambitious and far-reaching global environmental agreement yet was reached in Kyoto last December, when some 150 governments from around the world set legally binding targets and timetables for stabilizing and reducing greenhouse gas emissions. The point is that each of these agreements targets the environmental problem they aim to solve with an environmental answer. And they exemplify the scope for transgovernmental solutions to specific transborder issues.

I give this example to emphasize two points: first that multilateral approaches in the environmental field are working. And that nothing in the WTO stands in the way of the international community pursuing shared goals in other international agreements.

This is not for a moment to underestimate the real and complex challenge of ensuring that these global approaches are harmonious and mutually supportive. Establishing a framework to define the relationship between Multilateral Environment Agreements and the WTO - all the time ensuring that the trade and environmental agendas advance in tandem - must be a priority. And clearly policy coordination between national trade and environment policies will play an important role in reducing inconsistencies, and in ensuring that WTO members are able to respect the commitments they have made in the WTO and Multilateral Environment Agreements. The same applies at the international level.

IV

The trading system will continue to grow in global relevance as trade policy continues to move beyond simple border tariffs, to involve deeper issues inside national boundaries like investment policy, competition policy, and why not, electronic commerce. But this is not an argument for turning the WTO into an environmental watchdog, human rights body, or a development agency. Such a policy would, firstly, harm the trading system itself, with all the collateral effects this would have for a sustainable global economy; and secondly, it would fail to solve any of the other problems since an environmental problem needs an environmental answer, not a trade one.

I do not claim that the multilateral trading system that we have built in the last 50 years is a perfect one. But it is a system based on some features unique in international institutions. The first is its fundamental principle of non-discrimination: this means that the advantages that two or more trading partners negotiate among themselves are extended automatically to all others. If we are living a world in which there is not a high level of reciprocal protection between advanced and developing economies, it is because the trade liberalization negotiated among industrial countries has been extended automatically to developing countries over many years.

We have now 131 Members, 80 per cent of which are developing countries or economies in transition from centrally-planned to market economies. And 32 candidates, including major trading partners like China and Russia, all developing countries or economies in transition. And yet we do not offer grants or loans, but just a framework to negotiate the lowering of trade barriers inside binding rules with the appropriate flexibilities for developing countries. It is a sign that the system which we manage is quite attractive in itself.

We decide by consensus, and our decisions are approved by each government and ratified by each national parliament. Could you find a more transparent and democratic system in the international community?

Last but not least, our objective is a revolutionary one in the present international society: the creation of a universal trading system which is rule-based, not power-based. The most unique feature of our Organization is the dispute settlement procedure, an automatic and binding system to help countries to solve their disputes on the basis of the agreed rules. During the last three years, since the creation of the WTO, the dispute settlement procedure has worked remarkably well. It has enabled small developing countries to bring cases against major trading powers and win; and it has assisted governments to resolve a great number of disputes - about a quarter of the cases initiated - before they get to a formal judgement.

The WTO is not - and has no intention of becoming - a supranational body with unilateral powers. It is not a world policeman that can force compliance upon unwilling governments. In fact, it would be a profound mistake to assume that the challenges of our global age can be met by imposing our policies or values on others. Whose environmental standards, cultural traditions, political systems represent a universal norm? When is it right to impose our values and standards on other countries and peoples? And do we really want to invest the WTO - or any other international organization - with power to define our environmental, social and ethical values?

I don't pretend that reaching multilateral agreements on many environmental, labour, or ethical issues will be easy. But nor should we pretend that there is a short cut through the WTO - or a magic bullet called trade sanctions. Unilateralism or trade sanctions will not convince any country of the validity of the values which another asserts. This approach is a sign of weakness not strength. It reflect a basic lack of confidence that one's rights or values can be freely shared by others.

By definition, the global challenges we all face call for shared and cooperative solutions. They demand consensus. And this means using multilateral negotiations to construct multilateral agreements - which will require determination, skill, and patience. What we need is builders, not policemen.

This is also the lesson of history. In the last 50 years, our main challenge has been to manage a divided world; East and West, North and South. Since then we have made impressive progress. Now our biggest challenge is to manage an ever more integrated world, a task at least as difficult as the previous one. This is why, as I said a few days ago to Prince Sadruddin, I believe that the real issue of this exciting conference should be how to improve global architecture for global needs.

The WTO system forms an important part of this new international system. But it is only a beginning. The blurring of policies, as well as borders, clearly underlines the need for progress on the broadest possible front. It underlines, in other words, the need for a global architecture to oversee a new kind of global system. The WTO's experience over fifty years encourages us that it is possible to build such a system on consensus and mutual respect, on the rule of law rather than the rule of power. Seizing this opportunity will not only contribute to global prosperity and stability - it will contribute towards building a sustainable global community as well."