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hamburg, 11 June 1998

"The Next 50 Years: Challenges and Opportunities For the Multilateral Trading System"

Address to the Friedrich-Ebert-Foundation, Hamburg

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Three weeks ago in Geneva we marked the 50th anniversary of the multilateral trading system - an event which brought together world leaders and ministers from every region, every background and every stage of development to commemorate one of the great successes of the postwar world. This was more than a ceremonial occasion. It demonstrated how far we have come towards constructing a truly global economic system. Even during this period of significant change and uncertainty, not a single speaker questioned the validity of multilateral trade or of the WTO. From President Clinton to President Castro, Prime Minister Blair to President Mandela, President Cardoso to Prime Minister Prodi - all saw this system as indispensable to growth and stability in our interdependent world; even if each one had a different perspective on success and failure, reflecting different backgrounds and historical experiences. Everyone underlined the reality of the globalization process and the need to improve its governance.

Why does this consensus exist? Because the history of the latter half of this century has taught us that there is really no rational alternative. The postwar architects were guided by a central idea - that a durable international peace must be built on the foundations of progressive liberalization and economic interdependence. In their vision, removing barriers to trade would lead to shared prosperity and a shared commitment to international stability. The principle of non-discrimination in trade relations would restrain destructive economic nationalism, and help prevent the resurgence of the protectionist policies which had done so much to increase interwar tensions. Theirs was a vision centred on the rule of law, not the rule of power, built on consensus among nations, binding commitments freely entered into and the settlement of disputes through procedures available to all and applicable to all. These have also been the basic values on which we have built the European Union today - from a customs union through to an European single currency.

This idea now finds a consensus of support from practically every part of the world. The Berlin Wall fell because millions of people rebelled not only against the loss of their political freedom, but against the loss of their material and economic freedom as well. With the end of the Cold War came the end of any pretence of a viable competition between state-planned and free market economies. Equally significant is the economic revolution which has been unfolding in much of the developing world, and the changing dynamic of North-South relations. Countries in Latin America, Asia, and now Africa have moved or are moving from a world of import substitution and protectionism towards a world of freer markets and more open, rules-based trade. This change in outlook has in turn had a profound effect on the multilateral trading system. Whereas only 23 economies participated in the first GATT negotiation in 1947, today the WTO has 132 members, and 31 are waiting to join - ranging from giants like China and Russia, to small island states. Like the presence in Geneva of so many representative leaders and ministers for the 50th anniversary commemoration, this impressive number of Members and candidates to the WTO is an unmistakable sign of the validity of this system.


The point is not that the global economy is somehow perfect - or that the widening range of public concerns are without substance or validity. The point, rather, is that the challenges we face can only realistically be addressed inside this global system - not outside of it. If people, especially young people, say that unemployment is too high, they are right. If environmentalists say that growth must be sustainable - and not destroy the planet's essential equilibrium - they are right. If people say that labour standards have to be raised, not rolled back, they too are right. But none of these international - and national - problems will be resolved any easier by restricting trade, closing borders, or undermining the international rule of law - as embodied in the WTO. Just the opposite. As President Castro reminded demonstrators in Geneva, "it is unemployment we are fighting, not the WTO".

There is another important point which follows from this consensus. It is that we must stop viewing the world through a narrow lens, and begin to look at the various challenges we face as pieces of a larger puzzle demanding broader, more integrated solutions. It is true that some of the current opposition to liberalization and globalization is irrational or worse - as we saw from some of the demonstrations which accompanied the 50th anniversary commemoration in Geneva. But it is equally true that many perfectly reasonable people are legitimately concerned about signs of worsening environmental degradation, unacceptable levels of poverty, human rights abuses in certain countries, or a lowering of labour standards. All of which is made more immediate and central in the public's mind by the reality of ever-closer global integration, and the power of an ever-more influential global media.

More than ever before trade - and the rules of the trading system - intersect with a broad array of issues and concerns which have a powerful impact on people's day-to-day lives. More and more the WTO is under pressure to expand its agenda because more and more it is seen as the focal point for the many challenges and concerns of globalization.


How to respond? Certainly we must continue to advance trade liberalization within the multilateral system, which has been such a powerful engine of growth. Certainly we must continue to expand the universality of the system, in order to make its benefits more inclusive. Certainly this system cannot give answers to all the issues on the global agenda, just as it cannot ignore the pressures for change. However, as President Mandela pointed out, "trade does not of itself or in itself bring a better world". No invisible hand is at work to ensure globally balanced and harmonious outcomes. Freer markets alone will not restore the stratospheric ozone. Lower tariffs will promote trade, but not, of themselves, alleviate poverty or raise labour standards.

President Clinton captured the challenge facing us when he said that: "we must do more to make sure that this new economy lifts living standards around the world, and that spirited economic competition among nations never becomes a race to the bottom in environmental protection, consumer protection and labour standards. We should level up, not level down. Without such a strategy, we cannot build the necessary public support for the global economy. Working people will only assume the risks of a free international market if they have the confidence that this system will work for them".

What we need is a broader global vision to address at the national as well as the international level our growing global needs. We must build up a consensus for more cooperation and concerted action across a wider front of issues. By reaching enforceable multilateral agreements and standards, not just in trade. And by identifying and strengthening the kind of international institutions needed to promote - in a balanced way - a very complex global agenda. The WTO can - and must - be an important cornerstone of this architecture, and powerful support for the needed progress in other multilateral fora. Already WTO Members have outlined the need for progress in three broad areas of global policy.

First, we need to inject a new sense of dynamism into the WTO Committee on Trade and the Environment in order to better clarify a positive relationship between the rules of the trading system and the needs of the environment. President Clinton and Sir Leon Brittan have suggested a high level meeting on trade and the environment, as I myself have affirmed on various occasions. I do not want to enter into a discussion today of how to revitalize this relationship between trade and the environment. The point is that it must be revitalized - beginning with a thorough preparatory process - if the trade and environmental agendas are to advance in a mutually supportive way.

A second important step forward was the consensus reached at the WTO's first Ministerial Conference in Singapore on the issue of labour standards. Positions on either side of the issue were very strongly held. But after months of careful preparation in Geneva, and five days of intense debate in Singapore, we emerged from the Conference with a clear and strong consensus - 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 to put into question the comparative advantage of countries. It is this consensus which has opened the door for the International Labour Organization to make real progress in its Declaration of principles concerning fundamental rights and its appropriate follow-up mechanism. 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. 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. In Geneva, Prime Minister Blair and others urged that "we must all commit to zero tariffs". 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.

I give these examples to illustrate three points: First, that multilateral approaches in the environmental, labour and development fields can work. In these areas we are moving beyond identifying problems, and are starting to identify solutions. Second, that WTO Members have a direct interest in seeing real and substantive progress also in non-trade areas - not least because without progress, public support will weaken, and trade liberalization will suffer. And third, not only that consensus on the most difficult issues is possible, but that consensus is absolutely critical to real and lasting progress. The success of the WTO was the result - not the cause - of a broadening international consensus about the value of trade liberalization, painstakingly built up over the past fifty years. In the same way, we will only reach durable global solutions to the environment or labour issues - as to the many other global issues now on the agenda - by constructing the same kind of international consensus from the bottom up.

In all this we must also be clear that every global issue should have its own solution. Environmental and social problems need environmental and social answers - and seeking solutions through trade rules is not a substitute. And those solutions should be multilaterally agreed in the proper forum - in coordination with trade rules - so that different policies can reflect common values and be mutually supportive. The reality is that many of the existing problems the WTO system faces with environmental and other objectives do not lie in differences of values or of priorities, but in the lack of multilateral rules in these areas - which in turn calls for an impossible blessing of unilateral and extraterritorial rules.

This underlines the need for much greater technical and policy coordination - both at the national and the international level. No one should imagine that policy issues which cannot be balanced within a national government can miraculously achieve equilibrium in an international context. The first task must be to ensure that national delegations are bringing a coherent and consistent message to the negotiating table. The second task is to clarify all the cases in which there are no differences in values or objectives between the trading system and these other policy areas. The false perception exists that, in many cases, environmental objectives cannot be achieved because of the primacy of the trading rules. This perception must be dispelled. As the famous tuna-dolphin case between the US and Mexico has shown, the solution to the problem was not in maintaining unilateral trade measures but in a multilateral agreement on the kind of nets which capture tuna but protect dolphins. The answer was, as it should be, an environmental answer, not a trade answer.

We would be making a profound mistake to pretend that unilateral pressure offers a short cut to international environmental or social policy - or that there is a magic bullet called trade sanctions. Unilateralism will not convince any country of the validity of the values which another asserts. Nor will trade sanctions serve as a wake up call for public opinion around the world. This approach could in fact be seen as a sign of weakness not strength. And it reflects a basic lack of confidence that one's rights or values can be freely shared by others.


How, then, do we in the WTO move ahead? In one sense, our negotiating path is already set out. First, there is the task of implementing the 27,000 pages of Uruguay Round agreements. We have an important responsibility for providing technical assistance to many developing countries and, in particular, to all the least-developed countries if we want to achieve the full implementation of the commitments already agreed. And this, in turn, means we have a responsibility for providing the necessary financial resources. Second, there is the launch of the new negotiations at the turn of the century which are already mandated - in services, in agriculture, and in certain aspects of intellectual property. Third, there are decisions which must soon be taken about the work launched at the first Ministerial Conference in Singapore - in investment, competition policy, transparency in government procurement, and trade facilitation. And fourth, there is a lengthening list of new issues that Members wish to see the WTO take up - both new areas of negotiations, such as electronic commerce where we have already begun, and the broader public concerns I mentioned earlier. This road has been approved by consensus by the representatives of 132 Members in Geneva three weeks ago.

The real key to the future of the multilateral trading system does not lie only with trade negotiators, however. It lies also with our citizens, our public. It lies with our ability to explain what kind of future we want. What our goals are for the 21st century. And why millions of ordinary people should value and support these goals. This is why the very challenging ideas presented by President Clinton and the other leaders at the 50th anniversary celebration deserves the maximum attention.

This brings me back to the point with which I began today - the immeasurable importance of building consensus and global vision. By definition, the global challenges we all face call for shared and cooperative solutions. And this can only be achieved through consensus - as we have done in the multilateral trading system for the past fifty years. Furthermore, separate sectoral or national approaches are no longer sufficient. Nor can there be one, single policy response to the complex issues we face.

We need a global vision that embraces all of the issues, all of the actors, now on the international agenda - this is what our publics are asking for more and more. We need to integrate our responses to the economic challenges we face in a way which reflects real human values and real human interests. Trade liberalization must be supportive of environmental objectives; but environmental policies must also be supportive of growth and development through trade liberalization - the process which provides the new resources so critical to a sustainable environment. The same positive relationship must exist with regard to labour standards, to financial stability, and, most of all, to the promotion of national policies designed to alleviate the social impact of our rapid transition towards an ever-more interdependent world. We do not need to destroy the welfare state. We need to adapt it to the new realities of a globalizing economy.

Consensus does not just mean agreement among governments. Consensus also means dialogue with our citizens. And dialogue means working to understand one another, and working constructively to erase the false perceptions - and even false information - that sometimes stand between an open exchange of views. This is the way forward - building on the consensus we achieved in Geneva, through even more cooperation between governments and international institutions, but also broadening this consensus to include civil society and all the social partners. This is why I intend to devote a great deal of my time to improving this dialogue - a dialogue including the widest possible representation and transparency in all the activities of the WTO.

The end of the Cold War swept away many of the barriers of ideology, politics, and economics which had divided our world for almost fifty years. We have a unique opportunity, in this new global era, to tackle shared challenges with a new sense of shared outlook, shared values, and shared purpose. It would be a sad irony if, at a time when there has never been a broader awareness among governments and elites about the benefits of trade, openness and integration, we found a widening gap between these governments and the publics they serve. We cannot allow this gap to open.

So this 50th anniversary year is not simply an occasion to look to past successes. More importantly, it is an occasion to look to the future - and to grasp the huge opportunities that this future offers. To extend the benefits of technology and innovation to billions of people around the world. To reduce the inequalities of our present world. To work to eradicate poverty, malnutrition and the scourge of ignorance. To strengthen the foundations of international peace as well as prosperity - for developing and developed countries alike. This is a new beginning. We face today a shared challenge but also a shared responsibility - to be as creative in developing a new global community as our forefathers were a half a century ago in developing the postwar international system.

In this endeavour, the Federal Republic of Germany's contribution and pro-active r˘le is of the utmost importance. You are the second largest single world exporter of goods and the fourth largest services exporter. You are certainly one of the countries that benefit the most from a trade system like ours, based on binding commitments, global rules and an enforceable dispute settlement mechanism.

The construction of Europe and the launch of the single currency is certainly an historic achievement. But it is also important as a new departure towards an even more globalizing world. This is why you are an indispensable partner in the front row of this new global vision for a better world.