The WTO: New Issues; A New Round: When and How?

Ladies and Gentlemen,

It is a great pleasure to be here with you today. I'd like to take this opportunity to bring you up-to-date with what we are doing at the WTO and to look forward to what we hope to achieve over the next year.

We have successfully rebuilt confidence in the WTO, by purging the bad blood that poisoned relations among Member governments and demonstrating to the outside world that the WTO could function effectively and fairly. It has been a hard slog. But we have made progress on at least five fronts.

First, we have launched negotiations on agriculture and services. Together, these sectors account for over two-thirds of the world's economic output. The potential gains to both rich and poor countries from further liberalization in these areas are huge. They include cheaper and more bountiful food and clothes, cheaper telephone calls, better financial services and a faster spread of the Internet. A study for the Centre for Economic Policy in London puts the benefit to the world economy from liberalizing agriculture and manufacturing alone at over $250 billion, of which over $100 billion would go to developing countries. The gains from services liberalization, though hard to quantify, could be even bigger.

Both sets of negotiations are going well. Indeed, we have probably made as much progress this year as we would have done within the context of a wider round. We cannot, however, assume that this will continue to be true.

We have roadmaps for both sets of negotiations. In agriculture, numerous negotiating proposals have been submitted from, among others, the Cairns group of agricultural exporting countries, Canada, the United States, the European Union, and a group of 11 developing countries.

The objective of the service-sector talks is to expand the service agreement's country and sectoral coverage and remove restrictions on market access and national treatment. These negotiations cover some of the key industries of the future, such as telecoms, computing, finance and electronic commerce. We have a roadmap for the first year of negotiations, which will concentrate on rule-making, especially in the areas of domestic regulation and safeguards.

The services negotiations are off to an encouraging, business-like start, with delegations showing a great deal of commitment. Indeed, the lack of controversy about services marks an astonishing contrast with the tortured years of discussion before the Uruguay Round, when for a time North-South confrontation threatened to scuttle the round.

The fact that services is now an uncontroversial subject is powerful evidence of the speed with which economic integration has moved over the past ten years. The WTO's services agreement, known as GATS, is indeed a powerful integrating mechanism. No government is obliged to liberalize, or make commitments, on infrastructural services like finance and telecoms, but the efficiency gains for those countries which do so make the cost of protecting inefficient services very high—because the GATS is about investment and technology transfer, among other things, and market-access commitments are a powerful attraction for foreign-direct investment. This is why five small developing countries made unilateral commitments on telecoms after the end of the basic telecoms negotiations—they wanted to attract foreign investment in the sector.

On financial services, which always seemed the most sensitive sector for reasons of sovereignty, prudential control and so on, we have 106 Members with commitments, the vast majority of them developing countries—more than in any other sector but tourism.

So far this year, negotiations on market access in specific sectors have not really started. That will happen next year, when governments have got their negotiating objectives in order. But it is clear that there will be a great deal of interest in the financial sector: industry in the US, Europe and Japan is already active and there is great scope for the improvement of existing commitments, by extending them into additional financial sectors and by removing or reducing the limitations which governments now maintain.

In both the agriculture and services negotiations, the stakes are high and the interests involved are very important. Too important for us not to reinforce them and maximize their chances of success by setting them in an enlarged negotiating framework that would allow participants greater scope to pursue benefits across sectors.

Second, the WTO has welcomed four new Members this year: Jordan, Georgia, Albania and Croatia. Oman is set to join on 12 November. A few thousand protesters may demonstrate against the WTO, but 18 million people have joined the WTO this year. All of these new accessions represent a powerful vote of confidence in the multilateral trading system. Whatever our critics say about us, whatever our flaws, these accessions underline that governments believe that freer trade and the rule of law are good for their citizens. It is a dramatic referendum in support of rules-based, trade liberalization and the global trading system. And each new Member brings us ever closer to being a truly World Trade Organization.

Many more countries should soon be joining. Chinese Taipei, Vanuatu and Lithuania, for instance. And, of course, China.

China' decision to join the WTO is momentous. It has opted for reform rather than reaction, openness rather than isolation.

China has now concluded bilateral market-access agreements with all WTO Members that requested one except Mexico. The US Senate and House of Representatives have both voted convincingly in favour of permanent normal trade relations with China. These are big, positive steps. But China's long march towards WTO membership is not yet over. There is still a lot of work to do in Geneva to reach agreement on China's accession protocol, which sets out the rights and obligations of WTO membership. More flexibility and a new burst of political energy are required if China is to join the WTO soon. But it will eventually happen.

Third, we have established a mechanism for addressing issues and concerns – particularly among developing countries – arising out of the implementation of Uruguay Round commitments. This is a big achievement. In the run-up to Seattle, I spent more time on this issue than any other, including agriculture. It was the source of much of the rancour that prevented the launch of a new round. Now, we have a timetable and a framework, and a commitment from all sides to deal with genuine problems constructively. This positive disposition was evident at the special session of the WTO's General Council on 18 October which dealt with implementation issues.

Fourth, we have worked through an important package to help the world's poorest countries reap greater benefits from the world trading system. This includes offers of better access to 27 rich-country markets, increased technical assistance, and closer co-operation between the WTO and other global institutions that promote development, notably the World Bank. The so-called Integrated Framework, a good plan for inter-agency co-operation on trade-related technical assistance to LDCs, has been reinvented. We hope it will be in place next year.

Fifth, we have made progress on involving all our 138 Members in our work. Thirty do not even have missions in Geneva. Others have very small missions covering a host of different international organizations. We recently ran a second Geneva Week to update non-resident Members on our work. We have also set up Internet reference centres to keep our Members better informed of our work, and thus better able to participate in it. We are also continuously working to be more open and accountable, notably through our recently revamped website.

As a result of all these efforts, the climate in the WTO is much better than it was a year ago, or indeed at any time since the 1998 Ministerial. I believe we are now ready to build on this year's achievements. Our task for the year ahead is to broaden support for further multilateral liberalization. The freer-trade coalition is apathetic and fragmented. We need to mobilise and unite it.

Further trade liberalization should not be a hard sell. The gains to the world economy from the Uruguay Round alone come to over $240 billion a year—not a bad return on the $75 million that governments annually contribute to the WTO's budget. Yet with the world economy doing so well, and America's spectacularly well, the pressure for opening new markets is not as strong as it was. Moreover, new technology is to some extent substituting for trade liberalization in opening new markets. So we need to make the case for further liberalization again and again.

Unfortunately, the good times are unlikely to last forever. There is no convincing reason to believe the business cycle has been abolished. Further trade negotiations are an insurance policy against pleas for protection when economies turn down. If governments are negotiating to liberalize trade, they are less likely to give in to pressure to slam the door on imports. It ought not to take a recession to concentrate minds.

The longer we delay before launching a new round, the bigger the risk that the WTO will be undermined and sidelined. Bruising transatlantic disputes have already put the system to a severe test. An escalation of such mudslinging, or an attempt to deal with implementation issues through a battery of dispute-settlement cases, would destroy Members' good-will, on which the WTO's effectiveness depends. A continued absence of multilateral liberalization would also encourage the big players to act unilaterally and to carve up markets through preferential trade agreements. The rule of law could gradually give way to the law of the jungle.

To be sure, there are risks in rushing into a new round. Another failed launch would be disastrous. If a new round is to be started, governments need to show more flexibility and find the political will to confront entrenched special interests for the greater good. Governments big and small must move beyond their Seattle positions. As you know, Seattle failed not because of the process or protests but because the differences, transatlantic and North and South, were too deep, too entrenched to overcome.

Important differences remain among national positions, particularly on the subjects to be included in the future negotiations. These differences will have to be bridged if we are to move the trading system forward on a broad and balanced liberalising agenda as we all want. The work that my colleagues and I in the Secretariat have done in this past year has, I believe, improved the climate in which these issues are addressed. We have worked systematically to encourage dialogue and understanding at all levels, from government Ministers to technical experts. We will continue and intensify these efforts.

All of the existing — very substantial — work programme of the WTO must be carried forward energetically so that it contributes not only to building confidence but also momentum. I will do everything I can to ensure the preparation is done and conditions are favourable for the political decisions needed to launch a broader negotiating agenda. However, only WTO member governments can take those decisions. No one can decide for them.

Reaching a consensus to extend the negotiating agenda will call for flexibility and a willingness to compromise on all sides, frankly, more than we have seen so far. It will call for realism, for difficult choices among priorities, and for political courage. No one can expect to achieve one hundred per cent of their stated objectives. But all participants share an interest in success and difficult though the process of building consensus may be, it is the only way to agree on a new round to which all WTO members can actively commit themselves. You can be sure I will do everything I possibly can to facilitate members' efforts to reach such a consensus.

I urge all WTO member governments to build on the progress of the past year, to work together concretely and pragmatically, but never loosing sight of the truth that this must be a dynamic evolving system which works for all its members and their peoples.